Financial Advisor vs. Accountant: Do You Need a CFP or a CPA?
A financial advisor is not the same as an accountant. Which one is better for you depends on the services you need.
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Financial advisors and accountants both help people manage their money and reach their financial goals. But certified financial planners (CFPs) and certified public accountants (CPAs) also have very different jobs and different strengths. Here's how to tell the difference between the two and choose the one that’s best for you.
Is a financial advisor the same as an accountant?
No, a financial advisor is not the same as an accountant. Sometimes accountants provide financial advice, and sometimes financial advisors do some accounting, but the two jobs require different certification processes and skill sets.
What is a certified financial planner (CFP)?
A certified financial planner (CFP) helps clients create and maintain financial plans by determining their financial goals and discussing their current financial situations and appetites for risk. Some CFPs specialize in certain areas, such as divorce, retirement planning or small business. They must pass a test demonstrating proficiency in risk management, investments, taxes, retirement savings and income and estate planning.
What is a certified public accountant (CPA)?
A certified public accountant (CPA) is a person licensed in one or more states to review financial records for accuracy and compliance, prepare tax returns, provide tax planning services and offer guidance on budgeting, risk management, business strategy and other topics. They must pass a test demonstrating proficiency in auditing and attestation, business environments and concepts, financial accounting and reporting, and regulation. They must also obtain a state license to practice.
Can a CPA also be a financial advisor?
Yes, a person can hold both a CPA license and a CFP designation if they meet all the testing, education and licensure requirements. A common argument for holding both designations is that the person can provide more holistic, comprehensive financial advice and service to clients.
CFP vs. CPA compared
Certified Financial Planner (CFP) | Certified Public Accountant (CPA) | |
|---|---|---|
Primary focus | Financial planning and investment advice. | Tax return preparation, tax planning and accounting. |
Fiduciary duty to clients | Yes, CFPs must act in the best interests of the client. | No, CPAs must act in the best interests of the public; fiduciary duty may apply if acting as a trustee, an executor of an estate or providing investment advice. |
Requires a state license | No. | Yes. |
Requires college degree | Yes. | Yes. |
Requires passing a test | Yes. | Yes. |
Requires continuing education to retain designation | Yes. | Yes. |
Sources: Love and Eickemeyer, "Fiduciary Duty, Due Care, and the Public Interest." The CPA Journal. D. Strausfeld, "A new fiduciary rule: What CPA financial planners need to know." Journal of Accountancy. CFP.net, FINRA.org, National Association of State Boards of Accountancy, Association of International Certified Professional Accountants. | ||
Which is better: a financial advisor or a CPA?
The answer depends on what services you need.
A financial advisor might be a better fit if you mostly need:
Help deciding which investments to buy or sell.
Help coming up with a plan to pay off debt.
A comprehensive retirement plan, estate plan or college savings plan.
Someone to make sure you have enough insurance.
Help setting up and sticking to a budget.
Recommendations for ways to reduce your tax bill.
A CPA might be a better fit if you mostly need:
Someone to prepare and file your taxes.
Business operating advice.
Business succession advice.
Someone to set up a business entity for you.
Someone to handle paying your routine monthly bills for you.
Recommendations for ways to reduce your tax bill.
Someone to help you through a tax audit or represent you in front of the IRS.