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Financial Advisor Vs. Accountant – What Are The Main Differences?

A handshake between a client and a financial plannerSource: Pexel

When it comes to our finances, we want to get things right. But when the time comes time to ask for help, many people are unsure whether they should consult a financial advisor or accountant.

Both professionals can offer helpful advice, but some key differences between the two.

Financial advisors typically have more of a focus on the future. They work with clients to create long-term financial plans, including saving for retirement, investments, or managing debt. Accountants can help prepare taxes, ensure bills are paid on time, prepare financial statements and the like.

What to expect from a financial advisor

  • A focus on your financial goals

Financial advisors will want to know what your long-term financial goals are. They will then work with you to create a plan to help you achieve those goals. It might include creating a budget through investments or even finding ways to reduce your expenses.

  • An overview of your financial situation

Financial advisors will also want to get an overview of your financial situation. This includes your income, debts, assets, and expenses. They will use this information to get a complete picture of your finances and make recommendations accordingly.

  • Retirement Planning

Retirement planning can be a complex and confusing process. But a financial advisor can help you create a retirement plan that fits your needs and goals. This is a long-term project that should be in motion.

  • Investement Management

This includes choosing suitable investments, monitoring your portfolio, and making necessary changes. Investment management can be a complex process, but it is something that a financial advisor can help with.

  • Wealth management

A financial advisor can provide unbiased wealth management services for those with a significant amount of finances. It might include estate planning, tax planning, and even philanthropic giving. 

  • Tax advice

Though taxes are best left to certified public accountants, financial advisors can also provide tax advice. They can help you create a tax-efficient investment strategy or find ways to minimize your tax liability.

An elderly man with cash notes in his handSource: Pexels.com

What to expect from a certified public accountant

Certified public accountants (CPAs) can also be an excellent resource for financial advice. They tend to focus on the present but can still provide helpful guidance.

Here are some of the things you can expect from working with a CPA:

  • Assistance with tax preparation

Tax preparation is complicated. A CPA can help make it more manageable as they are familiar with the latest tax laws and regulations. Plus, they can help you maximize your deductions and get the best possible outcome.

  • Help with financial statements

One of the essential services that CPAs provide is help with financial statements. Financial statements can be confusing and difficult to understand. But a CPA is trained to interpret them and to provide guidance accordingly.

  • Budgeting assistance

Budgeting is an integral part of financial planning. But it can be challenging to do on your own. A CPA can help you create a budget that fits your unique needs and goals. They can also offer advice on how to improve your financial picture.

  • Cost-saving measures

CPAs can also help you to find cost-saving measures. It includes finding ways to reduce your expenses or get better deals on financial products and services. Areas like tax-saving and investing can be complex. But a CPA can help you navigate them and find the best possible options.

What are the main differences between Financial Advisors & Accountants?

The roles and expectations of financial advisors and certified public accountants (CPAs) can vary greatly. Here are some of the critical distinctions between the two:

  • Short-term vs. long term

Financial advisors tend to have a more long-term focus, while CPAs focus more on the present.

Financial advisors will want to know your long-term financial goals and work with you to create a plan to achieve them. They might also make recommendations for things like retirement planning or investment management.

On the other hand, CPAs are more likely to guide immediate financial concerns. This might include things like tax preparation or budgeting. But they can still offer helpful advice for long-term financial planning, but the current finances will direct all that.

  • Qualifications

The qualifications of financial advisors and CPAs can also differ. Financial advisors are not required to have a specific degree but must complete certain courses and exams before being certified.

Accountants must pass the CPA exam and have a bachelor’s degree in accounting. Some states also require CPAs to complete continuing education courses regularly.

On the other hand, financial advisors need to pass the Certified Financial Planner or Chartered Financial Analyst (CFA) exams. And like CPAs, they must also complete continuing education courses regularly to maintain their certification.

  • Compensation

The way financial advisors and CPAs are compensated can also differ. Financial advisors typically earn commissions on the products they sell. They might also earn fees for the services they provide.

