What is a financial consultant and do you need one?

Believe it or not, the financial services industry has approximately 200 professional designations. 

Some have high standards or indicate specific expertise. For example, if you work with a professional who’s a CERTIFIED FINANCIAL PLANNER™ or a Certified Public Accountant, you’ll learn a lot about their knowledge, expertise, and professional code of ethics.

If you choose to work with others, such as a Financial Consultant or Financial Coach, you'll have much less certainty about what they do, how ethical they are, or how much knowledge and expertise they have.

The reason is simple: some designations are meaningless in the financial services industry and have no professional standards. For example, anyone can call themselves a financial coach or advisor with minimal credentials (such as a bachelor’s degree) and little or no financial experience.

This article will outline some of the most common professional designations and what questions to ask before working with a finance professional.

What is a financial consultant?

Some professionals use the term financial consultant as a generic description of what they do. However, this, along with many other titles, is not recognized by a certifying organization. Therefore, anyone can use it to look more credible than they might be.

However, "Chartered Financial Consultant (ChFC®)" and "CFP® professional" are both examples of professional designations that can only be used by advisers that have gone through rigorous training and testing. Both designations are granted by organizations with rigorous standards. That's why they are considered the gold standard in financial planning. 

To further explain what we mean, let's dig a bit deeper. Here’s what what goes into acquiring these designations and why they should matter to you:

• Professionals who hold either designation are legally considered fiduciaries. By law, fiduciaries must always put their client's interests ahead of their own and only make recommendations that are best for the client.
• Both designations require that professionals adhere to a strict code of ethics.
• Both designations require that planners demonstrate a wide range of financial knowledge:
  • Investment management
  • Retirement planning
  • Estate planning
  • Risk management and insurance
  • Taxes
  • Employee benefits
  • Psychology of money

Functionally, a CFP® professional and a ChFC® provide similar services: both must have a certain amount of professional experience and keep their certifications current through annual continuing education classes. They also differ from every other professional designation in significant ways.

What is the difference between a financial consultant, financial advisor and a Certified Financial Planner?

If a CFP® professional and a ChFC® are the gold standards of financial planning, what do the other 200+ professional designations mean?

Many highlight a professional’s specific focus and are self-explanatory, such as:

• Accredited Estate Planner
• Certified College Financial Consultant
• Registered Insurance Planner

But what does it mean to be Bucket Plan Certified? Or to be a Chartered Financial Engineer? And will an Accredited Estate Planner know more about estate planning than a CFP® professional or a ChFC®?

Because the requirements and standards for professional designations vary widely, other professionals may or may not be highly skilled in their listed areas of expertise. But, more importantly, there's one compelling reason to choose a financial advisor with broad knowledge and expertise over someone with a narrow specialty.

Why planning for your entire life matters

Financial planning should include every aspect of your life that money touches, not just one piece. 

Financial decisions aren't made in a vacuum; many involve important decisions and tradeoffs. 

• Should you put more away for your children's education or boost your 401(k) deductions? 
• Do you need life insurance, and if so, what kind and how much?
• Which debt should you pay off first? 
• Should you consider changing your workplace benefits during the next open enrollment period?

These questions (and many more) need to be answered to round out your complete financial picture.

If you take a piecemeal approach, you’ll likely find it impossible to complete your puzzle. That’s because everything your money touches is interconnected.

Ultimately, you don't want someone to just advise you on your investments or retirement and leave you to figure out the rest. 

Instead, you want a resource who can help you make important financial decisions, ensuring those decisions align with the life you want to live.

If you’re ready to start thinking seriously about working with a financial planner, how do you choose one? You can start by asking the right questions.

How to choose the right financial planner

Understanding a planner's knowledge, expertise, and experience is only the beginning. 

You also want to know how they charge, what services they offer, and what you should expect if you become a client.

There are 10 important questions to ask before you choose a financial planner. Here are some of the key ones:

• Is there a minimum asset amount required to work with you?
• What advice is included?
• Are there any hidden fees, add-ons, planner commissions or product purchases required to work with you?
• How much will I pay for your service annually, in dollars, not percentages?

Many planners require you to have a six- or seven-figure amount to invest. 

Moreover, they'll typically charge a percentage of those assets (e.g., 1-1.5%) as a fee. 

That means if your investments increase in value, you’ll have to pay more, even if you’re not getting any additional attention or services. 

Some planners will only give advice about the investments they manage on your behalf. So if you want advice on your workplace retirement plan they don't manage, you may be out of luck.

Every financial planner at Facet Wealth is a CFP® professional, backed by additional in-house experts on everything from estate planning and equity compensation to military benefits and insurance. 

All are fiduciaries, meaning they put your interests first. None earn commissions or have anything to sell beyond their guidance, support, and expertise.