What is a financial consultant within a corporate structure?

Financial consultants provide expert advice to help businesses manage their finances effectively. Their main goal is to increase shareholder value and improve capital efficiency. They typically work closely with the Chief Financial Officer (CFO) or within the corporate finance division of a business.

Financial consultants handle a range of tasks that focus on strengthening a company’s financial health, including:

• Analyzing financial status: Financial consultants review the company’s current financial position to identify strengths, weaknesses, and potential risks. This helps leaders make informed decisions about the business’s future.
• Managing investments: They also assist in planning and overseeing significant investments to ensure they align with the company’s growth strategy.
• Handling debt: Financial consultants help businesses manage their debt efficiently, ensuring it’s used wisely and doesn’t harm the company’s financial stability.
• Special projects: They also play a key role in guiding companies through major activities like mergers and acquisitions (M&A) or selling parts of the business to raise funds.

Financial consultants can either work as independent contractors or part of consulting firms:

• Independent contractors: These financial consultants work on short-term projects for various clients, often gaining experience in multiple industries over time.
• Consulting firm professionals: These financial consultants are part of established firms and benefit from a strong network of resources and professional connections.

It’s important to note that corporate financial consultants are different to personal financial advisors, who focus on providing wealth management services to individuals. Corporate consultants focus entirely on business needs and strategies.

How do financial consultants contribute to a company’s success?

Financial consultants provide expert advice and tailored strategies to help businesses streamline operations and maximize profitability. Below are some examples of how financial consultants contribute to a company’s success:

Strategic financial planning

Financial consultants provide comprehensive financial planning services that align with a company's short and long-term goals. They help businesses set realistic milestones, outline actionable steps, and adapt to market changes. This strategic planning can help companies stay on track to achieve sustainable growth.

Cash flow management

Managing healthy cash flow is crucial for financial stability and business success. Financial consultants monitor accounts, optimize billing and collection processes, negotiate favorable payment terms, and ensure a company has enough cash reserves for daily operations and future investments.

Risk management

The aim of risk management is to help businesses identify and manage financial uncertainties, such as market fluctuations or economic downturns, to maintain stability during challenging times. Financial consultants help companies assess risks and develop strategies to mitigate them.

Cost efficiency

Financial consultants analyze a company’s financial structure and identify areas where processes can be improved or unnecessary costs eliminated. Improving cost efficiency helps boost a company’s profitability and ensures resources are used effectively.

Investment and growth opportunities

Financial consultants also help businesses identify growth opportunities, such as mergers, acquisitions, or entering new markets. They evaluate whether these opportunities are financially feasible and provide strategies to help companies maximize returns while minimizing risks.

Regulatory compliance

Staying compliant with evolving financial regulations is essential to avoid legal issues. Financial consultants can guide businesses on tax laws, corporate governance, and reporting standards to help them avoid penalties and maintain a strong reputation.

Financial reporting and analysis

Accurate financial reporting is important for informed decision-making. Financial consultants create and interpret reports, track key performance indicators (KPIs), and analyze trends. They then use these insights to create strategies that improve profitability and help businesses adapt to shifting market conditions.

Access to funding

Financial consultants can help prepare businesses to secure funding. Whether through loans or investment, they help present the company’s financial health in the best possible light to attract potential stakeholders.

Scaling

When businesses expand, financial consultants can help ensure that growth strategies are financially sustainable. They can also guide companies through scaling operations and help them maintain stability during periods of quick change.

How does a financial consultant differ from a financial advisor?

The terms ‘financial consultant’ and ‘financial advisor’ are often used interchangeably. Both financial consultants and advisors provide expert financial advice, however there are key distinctions between the two roles. We cover the differences between a financial consultant and a financial advisor below.

Scope of services provided

Financial advisors primarily serve individuals and small businesses, focusing on areas like:

• Investment strategies
• Retirement planning
• Estate planning
• Wealth management
• Insurance selection
• Tax advice.

Their goal is to help clients achieve their financial objectives by creating personalized plans and providing advice tailored to their unique situations. Some financial advisors also manage investment portfolios and assist clients with major financial decisions (e.g. purchasing a home).

