Financial Consultant

Types of Financial Consultants

There are several types of financial planners and consultants who offer services to businesses and individuals. Financial professionals are typically divided into two basic groups:

• Fee-Only Consultants: These financial gurus are entirely paid by the client and do not gain any money from product commissions or shares in investment portfolios. This practice ensures the consultant's first priority is providing the best possible service to the client rather than making portfolio or investment choices based on their own financial gain.
• Commission-Based Consultants: These planners typically have lower initial fees and derive some income as a percentage of the success they have with clients’ portfolios. While this motivates them to have a good sense of profitable investments, they may have a conflict of interest when it comes to the client’s long-term financial goals.

Specializations

Within the two basic categories for financial consultants, many financial specialists work only with certain financial situations. Individuals who seek advice on specific financial matters would do well to consult a professional experienced in that specific area, such as:

• Nonprofit Organizations: Planning for the growth and account management of charitable organizations.
• Small Businesses or Self-Employed Businesses: Planning for small to medium-sized businesses.
• Corporate Businesses: Planning for large businesses that require coordination among several departments and multiple budgets.
• Estate Planning: Managing accounts as they relate to wills, trusts, or advance funeral preparations.
• Retirement Planning: Managing short and long-term goals to meet anticipated retirement needs with a variety of financial approaches, such as 401(k) plans, IRAs, CDs, and ROTH accounts.
• Individual Household Planning: Establishing budgets and financial goals for a single individual, couple, or family.

What Does a Financial Consultant Do?

A financial consultant does more than draw up a budget. They work with clients to meet current and anticipated financial needs through a variety of investment, budgeting, and management techniques. The steps a financial advisor typically follows include:

Consultants should be familiar with all of the client's assets.

• Identifying reasonable financial goals such as home ownership, children’s educational needs, health expenses, debt repayment, or job advancement.
• Gathering and organizing data about the client’s current financial situation through tax returns, income statements, credit history, credit reports, etc.
• Analyzing data to determine how best to proceed while keeping in mind the client’s immediate financial needs.
• Recommending actions such as investments, retirement accounts, trusts, or other tasks to help the client achieve their financial goals.
• Assisting with the plan’s implementation by working with other professionals and establishing a timeline for making financial changes or commitments.
• Monitoring the plan’s progress and making adjustments as necessary to accommodate changes in the client’s financial situation.

Who Needs Consulting Services

Just because someone has amassed significant consumer debt or is struggling to save for a down payment on a house, it does not mean they automatically require a financial consultant. A financial planner can be useful, however, for people who...

• Are significantly in debt in a variety of ways but have a high income or other means to overcome their spending habits with objective assistance.
• Are starting new financial ventures that require significant organization, such as purchasing a franchise or starting a new business.
• Have income significantly higher than their expenses and wish to invest or otherwise manage their wealth to achieve greater financial success.
• May have a sudden substantial income increase from a promotion, inheritance, or other source and wish to manage it wisely but lack experience with high incomes.

And Who Doesn’t

On the other hand, people who are simply in debt from excessive purchases or poor choices may not need an expert financial consultant to assist with their financial needs. Because consulting services can be quite expensive and can lead to even further debt, it may be better to utilize other debt management services or become self-educated about how to reduce debt and budget household finances.

Choosing a Consultant

The most important consideration when choosing a financial consultant is to find one whose personal approach coincides well with your wishes so both parties are comfortable with the relationship. Different types of consulting certifications are available and include both educational and ethical requirements, and it is always wise to investigate a consultant’s credentials before hiring their services. Asking for references or previewing their portfolios can also help ascertain whether they will be a good match before agreeing to work with them.

Alternative Options

If hiring a financial consultant is not a suitable choice for you, there are a variety of other sources that offer financial planning advice. Tax preparation companies frequently offer free consultations, as do banks, mortgage lenders, estate lawyers, and loan officials. Debt consolidation and management companies may offer seminars or personal appointments for significantly lower fees than professional advisors, and for many individuals struggling with credit card debt, that may be the better option to meet their planning needs.

In Conclusion

Everyone should be involved in some manner of financial planning, from a simple savings or retirement account to a multi-tiered investment portfolio to manage multiple accounts and financial resources. The larger your financial commitments, the more suitable a professional financial consultant may be to your planning needs.