Hello all, welcome to this great write-up on Financial Advisors vs Consultants.
This write-up will help broaden your knowledge on the differences between Financial Advisors and Consultants, the educational qualifications for both, and their earning power.
In this article, we’ll discuss in detail:
By the end of this article, you will understand all the fuss regarding Financial Advisors vs Consultants.
Financial Advisors vs Consultants – Introduction
The majority of people interested in financial services will never differentiate Financial Consultants from Financial Advisors.
Some will understand that they fulfill different roles, while others say that these two professionals do the same thing but differ in name.
The Financial Advisor
Financial Advisors offer their services to people who need to understand their current financial situation, and they create plans to help these people meet their short and long-term financial goals.
People seek Financial Advisors when they want financial guidance on paying for college, saving for retirement, meeting regular expenses, or beginning investing.
It is also common for Financial Advisors to meet and offer services to clients making major life transitions like marriage, job transitions, divorce, the birth of a child, and others that will impact an individual or household finances.
Most Financial Advisors are also licensed to buy and sell financial products.
In some cases, this might be their primary service.
It is not uncommon for bankers, security analysts, insurance agents, and other financial professionals to call themselves financial advisors.
This is common even though they hardly spend quality time advising clients.
The Financial Consultant
Financial Consultants are Personal Financial Advisors who help clients grow wealth by developing comprehensive, long-term, and practical financial strategies to boost their investment portfolios.
They view personal finance in the same manner that analysts view large financial systems, focusing on strategizing, designing action plans, and accountability.
You will find Financial Consultants offering financial planning services.
Still, most of them strongly focus on purchasing and selling investments such as stocks, mutual funds, ETFs, bonds, money market accounts, CDs, and turning complicated financial concepts into workable strategies.
They will closely work with Investment Managers, Accountants, and other professionals.
Educating clients by hosting seminars, having one-on-one conversations, and sharing relevant news items is common practice with consultants.
They strive to maintain long-term relationships with their clients.
Financial Advisors vs Consultants – The Difference
It is evident that as much as Financial Advisor and Financial Consultant terms are used interchangeably, they might be the same or not.
Both professionals help their clients make informed financial decisions.
We can say that Financial Consultants offer services as personal Financial Advisors.
“Personal” is the keyword here.
Financial Consultants offer personalized advice that helps individuals grow their wealth through carefully-thought financial strategies.
They analyze a client’s situation and focus more on strategic decision-making on personal finance and investing.
The Consultant is all about creating financial action plans and rebalancing those plans based on current economic changes and clients’ life changes.
In contrast, Financial Advisors help clients in their journey to understand the nitty-gritty of personal finance and improve their financial situation.
Advisors help clients meet both long-term and short-term financial goals.
Financial Advisors offer helpful advice for anyone with long-term financial goals.
They are also licensed to sell financial products like life insurance, annuities, and so on.
Financial Consultants can end the relationship with the client after the critical financial situation has been addressed.
On the other hand, the Financial Advisor works with the individuals and family units for an extended period that could run several years.
This means that Financial Advisors perform a deeper dive into client finances compared to Financial Consultants.
Professionals in the industry might have different opinions about these two financial experts, with some even saying that there is no difference.
But the truth is that the focus and approach that both the Financial Consultants and Financial Advisors take varies between professionals and roles.
It is not uncommon to find both consultants and advisors engaged in long-term financial strategies with clients.
Difference With Financial Planners
The question of whether Financial Advisors and Consultants are the same as Financial Planners is also common.
They might have similar certifications, but the difference lies in their primary role to clients: to offer workable money management plans to achieve long-term financial goals.
That might sound a lot like what an Advisor and a Consultant do, but done differently.
In the end, it is how the financial professionals choose to brand themselves and how they carry out their roles.
Advisors vs Consultants – The Clients
When it comes to clients, Financial Advisors’ clients and Financial Consultants’ clients are the same.
The difference comes in how they find their clients.
The Financial Consultant doesn’t have to find their clients because most don’t prospect, especially under giant financial firms.
Financial Advisors, on the other hand, can find their clients and earn more money than consultants.
They also strive to keep that relationship with the client going for a couple of years.
While the Consultant will earn a base salary seeing clients that the firm has already prospected, the advisor’s earning potential is unlimited.
This is according to the top financial firms such as Fidelity, Schwab, or Vanguard.
Such firms treat these two positions very differently.
The Educational Qualifications
It is possible to become a Financial Advisor or a Financial Consultant by achieving a Master’s degree in finance, a bachelor’s degree in accounting, economics, business statistics, or finance.
But, there are financial firms that hire Financial Advisors and Consultants without related finance degrees or any degrees as long as the individuals have extensive experience in sales, finance, and entrepreneurship.
Most Financial Consultants and Advisors have graduate degrees, but it is not uncommon to find Consultants and Advisors training as generalists.
Still, some students specialize in investment management, finance management, retirement planning, and wealth management while studying for Master of Finance degree programs.
