What Is an Investment Consultant?

An investment consultant is a financial 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. Many financial advisors and financial planners would be considered investment consultants.

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.

Key Takeaways

  • An investment consultant helps clients formulate and put into place investment strategies as well as construct and maintain their portfolios.
  • As with other financial advisors, investment consultants actively monitor their client's investments and work with them as their financial objectives change over time to adjust their holdings.
  • Becoming an investment consultant typically requires a college degree and some work experience. Professional investment consultants must also be properly licensed to advise clients.

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 for reviewing the client's financial situation and coming 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, and 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 experienced in tax and estate planning, asset allocation, risk management, education savings, and retirement planning.

Becoming an investment consultant requires a college degree and work experience. Some of the important skills an investment consultant needs are problem-solving, math ability, and communicating clearly and effectively. This last skill is important because consultants may need to explain complex financial ideas to their clients and be objective in the face of emotion.

Investment consultants receive remuneration by charging fees and/or commission, and may also receive a set salary. Payscale.com reported the average annual base salary for an investment consultant was $78,862, which translated to $37.91 an hour. The closest occupation to an investment consultant under the U.S. Bureau of Labor Statistics (BLS) is a personal financial advisor. The median pay for a personal financial advisor in 2020 was $42.95 per hour or $89,330 per year. The job market for personal financial advisors was expected to grow 4% from 2019 to 2029.

Types of Investment Consultants

Investment consultants may fall into four main categories:

  • Registered Representatives: These are investment consultants, including stockbrokers and banking representatives, who are paid a commission to sell investment and insurance products. 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. Their compensation is based on charging fees, and they typically hold a Series 65 or Series 66 license.
  • Money Managers: Investment consultants who make investment decisions on behalf of a client are called money managers. Money managers work for asset management firms, fund managers, or hedge funds, which are all referred to as buy-side firms.

Qualifications for Investment Consultants

Investment consultants usually have a bachelor’s or graduate degree in a finance-related discipline 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. In addition, investment consultants may seek professional credentials such as the chartered financial analyst (CFA) or certified financial planner designation.

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 they hold 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.