The terms financial consultant and financial advisor are often used interchangeably, and different financial services firms may prefer to use one over the other. But while there can be a lot of overlap between the two, generally speaking, there are subtle but recognizable differences. Understanding which role is played by each type of financial expert can be important in selecting the right one for your needs. Here’s an overview of the main distinctions between these two types of financial experts.
What Is a Financial Advisor?
A financial advisor is a broad term that encompasses professionals who help manage your finances, including investments, taxes, estate planning and retirement planning. They provide ongoing financial planning and advice, building long-term relationships with their clients. Financial advisors assess your financial situation, understand your goals and help devise a comprehensive plan to achieve them.
What Is a Financial Consultant?
A financial consultant, in comparison, often focuses on specific areas of your financial life. They are typically sought after for specialized advice on particular financial projects or goals. The role of a financial consultant is more about providing expertise and guidance on a specific financial issue rather than offering ongoing financial management and planning.
Financial Consultant vs. Financial Advisor: Services Offered
While both financial consultants and financial advisors offer financial planning services, their scope and approach can differ.
Financial Consultant Services
Financial consultants usually focus on specific financial concerns. Their services might include offering advice on a major financial decision, like a home purchase, business investment or a particular investment strategy.
They may be brought in for a one-time consultation or for ongoing advice and services, depending on the client’s needs. Some may also provide more comprehensive financial planning services, but this usually spills over into the realm of a financial advisor.
Financial Advisor Services
Financial advisors typically provide a wide range of services, including investment management, retirement planning, tax planning and estate planning. They often work with clients over an extended period, adjusting financial strategies as the client’s life circumstances change.
They may work with outside experts, such as CPAs or estate attorneys, to provide holistic financial planning for their clients. Some may even enlist the aid of various financial consultants who are specialized experts, depending on the situation.
Financial Consultant vs. Financial Advisor: Qualifications
It might be surprising to learn, but there are technically no qualifications to become a financial consultant or a financial advisor. Anyone can call themselves by whichever term they choose.
However, to engage in certain activities, such as selling securities, financial professionals do require a Series 7 license. Those who act as a fiduciary and manage assets for clients with the obligation to act in their best interest may need to register with the SEC as Registered Investment Advisers, in addition to any applicable state licensing requirements.
Financial Advisor Certifications
Financial advisors who provide comprehensive financial planning typically also hold some type of advanced personal finance license or accreditation, such as the following:
- Certified Financial Planner or CFP
- Chartered Financial Consultant or CFC
- Personal Financial Specialist or PFS
This can obviously get into a gray area, as a financial advisor holding the qualification of CFC may also hold themselves out as a financial consultant. But by and large, financial advisors will have additional accreditation or titles that are more retail-oriented.
Financial Consultant Certifications
Financial consultants, on the other hand, may either have no additional licensing or may have more advanced research and analytical designations, such as these:
- Chartered Financial Analyst or CFA
- Certified Public Accountant or CPA
- Certified Management Consultant or CMC
How To Choose Between a Financial Consultant vs. Financial Advisor
The choice between a financial consultant and a financial advisor depends on your individual financial situation and goals:
- If you need comprehensive, ongoing financial guidance, particularly if your financial situation is complex, a financial advisor may be more suitable.
- If you have a specific financial question or a short-term financial goal, a financial consultant might be the better choice.
Good To Know
It’s important to remember that financial professionals can use any term they like to describe themselves, from financial consultants or advisors to loftier-sounding terms like “First Vice President — Investments.”
When choosing a financial professional, look at the exact services they provide and whether or not those match up with your personal financial needs.
How About Financial Planners?
To further confuse the mix, many financial professionals prefer to use the term “financial planner.” Just as with the terms financial advisor and financial consultant, any financial professional can dub themselves a financial planner.
The main distinction between the three, once again, is in how each individual conducts their business. Many financial planners earn the CFP designation and call themselves financial planners, but this is also true of some financial advisors.
Final Take
The decision between a financial consultant vs. financial advisor comes down to the nature and scope of your financial needs. For ongoing, holistic financial planning and management, a financial advisor is typically the right choice. For targeted advice on specific financial matters, a financial consultant can provide the expertise you need.
If you’re looking for a professional with a specific certification, such as the CFP designation, then the actual title that he or she may use is not as important as selecting someone with those credentials. Understanding the specific services that a financial professional offers is the key to making an informed decision about which can best help you achieve your financial goals.
FAQ
Here are the answers to some of the most frequently asked questions regarding financial consultants vs. financial advisors.- Is a financial consultant the same as a financial advisor?
- No, a financial consultant and a financial advisor are not the same. Although their roles overlap in providing financial advice, a financial consultant often specializes in specific areas and offers targeted advice for particular projects or goals. In contrast, a financial advisor provides broader, ongoing financial planning and management services.
- What is the difference between an advisor and a consultant?
- The key difference between an advisor and a consultant lies in the scope and duration of their services. A financial advisor offers comprehensive, long-term financial planning, covering various aspects like investments, retirement and taxes. A financial consultant focuses on providing expert advice on specific financial matters or projects, often over a shorter term.
- What is the role of a financial consultant?
- The role of a financial consultant is to provide specialized advice and expertise on specific financial issues. This can include guidance on investment choices, business financial planning, risk management and other particular financial decisions or projects. Their role is typically more focused and project-based compared to financial advisors.
- Are financial consultants worth it?
- Whether financial consultants are worth it depends on your specific financial needs. If you require expert advice on a particular financial matter or project, a financial consultant can be very valuable. They can provide the specialized knowledge and insights you need to make informed decisions. However, for ongoing financial planning and diverse financial needs, a financial advisor might be a more suitable choice.
Elizabeth Constantineau contributed to the reporting for this article.