On the other hand, CPAs usually earn an hourly rate or a flat fee for the services they provide. Some CPAs also work on commission, but that is less common. In some places, like PwC and Deloitte, starting salaries can range from $45k to $80k. (1)

Some financial advisors may charge an hourly rate, a flat rate, or a mix of commissions and fees. In some places like California, Financials advisors can expect to pocket $80k per year. (2)

  • Certifications

A cup of coffee on top of a certificateSource: Pexels.com

There are different certifications that financial advisors and CPAs can earn. Financial advisors might become certified financial planners (CFPs) or chartered financial consultants (ChFCs), or Chartered Financial Analyst (CFA).

On the other hand, accountants can become certified public accountants (CPAs) or Association of Chartered Certified Accountants (ACCA).

Financial advisors and CPAs need to pass exams and have a certain amount of experience to earn their certification. And they must also complete continuing education courses regularly to keep up with the rising demands of their areas.

  • Expected skills

Accountants are expected to have strong math skills and be able to work with numbers. They should also be detail-oriented and able to meet deadlines. 

On the other hand, financial advisors need to have strong people skills. They should be able to build relationships and understand their client’s needs. 

Good problem-solving and strong analytical skills are also essential to their job. 

  • Projected growth

Even though both financial advisors and CPAs are in high demand, the projected growth for financial advisors is much higher. The Bureau of Labor Statistics projects that the job growth for financial advisors will be 5% from 2020 to 2030. (3)

In contrast, the job growth for accountants is expected to be slightly higher at 7% during that same period. The job outlook for financial advisors and accountants is strong and will keep rising. (4)

Financial advisor vs. Accountant – Which one is right for you?

Whether to work with a financial advisor or a certified public accountant depends on your needs. Here are a few scenarios to help you decide which one is right for you.

  • Starting a business

When starting a business, you’ll need to track your expenses and revenue, file for taxes, and manage your cash flow. You might also need help with financial planning and raising capital. In this case, you should work with a CPA. They are better equipped to handle the financial side of starting a business.

  • Saving for retirement

If you’re self-employed or don’t have access to a 401(k), you might need help saving for retirement. In this case, you should work with a financial advisor. They can help you set up an IRA or Roth IRA and develop a retirement savings plan.

  • Paying off debt

If you’re struggling to pay off debt, you might need help creating a budget and developing a debt repayment plan. You might also need help with financial planning and saving for the future. In this case, you should work with a financial advisor. A financial advisor manages your financial life and helps you improve your financial management skills.

  • Business expansion

There comes a time in every business when you need to expand. This might mean opening a new location, hiring more employees, or increasing inventory. If you’re growing your business, you should work with a CPA. They can help with tax planning, business finances, and cash flow management.

  • Taxes

A group of people holding up letters to spell "Taxes"Source: Pexel

It may sound obvious, but you should work with a CPA if you need help with your taxes. They can help you file taxes, maximize deductions, and minimize tax liability.

A financial advisor can also help with taxes, but they typically don’t have the same expertise as CPAs. But if you’re looking at securities and investments, you may find that some financial advisors also have licenses, which would give them the ability to sell securities.

  • Business acquisitions

Acquiring new businesses can be a great way to grow your company. But it’s also a complex process with a lot of financial implications. If you’re considering acquiring another business, you should work with a financial advisor. They can help you with due diligence, financial planning, and tax implications.

Since they are keen on emerging trends, financial advisors might better understand which businesses are worth acquiring.

Parting shot

There are many differences between an accountant and a financial advisor, but the most crucial difference is their services. A Financial advisor typically helps with financial planning, investing, wealth management, and retirement planning.

On the other hand, Accountants are better equipped to handle the financial side of starting a business. They can help with bookkeeping, taxes, and auditing.

So, which one is right for you? 

It depends on your needs. If you need help with financial planning and investing, you should work with a financial advisor. If you need help with taxes and bookkeeping, you should work with a CPA.

Did you know that Envoice is a smart capture program that enables accountants with all data entry tasks? The program can capture and upload important information from invoices and receipts into the accounting software using OCR. Click here to learn more about it. 

Article links:

  1. https://big4accountingfirms.com
  2. https://www.indeed.com
  3. https://www.bls.gov
  4. https://www.bls.gov