On the other hand, financial consultants typically work in corporate finance or consulting firms and specialize in specific areas such as:

• Financial strategy
• Risk management
• Tax planning
• Investment management
• Mergers & acquisitions.

Financial consultants often focus on optimizing a company’s operations, reducing costs, or improving profitability and growth. They analyze market trends, identify opportunities for long-term success, and develop strategies to help businesses improve their financial standing.

Some financial consultants offer dedicated advice for specific areas of finance, for example, commodities consultants advise businesses on managing risks and investing in the commodities market, while carbon market consultants guide companies through trading in carbon credits and complying with environmental regulations.

Required qualifications

Financial advisors generally hold a bachelor’s degree in finance, business, or economics. Depending on the services they provide, they may also obtain additional certifications such as Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC), or Personal Financial Specialist (PFS).

Financial advisors involved in investment management also require licenses from regulatory bodies, such as Series 65 or Series 7 licenses in the U.S. They might also be registered with the Securities and Exchange Commission (SEC).

Financial consultants usually have a similar educational background to financial advisors and often hold additional degrees like an MBA or master’s in finance. They might also hold certifications such as Chartered Financial Analyst (CFA), Certified Public Accountant (CPA), or Certified Management Consultant (CMC).

Like advisors, financial consultants who offer investment advice or manage portfolios may need additional licenses and registration with regulatory bodies.

Compensation models

Financial advisors have diverse compensation models, including:

• Fee-only: Charging a flat fee, hourly rate, or percentage of assets under management (AUM)
• Fee-based: Combining fees with commissions earned from selling financial products
• Commission-only: Earning money solely from selling products or executing transactions.

Financial consultants typically receive compensation in the form of:

• Hourly or daily rates
• Project-based fees
• Retainers for ongoing services.

If a financial consultant offers investment advice or portfolio management, they might also charge a percentage of AUM, however they rarely earn commissions from selling financial products.

What is the role of financial consultants in managing corporate investments?

Financial consultants play an important role in managing corporate investments by developing investment strategies, helping manage risks, and ensuring compliance. Their responsibilities include:

• Developing investment strategies: Financial consultants analyze market trends and a company’s financial objectives to develop tailored investment strategies.
• Optimizing capital allocation: They allocate funds across various investments, such as stocks, bonds, or real estate, with the aim of balancing growth potential with a company’s risk tolerance.
• Managing risks: Risk management is an important part of corporate investing. Financial consultants evaluate potential risks associated with investments and develop hedging or diversification strategies to minimize exposure.
• Planning for growth: Beyond short-term investments, financial consultants also help businesses plan for long-term growth through M&A or global expansion.
• Ensuring compliance: Financial consultants also stay on top of regulations and legal requirements to help companies maintain compliance and avoid penalties.

What roles do financial consultants play in business decision-making?

Financial consultants guide business decision-making by providing expert financial guidance and strategic planning. They offer objective, data-driven advice to help companies make difficult decisions without emotional influence and ensure decisions align with a business’s goals and risk tolerance.

What qualifications are required for financial consultants in large corporations?

Financial consultants require a bachelor's degree in finance, accounting, or a related field. Many companies, particularly large consulting firms, value candidates with a master's degree in business or finance.

Many financial consultants also hold professional certifications such as Chartered Financial Analyst (CFA) or Certified Public Accountant (CPA). Professional associations also provide additional certifications, for example, International Financial Reporting Standards or Business Applications of Statistics and Data Analytics, allowing financial consultants to specialize in certain areas.

How do financial consultants contribute to risk management for businesses?

Every business is exposed to a range of unavoidable financial risks, including credit risk, market risk, operational risk, or liquidity risk. Financial consultants help companies identify, evaluate, and mitigate these risks through strategies designed to help businesses stay resilient and financially stable during unforeseen challenges.

How do financial consultants support strategic planning and budgeting?

Financial consultants support strategic planning and budgeting by analyzing a company’s current financial health, evaluating market trends, and identifying potential opportunities for growth. They then provide expert guidance and analysis to help these businesses manage cash flows, obtain financing, and make informed decisions to help them achieve their short and long-term goals.

This material is for informational purposes only and should not be considered as an investment recommendation or a personal recommendation.