If you are looking to hire freelance financial consultants, you’re weighing more than your individual budget–these professionals can help you achieve your long-term goals, such as saving for retirement, and college, or making investments that can result in generational wealth for your family. These are no simple or small feats!
What does a financial consultant do? A financial consultant is a professional who provides clients with financial services based on their unique financial situation. They take a holistic approach to your finances, carefully analyzing your current expenses, assets, and income, and then compare those numbers to your goals.
When you’re hiring, you may wonder what the difference between a financial consultant versus a financial advisor is. In truth, both of these roles achieve similar objectives, but financial consultants generally have credentials and licenses to provide premium advice and be able to manage money and investments on behalf of their clients. In most countries, financial consultants must complete specific training in order to provide advice and guidance.
Due to their expertise, financial consultants in the US earn on average $94,170 annually as of 2021, or an hourly rate of about $43 as of 2015.
Average Cost to Hire Financial Consultants
What financial advisors make annually doesn’t necessarily translate to how much you will be paying them. Depending on the size of your investment, consultants typically charge a fixed-rate fee between $7,500 and $55,000, or they may charge 1.02% of assets under management (AUM) for ongoing portfolio management.
What does ‘AUM’ mean? ‘AUM’ refers to money that you have designated to your consultant to manage or invest. If you allot $5,000 for investing, your consultant would take home $51 of that.
In this arrangement, your consultant benefits when you make bigger returns on your investment. Say that the next quarter, your $5,000 doubles to $10,000 due to sound investment decisions–your consultant would then take home $102. The more money your consultant makes for you, the more money they make for themselves.
A Breakdown of Fee Structures
However, there are other ways consultants charge for their services. This includes:
- Hourly rates
- Commissions
- Performance-based fees
- Percentage of AUM
- Fixed Fees
Financial consultants may charge one of these types of fees or rates or a combination of them.
Hourly Rates
When a consultant charges you per hour, this is typically for special projects or only consulting (meaning, they do not make or manage investments on your behalf).
Commissions
Consultants who make money from commissions only receive compensation when a purchase or trade is made. This is most common when hiring a financial consultant for investment management purposes.
Fixed Fees
The consultant charges you a predetermined amount for a service, such as drafting and finalizing a financial plan. Typically, these financial consultants will have some form of a rate card, detailing services they can provide and how much each costs.
Performance-Based Fees
In this method of payment, the consultant typically charges a fixed fee, and an additional fee is charged if a defined benchmark is outperformed. This should be detailed prior to receiving services and should be stated in your contract.
Percentage of AUM
As mentioned above, consultants earn a percentage of the total assets of a client’s account. This can follow a tiered schedule, where the percentage they take lowers the more money is in the account. Put simply, the higher the asset level of the account, the lower the percentage fee you’ll pay.
Fee-Only Versus Fee-Based Consultants
When you’re hiring a financial consultant, you want to know they are truly looking out for you and your finances, rather than trying to make a quick buck. Fee-only consultants earn money exclusively from the fees their clients pay, meaning they don’t receive other forms of compensation or commissions by making certain trades or selling you specific financial products. They still can have conflicts of interest, but they must disclose them prior to you engaging in business with them.
Fee-based consultants, on the other hand, receive a combination of their income from the fees their clients pay and commissions or compensation from a third party. This is more common when your hired consultant is dual-registered as a broker-dealer or insurance agent.
Dual registration allows them to sell affiliate products, policies, or investments for additional compensation. Because this can present a conflict of interest, these consultants should disclose this even though they must abide by fiduciary duty.
Find a Consultant In Your Budget at Guru
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Simply use our search function and refine your search by selecting a category. Need a consultant for financial planning, an international accounting specialist, or insight into investment banking and management? Our freelancers have you covered. If you’re ready to make your financial dreams come true, get started with Guru today!
