What Is an Investment Consultant?

An investment consultant refers to a professional who provides investors with investment products, advice, and/or planning. Investment consultants do in-depth work on formulating investment strategies for clients, helping them fulfill their needs and reach their financial goals.

Investment consultants have experience in many different facets of the financial world, and may work for a bank, investment firm, or on their own. They are normally educated in a financial field, must have experience in the financial services industry, and must be licensed in order to work.

Understanding Investment Consultants

An investment consultant works with clients to form an investment strategy. Clients may be individuals or businesses—small businesses to larger corporations. The investment consultant is responsible to review the client's financial situation and come up with a plan to meet their goals. Some of their duties include actively monitoring the client's investments and working with them as their financial objectives change over time. Because of the nature of their work, many investment consultants develop a long-term working relationship with their clients.

These financial professionals work in a variety of settings including banks, asset management firms, private investment companies, or they may work independently. They provide an important service to their clients, helping them organize their finances and improve their
financial situation. Many investment consultants are often experienced in tax and estate planning, asset allocation, risk management, educational and retirement planning.

Becoming an investment consultant requires a college degree and work experience. Some of the important skills an investment consultant needs is problem solving, math, and the ability to communicate. This last skill is important because consultants may need to explain complex financial ideas to their clients.

Investment consultants receive remuneration through charging fees and/or commission, and may also receive a set salary. Payscale.com reported the average annual salary for an investment consultant was $67,984, which translated to $21.99 an hour. The closest occupation to an investment consultant under the U.S. Bureau of Labor Statistics is a personal financial advisor. The median pay for a personal financial advisor in 2018 was $42.73 per hour or $88,890 per year. The job market for personal financial advisors was expected to grow 15%t from 2016 to 2026.

Key Takeaways

  • An investment consultant refers to a professional who provides investors with investment products, advice, and/or planning.
  • They do in-depth work on formulating investment strategies for clients, helping them fulfill their needs and reach their financial goals.
  • Some of their duties include actively monitoring the client's investments and working with them as their financial objectives change over time.
  • Becoming an investment consultant requires a college degree and work experience, and they must be licensed to work.

Types of Investment Consultants

Investment consultants fall into four main categories:

  • Registered Representatives: These are investment consultants who get paid a commission to sell investment and insurance products such as stockbrokers and banking representatives. They work for what is known as sell-side firms—financial organizations that create, promote, and sell financial instruments. Registered representatives typically hold a Series 6 or Series 7 license.
  • Financial Planners: Investment consultants who manage their clients’ personal finances are known as financial planners. They may develop a financial plan to help a client manage college tuition fees. Qualified financial planners hold a Certified Financial Planner (CFP), Certified Public Accountant (CPA), or Personal Financial Specialist (PFS) certification.
  • Financial Advisors: These investment consultants give general and personalized financial advice. They are compensated through charging fees and typically hold a Series 65 or 66 license.
  • Money Managers: Investment consultants who make investment decisions on behalf of the client are called money managers. Money managers work for asset management firms, fund managers, or hedge funds, which are referred to as buy-side firms.

Qualifications for Investment Consultants

Investment consultants usually have a bachelor’s or graduate degree in finance-related disciplines such as accounting, business, or economics. Although it's not a requirement, they may also complete coursework in investments, taxes, risk management, and estate planning.

Investment consultants must be licensed to work in the United States.

In the United States, most investment consultants are licensed by the Financial Industry Regulatory Authority (FINRA), which is an independent regulator. The Securities and Exchange Commission (SEC) oversees the activities of investment consultants from the government level.

Choosing an Investment Consultant

Research an investment consultant's background before hiring their services. Review their compliance records and check for any serious breaches. For instance, check to see if they have been investigated for insider trading. It’s also prudent to check their fiduciary status and criminal record.

Check an investment consultant’s certifications to ensure he or she holds the correct licenses. Assess their education and association memberships to determine if they have the necessary experience and expertise.

Before selecting an investment consultant, it's always a good idea to organize an in-person meeting to determine if they understand your financial goals and are accessible. Ask about fees and whether they receive any commissions.