From certified financial planners (CFPs) and accountants, to wealth managers and financial consultants—there are plenty of different professionals out there who want to help you manage your money. Given all the options, it can be hard to know where to turn.
With two of the more common financial roles—a financial advisor and an accountant—it helps to understand what each can do for your money.
At a high level, a financial advisor often helps with your financial plan, picks an investment strategy and potentially considers tax implications of various financial tools. On the other hand, while most people think of an accountant only in the context of preparing tax returns and providing tax advice, they also can often provide guidance on investments and household finances.
If your needs are varied, working with multiple professionals can help ensure you’re getting the most tailored advice. If you’re trying to pick between a financial advisor and an accountant, though, here’s a look at the key differences.
Difference Between a Financial Advisor and an Accountant
Financial advisor is a generic term used to describe financial professionals who are licensed to provide financial planning and investment advice.
Financial advisors may be consultants, CFPs or investment managers, among other distinctions. Depending on their expertise, they can help with a wide range of financial decisions, including retirement planning and budgeting, coaching and sometimes tax planning related to specific investments.
Accountants often only provide tax advice. It’s also important to note that not all accountants are certified public accounts (CPAs), which is a designation given to individuals who go through additional education, experience and testing requirements to earn that title.
The level of advice you’ll receive from an accountant or CPA will depend largely on their experience, certification and background, and not all will be able to provide guidance regarding investments or buying and selling securities.
Although there are exceptions to the rule, generally speaking, if you need help with financial planning and investments, it’s best to work with a certified financial advisor. If you’re looking for help preparing a tax return or understanding the tax implications of a particular financial decision, an accountant or CPA is usually a better choice.
Certifications for CPAs vs. Financial Advisor
If you’re looking for someone to help with your taxes or investments, make sure they’re licensed to do so, and that they hold certifications related to their particular area(s) of expertise.
It also helps to find someone who is knowledgeable about the laws in your particular state, especially as it relates to taxes. Otherwise, you could end up working with someone who isn’t sufficiently knowledgeable to provide reliable advice or worse, who provides bad advice.
In the cases of both tax and financial advisors, you’ll want to look for licensed professionals. Financial advisors, for example, should be licensed by the financial regulator in their state, as well as the Financial Industry Regulatory Authority (FINRA).
Depending on their specific services, advisors are typically required to pass both the Series 7 and Series 65 or 66 exam, which test their knowledge of securities and investment strategies.
Likewise, CPAs, specifically, need to be licensed by their state’s board of accountancy. CPAs also must pass the Uniform CPA Exam, which tests their knowledge of accounting and tax laws.
CPA Certification Requirements
- A bachelor’s degree in accounting
- At least two years of public accounting experience
- Passing of the Uniform CPA Exam
- Completion of continuing education requirements
Financial Advisor Certification Requirements
Financial advisor certification requirements vary based on the exact certification an individual is trying to obtain. Although other certifications exist, the basics include:
- Registering with the SEC and the Financial Industry Regulatory Authority
- Passing of the Series 7, 65 or 66 exams
- Passing the CFP Board exam (for CFPs)
- Completion of continuing education requirements
Besides having different certification qualifications, there are different standards to which accountants and financial advisors are held. For example, licensed broker-dealers are typically held to a suitability standard, meaning they are required to show that the investments they sell are suitable for the investors they sell them to.
Fee-based investment advisors (a particular subset of financial advisors), however, are typically held to a fiduciary standard. This means they are required to act in their clients’ best interests, even if it does not serve their interests as advisors. This duty of care is much stricter than the suitability standard and serves to help reassure investors that their advisor is looking out for their best interests.
Unlike financial advisors, whose duty of care varies based on their licenses, CPAs are all generally considered to have a fiduciary duty to their clients. This is because the American Institute of Certified Public Accountants, the licensing body for CPAs, includes in its Professional Code of Conduct language which requires licensed public accountants to act in the best interest of their clients.
When to Hire a Financial Advisor vs. an Accountant
Before you pick a financial professional to work with, it’s important to know their respective specialties so you can determine which would be better for your particular circumstances.
Working with a Financial Advisor
- You have a complex financial situation. If you have a lot of debt, investment income or other complicating factors, a financial advisor can help you make sense of it all and plan and budget accordingly.
- Your focus is on investing or reducing debt. If your primary reason for seeking financial advice is to get help in picking an investment strategy or individual securities or to figure out a plan to reduce your overall debt, a financial advisor may be more helpful.
Working with an Accountant
There are also a few situations when it might make more sense to use an accountant:
- You need someone to prepare your tax return. If you don’t need investment advice, an accountant can prepare your tax return for you.
Working with Both
- You’re starting a business. If you’re starting a business, a financial advisor or CPA can help you set up your business structure, choose the right insurance and plan for your future growth.
- You’re buying a home. A financial advisor can help you figure out how much you can afford to spend on a home and consider different mortgage products that may fit your needs, while a CPA can advise you of tax breaks to take advantage of as a first-time homebuyer or as someone with a mortgage.
- You’re planning for retirement. A financial advisor can help you create a retirement plan that will ensure you have enough money to live on, while a CPA can inform you of all the specifics of different retirement plans, particularly as they relate to owning a business or borrowing from different accounts.
These are some typical scenarios involved when working with either an accountant or a financial advisor, but either of these professionals may have additional licenses or certifications that can make them good resources for other things. Always ask about an advisor or accountant’s licenses and certifications before deciding to work with them.
How to Find the Right Financial Advice
Finding the right advice—and the right advisor—for your circumstances may be complicated. If you’re not sure which type of professional is right for you, it’s a good idea to consult with many types of advisors. Follow these tips to find the right financial expert for the advice you need:
- Ask your friends, family and colleagues for recommendations
- Make sure the financial advisor or accountant you’re considering is licensed and certified to provide the specific products and services you need
- Know the duty of care the advisor is held to—whether they’re required to put your interests first or simply demonstrate suitability of any products they sell you
- Find out how much the financial advisor or accountant charges—as well as any additional fees that might crop up—and make sure you’re comfortable with the fee structure
- Know what other resources are available through the advisor’s firm or providers they work with
- Schedule a consultation with the financial advisor or accountant to get a sense of their style and to see if you’re comfortable working with them
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