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Sometimes we need some expert advice about our finances. That's where a financial counselor can come in. A financial counselor is a professional who can provide educational and emotional support to objectively help you manage your money. They won't help you pick specific investments or make trades on your behalf, but they can help you make a plan to reach your financial goals. Financial counselors can be especially helpful if you're facing financial challenges or want to improve your money management skills.
Follow along to learn about what a financial counselor does and how to find one.
What Do Financial Counselors Do?
A financial counselor combines the skills of an investigator, educator and coach. They dig into your finances to assist you with everything from creating a financial plan to paying off credit card debt. A financial counselor can:
- Analyze your financial situation
- Assess your financial habits
- Determine your attitudes toward money
- Find out your financial goals
- Come up with a strategy to achieve your financial goals
- Make suggestions for responsible money management
- Recommend ways to reduce or eliminate debt
- Devise a plan for building up savings
- Support you as you tackle financial challenges
- Help you file tax returns
Financial counselors specialize in putting you on a path to your financial goals. They don't, however, help you choose specific investments, as other types of financial professionals do (more on this below). Instead, financial counselors are there to help those who want to improve money habits, get out of debt and learn ways to achieve financial milestones.
Essentially anyone can call themselves a financial counselor. That's why it's important to work with a financial counselor accredited by the Association for Financial Counseling & Planning Education (AFCPE). To check whether the person you want to work with is an accredited financial counselor (AFC) certified by AFCPE, visit the verification section of its website.
How Much Does It Cost to Hire a Financial Counselor?
Generally, financial counselors provide free or low-cost services to clients. That differs from financial advisors and financial planners, who typically assist with investment strategies and may charge high one-time or annual fees, or a percentage of an investment portfolio's earnings.
Financial Counselor vs. Financial Advisor vs. Financial Planner
A financial counselor isn't the same as a financial advisor. The term "financial advisor" can cover several different types of professionals who provide financial advice and guidance. Financial advisors typically charge a fee for their services, which can include everything from providing a financial roadmap to managing a client's investment portfolio.
A financial planner is a type of financial advisor who helps create a comprehensive financial roadmap that normally includes a retirement blueprint but also can touch on matters such as buying a home or a life insurance policy.
The "financial advisor" category can include certified financial planners (CFPs), chartered financial analysts (CFAs), and registered investment advisors (RIAs).
Here are some of the differences among financial counselors, financial advisors and financial planners.
- Wealth guidance: Financial advisors and financial planners focus primarily on helping clients build wealth, while financial counselors concentrate on assisting clients with tasks such as budgeting and debt reduction. Some financial advisors may require you to have a certain amount in assets before accepting you as a client.
- Professional designation: A financial advisor may be a certified financial planner, chartered financial analyst, or registered investment advisor. A financial counselor typically does not hold any of these certifications.
- Cost: Financial counselors generally offer free or low-cost services. By contrast, a financial advisor or financial planner might charge a flat fee of, say, $1,000 to $5,000 to help you create a financial plan or an hourly rate of $100 to $400. Investment advisors may charge you a percentage of assets under management (usually 1% but this can vary).
How to Find a Financial Counselor
Here are four suggestions for finding a financial counselor:
- Visit the AFCPE website.
- Ask friends, relatives and colleagues for recommendations.
- Perform a web search for financial counselors in your area. For any counselor you're considering, check out their online reviews and Better Business Bureau ratings, and find out whether they're certified.
- If you're an active-duty member of the military, or are a family member or survivor of an active-duty member, visit the website for the U.S. Department of Defense Office of Financial Readiness.
Among the questions that AFCPE recommends asking a financial counselor before working with them are:
- What is your experience with financial counseling?
- What kind of approach do you take with financial counseling?
- What are your professional credentials?
- What services do you provide?
- Do you have any financial conflicts of interest?
- How much do you charge?
- How will I need to pay for your services?
What Is a Patient Financial Counselor?
In addition to financial counselors who help with your overall finances, there are patient financial counselors to help you with financial issues related to medical care.
A patient financial counselor works for a health care provider, such as a hospital. This type of counselor works with patients who have no health insurance and can't pay their medical bills, or patients who do have health insurance but are having trouble paying medical bills that aren't fully covered by insurance.
Among other things, a patient financial counselor answers questions about costs for health care services, establishes payment plans, and looks into other kinds of financial assistance. Some patients who work with a financial counselor might qualify for charity care.
The Bottom Line
Seeking help from a financial counselor can put you on the right path when it comes to money management and achieving financial goals. To further improve your money management, regularly check your free Experian credit report and free credit score to find out where your credit stands.