Financial counselors help individuals and families develop financial literacy skills and establish good financial habits. They offer a broad range of services and might help you tackle an immediate financial crisis, build savings, manage student loans, pay down debt, and refer you to a different type of financial professional when your needs change. If you could benefit from financial education and support, a financial counselor might offer the help you need.
- Financial counselors help people build financial skills and improve their overall financial health.
- Financial counselors often help lower-income households manage current expenses, build savings, make plans to pay off debt, and navigate public assistance benefits.
- Financial counselor fees are generally lower than those for financial advisors and planners.
- Military members, university students, and households struggling financially due to the COVID-19 pandemic may have access to free financial counseling.
What Is a Financial Counselor?
Financial counselors are personal finance experts who help clients manage their money more effectively and responsibly. They often provide education and guidance on topics relevant to lower-income households, such as saving, budgeting, paying off debt, managing credit, and realizing financial goals, such as buying a house.
Like many titles used by financial professionals, the term “financial counselor” is not regulated—meaning anyone can call themselves one. What’s more, you don’t need any specific licenses or certifications to set up shop as a financial counselor. These factors can make it tricky to find a counselor with the experience and expertise you need.
Still, one certification in the field is gaining traction: the accredited financial counselor (AFC), offered by the Association for Financial Counseling and Planning Education (AFCPE). To earn the certification, candidates must meet ethical, educational, and experience requirements, including a minimum of 1,000 hours of relevant experience in financial counseling. There’s also an exam that focuses on nine core competencies:
- Gathering client information
- Helping clients create action plans
- Developing financial statements, ratios, and spending plans
- Money management
- Credit and debt management
- Educating clients about major purchases
- Managing financial risks
- Discussing investing basics with clients
- Educating clients about retirement and estate planning
Financial counselors who hold the AFC accreditation must also meet continuing education requirements and abide by a code of ethics.
What Do Financial Counselors Do?
Financial counselors offer support and guidance on a variety of financial topics. They can help you to:
- Build savings
- Create (and stick to) a budget
- Create a plan to pay down debt
- Deal with an immediate financial crisis
- Determine if you’re eligible for tax credits
- Improve your credit score
- Manage lines of credit
- Manage student loans
- Modify ineffective money habits
- Navigate available public benefits and community resources
- Set and realize financial goals
- Understand basic financial principles
- Improve your overall financial health
- Refer you to an investment advisor or financial planner when you’re ready
Some financial counselors have extra training in other areas, such as serving the needs of military service members and their families, veterans, and people with disabilities. There are also housing counselors, who specialize in helping people find affordable housing, avoid foreclosure, and manage reverse mortgages. You can find a housing counselor approved by the U.S. Department of Housing and Urban Development (HUD) on its website.
A financial counselor can’t make investment recommendations unless registered as an investment advisor.
If you need help with budgeting, saving, or paying down debt, an AFC-certified financial counselor can be a good choice. However, if you’re looking for investment recommendations, asset management, retirement planning, complex tax strategies, or a complete financial plan, a financial advisor or certified financial planner (CFP) will be a better fit.
How Much Do Financial Counselors Cost?
Financial counselors work in various settings—from hospitals and banks to universities and private practices. The cost of meeting with a financial counselor usually depends on where they work, but in many cases the price is lower than working with a financial advisor or CFP.
Financial counselors who work in private practice may offer a free initial session and then charge a flat fee for any subsequent meetings. Others may charge an hourly rate or a monthly subscription.
You may also be able to find free financial counseling services. For example, counselors who work for the military may offer financial counseling to service members at no charge. Likewise, universities with a money management or career center may offer free financial counseling to students.
No matter where AFC-certified counselors work, they must offer “reasonable” fees that are disclosed upfront to clients.
AFCPE-accredited financial counselors and coaches offer unbiased and fully confidential virtual financial counseling and coaching sessions that are free to individuals and families struggling with the financial implications of COVID-19. The program is supported by the Wells Fargo Foundation and delivered in partnership with the Coordinated Assistance Network.
How to Choose a Financial Counselor
If you think you could benefit from a financial counselor—but don’t happen to know one—start with referrals from friends, colleagues, or family members who seem to have their finances under control. You can also ask your local bank or credit union if it offers financial counseling services.
Once you have a few potential candidates, the AFCPE suggests asking the contenders a few questions before making any decisions:
- What are your credentials? Look for the AFC accreditation, which demonstrates a higher level of education and commitment to the profession.
- What experience do you have? Find a counselor who has helped people in situations similar to yours.
- How do you stay up to date with developments in personal finance? AFCs have to meet continuing education requirements and abide by a code of ethics.
- Which services do you offer? Be sure their services or areas of expertise align with your needs.
- What is your approach? Make sure their philosophy, personality, and communication style work well for you.
- Which types of clients do you work with? Some financial counselors work with clients with a specific minimum net worth, so make sure the counselor is a good fit for your financial situation.
- How much do you charge? The financial counselor should provide an estimate based on what you want to accomplish.
- Do others stand to gain from the financial advice you give me? Find out if there are any conflicts of interest.
- Have you ever been disciplined for any unlawful or unethical actions? You might also want to ask for references and do an online search.
The AFCPE emphasizes that "anyone can call themselves a financial counselor, coach, advisor or planner, but a credential demonstrates a higher level of education, specialty or commitment." You can verify if a potential candidate has received a qualification by checking the AFCPE directory.
What Is an Accredited Financial Counselor?
The accredited financial counselor (AFC) certification is offered by the Association for Financial Counseling and Planning Education (AFCPE) to certify counselors who have met the organization's educational requirements and pledged to follow its ethical standards. Candidates must have a minimum of 1,000 hours of relevant experience in financial counseling and take continuing education to maintain certification.
What Is the Difference Between a Financial Counselor and a Financial Advisor?
The primary difference between financial counselors and advisors is the clients they serve. Financial counselors tend to work with lower-income clients, building financial literacy skills and sound financial habits. In contrast, financial advisors typically offer a comprehensive range of services for middle- and higher-income clients, such as investment recommendations, portfolio management, estate planning, tax planning, insurance, and putting the kids through college.
What Does a Financial Counselor Cost?
That is decided in part by where they work, whether it be a bank, a hospital, a university, or their own private practice. An initial session is often free, after which a flat fee per meeting, an hourly rate, or a monthly subscription fee are all possible scenarios. University students and military service members and veterans may qualify for free services. The price is generally less than that charged by financial advisors and certified financial planners (CFPs). Financial counselors with the AFC accreditation are required to charge “reasonable” fees and state them up front.
The Bottom Line
Financial counselors provide education and guidance to help people manage their money and improve their financial well-being. Working with a financial counselor can be an excellent first step, as they help lay the foundation for financial success. Once your financial situation is under control, the counselor may refer you to a financial advisor or planner to work on advanced topics, such as investing, tax planning, saving for college, and building a nest egg.