Consultants vs Advisors – The Certifications
Whether you are a Financial Advisor or a Financial Consultant, you will need the same certifications to conduct your business with clients.
The first step for both is earning the Certified Financial Planner(CFP) certification and the Chartered Financial Consultant (ChFC) certification.
For these professionals to earn the CFP designation, they must have three years of work experience and complete an education program requiring them to pass the certification exam.
Maintaining these certifications by both clients requires them to meet the continuing education requirements and abide by the CFP Board’s code of ethics.
It is also a major requirement that Certified Financial Planners become fiduciaries.
This means that they pledge to act in the client’s best interest always.
As for the ChFC candidates, nine courses must be taken that focus on retirement planning, insurance, estate planning, income taxes, and investments for successful earning this certification.
Seven of these courses are also part of the CFP certification program, making it easier for advisors and consultants to earn both certifications simultaneously.
There are other certifications for both Financial Consultants and Financial Advisors, and they are as follows:
- Personal Financial Specialist(PFS) certification
- Certified Investment Management Analyst(CIMA) designation.
- Certified Public Accountant or Personal Financial Specialist (CPA/PFS) designation.
- Retirement Management Analyst (RMA) designation
- Chartered Investment Counselor(CIC) designation
- Retirement Management Analyst(RMA) designation
- Certified Fund Specialist(CFS) designation
- Retirement Income Certified Professional(RICP) designation.
- Chartered Market Technician(CMT) designation
- Retirement Income Certified Professional (RICP) designation
Some Financial Advisors also go that extra mile to get Financial Industry Regulatory Authority (FINRA) licenses.
However, not all financial firms make it mandatory for their Advisors and Consultant to obtain FINRA licenses.
Still, they must be licensed if a financial professional sells annuities and all the other insurance-linked financial products.
Financial Advisors vs Financial Consultants – Salaries
As much as Financial Advisors and consultants earn the same degrees and certifications, their salaries differ significantly.
According to various career sites, the average financial consultant salary is about $89000, while the average Financial Advisor salary is about $67000.
The reason for this vast difference is not precisely defined.
This could be so because the high-end financial and brokerage firms hire Financial Consultants and pay them a salary, while most Financial Advisors own their firms or work for small businesses.
Another reason could be that the above salaries indicate the base pay, which Financial Consultants are limited to.
On the other hand, Financial Advisors earn that base pay plus bonuses that make up a considerable percentage of their annual income.
The truth is both Financial Advisors and Financial Consultants earn in various ways.
Some will earn a higher base pay plus limited bonuses, while others will make most of their income in variable compensation.
Variable pay is determined by how much money they earn for a firm if they work under one and the overall customer satisfaction.
There are still others that are fee-only Advisors and will be paid an hourly fee or on retainer.
Two Titles, Same Position?
Many ask whether a Financial Advisor and a Financial Consultant are two titles with the same position.
The mind-boggling answer is that in some instances, they are, and in others, they are not.
This will all depend on who you ask.
There are no legal definitions for either of them, and this means that independent professionals and marketing directors at brokerage firms will use whichever term they think will sound appealing to potential clients.
For example, Schwab hires Financial Consultants, Vanguard hires Advisors, while Fidelity hires both.
This is no different from companies that hire Investment Advisors, Wealth Managers, or Brokers.
The terms Financial Advisor and Financial Consultant don’t say anything about the professional’s approach to licensure, finance, practice standards, specialty area, and legal obligations.
With the proper training and certifications, any financial professional can work in any position.
This means that these titles are for the same position even though other firms might treat the roles differently, but the truth is both Financial Advisors and Financial Consultants are doing similar things for their clients.
Financial Advice Should Be Tailored To A Financial Situation
Whether a client is seeing a Financial Advisor or a Financial Consultant, it is always essential to receive financial advice tailored to their financial challenges and life situation.
A Consultant and an Advisor can do both.
It is vital that in the end, whatever tags that the professional financial label themselves with, they must deliver what the client wants.
They must also be so good at their job that the clients will always want to seek a solid financial plan and not simply opt for one of those Robo-Advisors.
Above all, the professional must be a Registered Investment Advisor to offer a tailor-made financial plan to every client to help them build wealth.
Financial Consultants and Financial Advisors are a little similar but not the same.
The distinction between the two is mainly based on their roles to their clients.
There is not much difference because it all comes down to what they do in their environment.
We have seen their differences, salaries, approach to financial situations, clients, qualifications, and certifications.
It all depends on what each professional chooses to be called and what they do.
Client relationships will also determine this, as we have seen, with some having long-term relationships while others only short-term until the financial service has been rendered.
Though it is hard to distinguish them in terms of what they do, professionals in this field still love to be referred to specifically in either of these titles.
Perhaps a question of Financial advisor vs Consultant, which one is better?
Hard to tell when both titles comprise investment advisors who do most things, such as offering investment advice the same way.