Seeking professional advice on a subject is often a sensible idea, particularly regarding health, legal and financial matters. That is why many people employ a financial consultant for advice on managing their money and securing their financial future. A professional financial consultant can provide sound advice about how best to put your money to work for you. But what exactly is a financial consultant, and how is this profession different from a financial advisor?
Find out more as this article explores the specific duties of a financial consultant, how they differ from financial advisors, and some guiding principles every consultant needs to follow.
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What does a financial consultant do?
To clarify what is financial consulting, we need to delve into the various services these professionals provide, both to private individuals and businesses, and the qualifications required to enter the profession. Most financial consultants will have attained a high level of general academic achievement, often followed up with a master’s in business administration, such as the one available from Spring Arbor University. The online flexible learning course the University provides teaches accounting and finance, plus specialized subjects, including Organization Consulting.
Finance consulting can be for personal and corporate clients. Consultants work for individuals (some high-net-worth) and companies with diverse investment portfolios and substantial financial resources. Services provided include income management, investment advice, taxation planning, and more. Business finance consulting is used by companies that need extra expertise in finance, accounting, and other areas of money management. Financial consultants work with companies to help them manage investments, create long-term financial plans, and provide advice on industry trends and the handling of risk management.
A financial consultant works with clients to help them understand their assets and how to leverage those assets to get maximum gains in the future. For example, suppose a client intends to take up an education insurance policy. In that case, a financial consultant can recommend the best type of policy to sign up for and advise on the amount to save to get the desired returns.
Financial consultants also work for non-profit organizations and government agencies. They often specialize in business planning, insurance, tax planning, risk management, and estate planning.
There are various ways to obtain a financial consultant’s services. They include:
- Robo-Advisors are bots that use algorithms to give financial advice and manage investments. Apart from being affordable, this option works for clients who can’t manage their portfolios or don’t know the available investment options.
- Online Financial Consultancy Services. Clients can also opt for a more human approach by signing up for an online consultancy. This option has reduced overhead costs, which makes it affordable compared to traditional consultancy services.
- In-Person Financial Consultants. An in-person consultancy provides more human interaction but attracts higher fees than the above.
What services does a financial consultant provide?
Financial consultants provide different services depending on their specialization. Some of the responsibilities of a financial consultant include:
Helping clients understand their financial position
A financial consultant works with their client to help them achieve their financial goals. That involves reviewing their assets, evaluating their income, calculating their expenditure, and determining their debts.
These professionals also work with businesses by assessing their financial position and recommending improvements to their financial future. That may involve checking the businesses’ cash flow, developing a budget, and strategizing ways to reduce debt.
Advice on risk management
Financial consultants work with individuals and businesses to help them understand the risks they face when investing in a particular asset. They also help them create a risk management plan to mitigate these risks.
Managing a client’s investments
Some consultants also manage their client’s investments and advise them on better ways to secure them. That can include helping them with estate planning and advising them on the best ways to secure their investments for better returns. Financial consultants can also advise buying and selling investments like stocks and bonds. They also help with estate planning, advising them on inheritances and ways to minimize taxes.
Tax planning and tax strategy services
Consultants with a chartered financial consultant designation offer specialized financial planning. Certified financial consultants provide tax planning services to individuals and businesses. They work with their clients to help them understand how certain financial decisions can have tax implications. For example, failure to file your taxes on time could lead to penalties. A financial consultant explains these implications and develops a strategy to reduce your tax liability.
Advising on insurance products
Financial consultants with a specific specialization advise clients on insurance and insurance products that could benefit the client in case of a sudden illness or death. Some licensed financial consultants sell life insurance, primarily if they specialize in insurance planning. They’ll advise you on a long-term care insurance policy and suggest other ways to plan for your retirement. Consultants can also help people determine the amount of savings to cover living expenses to ensure a comfortable retirement.
How does a financial consultant differ from a financial advisor?
In most cases, the terms financial advisor and financial consultant are used interchangeably. Although the two are mainly involved in advising on finances, they differ. Here’s a look at how these two vary.
They have different certifications
Most financial advisers and consultants attain a CFP or certified financial planner certification. The specialization ensures that these professionals gain enough knowledge to provide financial advice to clients. They must pass an exam and have the required experience to practice. However, some financial consultants differentiate themselves by earning a ChFC or a chartered financial consultant certification. Unlike CFP, individuals sitting for the ChFC don’t have to sit for an exam but must take extra elective courses. Financial consultants with ChFC can also provide specialized financial planning services such as estate or retirement planning.
Apart from certifications, financial advisers and consultants have various licenses. Most have series 66 and 7 licenses under FINRA, which regulates broker-dealers. It is always advisable to ask your financial consultant about their certifications and check their background to determine if they fit your financial needs correctly.
