An investment consultant (also known as a financial advisor) is a financial professional who advises clients on financial goals. They support both individual and larger business clients in setting and meeting these short- and long-term goals. Basically, investment consultants are professionals who help their clients reach their financial objectives, whether that goal is to develop an investment strategy for an individual or maintain portfolios for a large corporation/endowment or other fund.

Investment consultants are professionals whose primary job or function is to provide sound financial advice.

There are various legislative and regulatory contexts from which they came about and within which they are required to work. Financial advisors in general became more prevalent with the start of the Employee Retirement Income Security Act (ERISA) in the 1970s. Beyond this, the Investment Advisors Act of 1940 requires that “firms or sole practitioners compensated for advising others about securities investments must register with the SEC and conform to regulations designed to protect investors.”

Becoming an investment consultant requires a bachelor’s degree and educational background in economics, accounting, business administration, finance or a similar topic of study. Investment consultants typically need detailed knowledge about investment theories and practices, financial markets and various business models.

It is also beneficial for investment consultants to have experience in or knowledge of tax planning, asset allocation, risk tolerance and management, retirement planning, estate planning, etc. This helps the consultant stay prepared and able to support a variety of clients at various stages in life or experiencing a range of financial situations or circumstances.

Sometimes, a client will allow an investment consultant to act as a fiduciary for them, giving the consultant permission to make financial decisions on the client’s behalf without needing to ask for prior approval or permission.

More specifically, here are four types of investment consultants:

Certified financial planner (CFP)

To become a CFP, you must complete a rigorous certification process that requires passing challenging exams. CFPs specialize in building comprehensive financial plans for clients.

Chartered Financial Analyst (CFA)

This type of financial professional has been certified by the CFA Institute to help value securities that investors buy and sell.

Registered Investment Advisor (RIA)

This is a company that employs individual financial advisors and is registered with the U.S. Securities and Exchange Commission (SEC) or individual states. Employees of RIAs have the ability to make investment decisions on clients’ behalf.

Chartered Financial Consultant (ChFC)

This type of advisor has been certified by The American College of Financial Services to help clients with a range of financial planning issues.

These investment consultants are different from wealth advisors or wealth managers, who work with high net worth clients, usually take a holistic look at clients’ finances, and focus on growing and preserving long-term wealth.

There are many different financial advisor licenses issued by the Financial Industry Regulatory Authority (FINRA) that allow advisors to provide different services to clients. Each license has different requirements, but all involve passing an exam and meeting continuing education requirements.

Here are five licenses that can help advisors offer a wide range of services:

Series 7

The General Securities Representative Qualification Examination—or the Series 7 exam—is the standard licensing exam for registered representatives. Passing the Series 7 allows an individual to become a stockbroker or security trader. You must work for a FINRA member firm to take the test and gain this license.

Series 6

The Investment Company and Variable Contracts Products Representative Qualification Examination is a consolidated exam similar to the Series 7 that qualifies individuals to sell mutual funds and variable annuities.

Series 63

The Uniform Securities Agent State Law Examination is an exam required by most U.S. states for individuals who wish to sell securities. This license is required in addition to the Series 7 for advisors to sell securities in most states.

Series 65

The Uniform Investment Advisor Law Examination is required for individuals who wish to become -investment advisor representatives and make investment recommendations to clients or manage investments on their behalf.

Series 66

The Uniform Combined State Law Examination is a combination of the Series 63 and 65 exams. Passing it allows an individual to work as an investment advisor representative and sell securities in most states.

A 2019 CFA Institute compensation study of charterholders and members found that investment consultants reported a typical, global total compensation of US$131,000 (US$106,000 base annual salary).

Becoming a financial advisor typically involves completing certain industry-specific training, passing an exam and obtaining licenses. If you’re ready for a career in finance, consider the requirements to be a financial advisor and follow these steps:

Step 1 - Get a Job

The first step toward becoming a financial advisor is to get a job at a firm that will sponsor you for your licenses. Some firms hire people with no experience in the financial industry and train them to become financial advisors. However, these firms are usually looking for people with strong sales skills, so if you have experience selling products or services, include it in your resume and during your interview.

step 2 - Pass Necessary Licensing Exams

For anyone looking to enter the financial advising industry, passing the required licensing exams is an essential first step. This usually requires passing the FINRA Series 7 Exam as well as additional exams based on the types of products and services you want to sell. For example, if you want to sell securities in most states and recommend securities to clients, you’ll need to pass the FINRA Series 66 Exam.

step 3 - Undergo a Background Check

As part of the registration process as a new financial advisor, you’ll need to undergo a background check. Your firm will coordinate this process—though it may take a few weeks and you may be restricted in your activities until it’s completed. For example, you may have to work under the supervision of a fully-licensed broker (or be restricted from building a book of business) until your background check is processed.

step 4 - Build a Book of Business

Any financial advisor will tell you that building a strong book of business is a key element to becoming successful. Essentially, a book of business is your clientele—the people or businesses that you provide advice and financial services to. And just like any good relationship, it takes effort to build and maintain a strong book of business.

Here are a few tips for how to do just that:

• Always provide top-notch service. Your clients should feel like they are your top priority, and that you always have their best interests at heart.

• Be responsive to your clients’ needs. They should feel like they can reach out to you anytime, and that you will get back to them promptly.

• Foster relationships with other professionals in your field. These connections can help you refer clients to others and vice versa, growing your businesses together.

step 5 - Stay Current with Continuing Education

Once they’re licensed, financial advisors are required to adhere to strict firm and regulatory requirements to maintain their licenses. Some of these requirements include completing continuing education courses and passing routine exams. While meeting these requirements can be time-consuming, it’s generally not challenging and is essential for financial advisors to stay up-to-date on the latest regulations and best practices.

If you are planning on hiring an investment consultant, below is a helpful template to get you started:

“We are seeking a financial ace with excellent interpersonal skills for the role of an investment consultant. The investment consultant will be responsible for working with clients to understand their investment goals, consistently monitoring investment markets and client portfolios, managing and preparing for risk, and making adjustments to investment strategies.

A successful investment consultant will be highly analytical and have a mind for strategy while possessing good client-facing skills as well as good written and verbal communication.”

Investment Consultant Responsibilities

• Working with clients to identify their unique investment goals

• Formulating investment strategies based on client goals

• Issuing client documents, including monthly or yearly portfolio reports

• Managing client documents for tax reporting

• Suggesting investment products based on client needs

• Analyzing various markets and conducting research

• Making adjustments to client investments over time, such as switching to a lower-risk investment as a client reaches retirement age

• Communicating openly, consistently, and honestly with clients and always keeping them informed about changes to your investment strategy

Investment Consultant Requirements

• Bachelor's degree in finance, accounting, economics, or a related discipline.

• FINRA license

• 2–8 years' experience in a finance position

• Expertise in tax financial regulation laws

• Outstanding interpersonal skills

• Excellent written and verbal communication skills

• Confident decision-making abilities

• Analytical mind with good problem-solving skills