Financial Consultant—Definition and History
The name has changed but responsibilities are much the same
"Financial consultant" is a somewhat bygone title that's been replaced by "financial advisor" at most financial services firms. The job used to be known colloquially among the general public as a broker or stockbroker and the more formal job title used by most securities brokerage firms was account executive or registered representative.
The position has also been known as account executive, registered representative, and financial consultant.
Details, Responsibilities and Specialization
Back in the days when financial consultants were commonly found in financial services firms, their job duties were similar to what they are today. All that's really changed is the title.
Financial consultants counsel clients on investment opportunities and this requires staying up to the minute with fluctuations in the market. They have to be excellent salespersons, selling themselves, their firms, and their investment ideas.
Some financial consultants serve only individuals while others serve only businesses such as retail chains or institutions.
Compensation is typically by commission, but some financial consultants also earn salaries and are additionally compensated through bonus programs and profit sharing.
Overall, pay can range from as little as $36,000 a year for those who are just starting out and haven't yet established a significant client base to upward of $170,000 a year for more experienced consultants.
As in most professions, compensation tends to increase with the size and stability of the firm with average compensation falling in the neighborhood of about $57,000 across all firms.
The job requires dedication and a significant time commitment. Most financial consultants work in excess of 50 hours a week and working 80 hours a week is not uncommon.
A Little History
Most leading securities brokerage firms had launched what today would be called a rebranding of this position by the 1980s. They sought to upgrade its image and the title "financial consultant" was a popular choice at many firms.
The goal was to replace the old image of the transaction-driven salesperson with a new one of a highly-trained financial professional who offered valuable investment advice and counsel to clients.
"Financial advisor" started gaining in popularity by the early 1990s as yet another rebranding exercise. Many firms believed that this title conveyed the image that they wanted to project even more so than "financial consultant". It seemed to be an obvious evolution given that the advisory role was a key part of the "consultant" image.
Merrill Lynch Comes on Board
Interestingly, retail securities brokerage industry leader Merrill Lynch was the last of the major firms to make this change. Its compliance department was very powerful and very cautious back in those days.
Merrill Lynch feared that using the title "financial advisor" could have severe legal and regulatory ramifications by implying that the holders of that title would be subject to more stringent fiduciary standards.
The looser suitability standard traditionally guided the actions of brokers, account executives, and registered representatives.
Indeed, various business and financial publications such as The Wall Street Journal, Barron's, and Forbes regularly editorialized that the financial advisor title carried such an implication. The media called for a fiduciary standard to be imposed upon its holders.
As it turned out, Merrill's fears turned out to be unfounded and it eventually renamed its financial consultants as financial advisors.
As a source of additional confusion, the Chartered Financial Consultant (ChFC) designation is a credential for financial planners.