Client base
Financial consultants work with clients like non-profit organizations, businesses, government agencies, and other third-party firms. However, financial advisers mainly focus on individual clients, although they may be employed. Advisors also charge a fixed fee for their services, or they can receive a commission when they sell investment products. In contrast, consultants are paid a flat fee or an hourly rate and are not eligible for a commission on any investment product sold. That is to ensure they can offer unbiased advice. Sometimes a consultant may get a percentage of the assets managed if dealing with portfolio management.
Their speciality and approach to financial situations
Financial consultants are more prevalent and can work through a consulting firm or independently. Their main work revolves around assisting clients in meeting specific financial goals and designing financial plans for individuals and company executives. You’ll also find that most finance consultants handle the buying and selling of investments, not so much financial planning. A good example is when a client wants to determine what insurance product to purchase. The consultant can meet with the client and advise them on specific insurance; however, financial advisers are more thorough as they evaluate your financial standing and other factors before recommending a product.
Financial advisers differ from consultants as they often work at an investment bank or as asset managers. They primarily focus on assessing the financial health of individuals and provide extra financial planning services. It is possible to find an adviser that has been with the same client for years. These professionals are also easily approachable, and you can have one-on-one meetings with them, unlike some financial consultants.
What are the principles of a financial consultant?
Financial consultants have guiding principles, which include:
Integrity
Under CFP’s board code of ethics and standard conduct, all certified financial planners must act with integrity, honesty, and competence. Financial consultants work with people from diverse backgrounds, advising them on what products to invest in and how to manage their current investments. Professionals must be honest with their clients and practice full disclosure. Consultants recommend what’s best for the client without putting their interests first.
It’s unethical for a consultant to engage in any practice or business which would deceive a client. Clients should be able to trust the professional judgment and recommendations they are given.
Competency
The best way to build client credibility is to be knowledgeable in your field. Financial consultants must acquire and apply relevant knowledge in key areas to help their clients make informed decisions. Besides obtaining the necessary certifications, consultants can also polish their skills by attending seminars, listening to experienced consultants, or reading relevant textbooks.
It’s easier to establish trust with a client if they are comfortable with how the work is handled. As a professional, exercising professional judgment in your line of work must never be compromised.
Confidentiality
Client confidentiality is critical when working as a financial consultant. Examples of confidential information include social security numbers, credit reports, investment strategies, credit reports, and transaction history. Keeping the client’s information secure prevents identity theft and fraud. Maintaining confidentiality helps to build trust between clients and financial institutions. It’s also part of complying with legal and ethical obligations.
Objectivity
Being objective as a financial consultant is essential as it tells your clients you can provide unbiased information free from external or internal influence. Objectivity requires consultants to exercise sound professional judgment and manage any conflict.
When clients trust you to provide accurate data, they can make the best decision based on their circumstances.
A fiduciary standard of care
A financial consultant should follow a fiduciary standard of care. That means that the professional should act in the best interests of clients.
Most financial advisors will advise their clients on a suitable investment, which may not be in the client’s best interest at the time of recommendation. A knowledgeable consultant should always follow a fiduciary standard of care as a guiding principle when working with individuals or businesses.
Diligence
Financial consultants need to fulfill their professional commitments in a thorough and timely manner. That also includes taking time to plan, supervise and deliver financial advice.
Maintaining a professional reputation also helps to build trust and promote a long-term relationship.
Fairness
Fairness involves treating other people how you’d also wish to be treated.
Being fair requires financial advisers to deliver services according to a client’s expectations. They should also be open and honest about conflicts of interest and learn how to handle prejudices.
Professionalism
Finance professionals need to act in a manner that demonstrates impeccable professional conduct. That requires you to work in a dignified manner and show respect to your clients and colleagues. It involves complying with professional requirements and regulations.
Professionalism also entails delivering targeted solutions and sound advice to serve the client’s best interest.
Level of service
Knowledgeable financial consultants should deliver attentive and individualized service every time. That involves listening to their client’s concerns and learning what is important to them. With that information, the consultant can provide unbiased advice and the best service to each client.
Most consultants take a holistic approach, which involves reviewing all the clients’ assets and developing a financial plan customized to their needs. That also helps to establish a long-term relationship.
Accountability
Financial consultants need to take responsibility for the advice they offer clients. Sometimes you must admit when things don’t go as planned instead of waiting for a client to hold you accountable.
Accountability for your decisions and actions also seals your reputation and allows your clients to trust you to deliver.
Final thoughts
Financial consultants are trained and certified to offer advice on different financial goals. They can provide various services, from retirement planning, tax planning to estate planning. These professionals are governed by integrity, accountability, professionalism, and diligence principles that help them provide unbiased advice to individuals and businesses.
Take time to ask for recommendations when working with a financial consultant. Ensure that the person you settle for is experienced and has the necessary certifications to work in this field.