Do you need a financial adviser or an accountant? – Forbes Advisor

Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.

From certified financial planners (CFPs) and accountants, to wealth managers and financial advisors, there are many different professionals who want to help you manage your money. With all the options, it can be hard to know where to turn.

With two of the most common financial roles – a financial adviser and an accountant – it’s worth understanding what each can do for your money.

At a high level, a financial advisor often helps you with your financial plan, chooses an investment strategy, and potentially considers the 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 can often also provide investment and household finance advice.

If your needs are varied, working with multiple professionals can help you get the best advice. If you’re trying to decide between a financial adviser and an accountant, here’s an overview of the key differences.

Difference Between a Financial Advisor and an Accountant

Financial Advisor is an umbrella term used to describe financial professionals who are licensed to provide financial planning and investment advice.

Financial advisors can be consultants, CFPs, or investment managers, among other distinctions. Depending on their expertise, they can help you 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 is also important to note that not all accountants are Certified Public Accountants (CPA), which is a designation given to individuals who go through additional education, experience, and testing requirements to obtain this designation.

The level of advice you receive from an accountant or CPA will largely depend on their experience, certification and background, and not everyone will be able to provide investment or buying advice. and the sale of securities.

Although there are exceptions to the rule, as a general rule, if you need help with financial planning and investments, it’s best to work with a licensed 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 Advisors

If you’re looking for someone to help you with your taxes or investments, make sure they’re licensed to do so and hold certifications related to their particular area(s) of expertise.

It’s also helpful to find someone who knows the laws of your particular state, especially regarding taxes. Otherwise, you could find yourself working with someone who isn’t knowledgeable enough to provide reliable advice, or worse, giving bad advice.

In the case of tax and financial advisors, you will want to seek licensed professionals. Financial advisers, for example, must be licensed by their state’s financial regulator, as well as by the Financial Industry Regulatory Authority (FINRA).

Depending on their specific services, advisors are typically required to pass the Series 7 and Series 65 or 66 exam, which tests their knowledge of securities and investment strategies.

Likewise, CPAs, in particular, must be licensed by their state’s accounting board. CPAs must also pass the Uniform CPA Examination, which tests their knowledge of accounting and tax laws.

CPA certification requirements

  • A bachelor’s degree in accounting
  • At least two years of experience in public accounting
  • Successful completion of the Uniform CPA Examination
  • Completion of continuing education requirements

Financial Advisor Certification Requirements

Financial advisor certification requirements vary depending on the exact certification an individual is trying to obtain. Although other certifications exist, the basics include:

  • Registration with the SEC and the Financial Industry Regulatory Authority
  • Successful completion of Series 7, 65, or 66 exams
  • Pass the CFP Board exam (for CFPs)
  • Completion of continuing education requirements

Professional standards

In addition to having different certification qualifications, there are different standards that accountants and financial advisors are held to. For example, licensed brokers are generally required to aptitude standardmeaning they are required to prove that the investments they are selling are suitable for the investors to whom they are selling them.

However, paid investment advisers (a particular subset of financial advisers) are generally held to a fiduciary standard. This means that they are required to act in the best interests of their clients, even if it does not serve their interests as advisers. This duty of care is much stricter than the suitability standard and serves to reassure investors that their advisor is looking out for their best interests.

Unlike financial advisors, whose duty of care varies depending on their licenses, CPAs are all generally considered to have a fiduciary duty to their customers. Indeed, the American Institute of Certified Public Accountants, the certifying body for CPAs, includes language in its professional code of conduct that requires CPAs to act in the best interests of their clients.

When to Hire a Financial Advisor or Accountant

Before choosing a financial professional to work with, it is important to know their respective specialties so that you can determine which one would be best suited to your particular situation.

Work 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 figure it all out and plan and budget accordingly.
  • You focus on investing or reducing debt. If your main reason for seeking financial advice is to get help choosing an investment strategy or individual securities, or to develop a plan to reduce your overall debt, a financial advisor may be more helpful.

Work with an accountant

There are also a few situations where it may make more sense to hire 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.

Work with both

  • You are starting a business. If you’re starting a business, a financial advisor or CPA can help you structure your business, choose the right insurance, and plan for future growth.
  • You buy a house. 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 suit your needs, while a CPA can advise you on tax breaks you can take advantage of as a first-time homebuyer or someone with a mortgage.
  • You are planning your 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 educate you on all the specifics of different retirement plans, including ownership. of a company or borrowings from different accounts.

Here are some typical scenarios when working with an accountant or financial advisor, but either of these professionals may have additional licenses or certifications that may make them good resources for other things. Always ask about an advisor’s 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 situation can be complicated. If you’re not sure which type of professional is right for you, it’s a good idea to consult several types of advisors. Follow these tips to find the right financial expert for the advice you need:

  • Ask friends, family and colleagues for recommendations
  • Make sure the financial advisor or accountant you are considering is licensed and certified to provide the specific products and services you need
  • Know the advisor’s duty of care – whether they are required to put your interests first or simply demonstrate the suitability of the products they are selling to you
  • Ask about the fees charged by the financial advisor or accountant, as well as any additional fees that may arise, and make sure you are comfortable with the fee structure.
  • Know what other resources are available through the advisor’s company or vendors they work with
  • Schedule a consultation with the financial advisor or accountant to get a sense of their style and to see if you are comfortable working with them

Are you looking for a financial adviser?

Start with a financial advisor with Personal Capital to build your financial strategy

Comments are closed.