When seeking financial advice, you may find it challenging to decide between hiring a Certified Public Accountant (CPA) or a Certified Financial Planner (CFP). Depending on your circumstances, you may need one or both.
What is the difference between CFPs and CPAs?
Certified Financial Planner (CFP) Certified Public Accountant (CPA)
What they do Provide advice on budgeting, debt management, and investments. Provide advice on unusual tax situations or highly specialized matters.
Clients Anyone interested in money management and wealth accumulation can benefit. Best for business owners or those with complex income situations.
Which is right for you?
Most people do not need an accountant, but some do. Here’s how to know if a CFP or CPA is right for you.
When should you use an accountant?
Most people do not need an accountant. While it is less common, there are definitely some situations where you need an accountant’s expertise. See if you are:
- Own your own business
- Make more than $200,000
- Plan to leave an inheritance for your children
- Own rental property
- Expect to receive a large sum of money
Simply put, an accountant will help you with specific issues that most people do not face. They can review your tax situation and help you get your finances organized. There are also situations where using an accountant can help you save money.
If you are very wealthy or own a business, you might consider getting an accountant to help you understand accounting and tax laws.
Owning rental property is like owning your own business, so hiring an accountant will help you manage the books and the tax implications.
You may also want to hire an accountant if you have a complex tax situation. Most people will be able to prepare their taxes using tax preparation software, but if you own your own business or have several significant investments, you might consider finding an accountant or tax professional to do your taxes for you.
If you are undergoing a major life change affecting your finances, such as adopting a child, purchasing property, or receiving a large amount of money, hiring an accountant can provide peace of mind. You may only need to visit the accountant once, or speak to them once a year around tax time. Either way, it is financially wise to have an expert you can consult if you have questions.
When should you use a financial planner?
A financial planner is different from an accountant. If you are seeking advice on budgeting, getting out of debt, or investing – any type of planning for your money – it is time to hire a financial planner.
Hiring a financial planner can work in two different ways. One way to hire a financial planner is to pay a flat fee to help you create a financial plan so you can build your wealth. A consultant said to act solely in your best interest, not to line their own pockets, works as a fiduciary.
Alternatively, you can hire a financial planner who receives a commission on the products they sell you, or on specific investments tailored to your situation. However, with this setup, you run the risk of the planner being focused on their profit rather than what is best for your situation.
Note: A good financial planner will encourage you to get out of debt before you start seriously investing your money.
Some services that a financial planner can help you with include:
- Creating a budget and getting out of debt
- Saving for college
- Retirement planning
- Choosing the best investments
- Insurance planning
- Estate planning
Your bank may offer financial planning services, or you can ask for referrals from friends. You should check the qualifications of any planner you intend to hire. Not all financial planners are certified, so you should ask about their experience and qualifications, whether they are certified and what they had to do to earn that designation. Be wary of inflated qualifications and misleading information.
Option
Combining the Best of Both Worlds
If you own your own business, your accountant and financial planner should work together to help you stay on track financially. Additionally, some accountants also work as financial planners.
Conclusion
Certified accountants assist corporations, wealthy individuals, and those with unusual income situations. They specialize in tax issues. On the other hand, financial planners offer more general financial advice regarding debt, savings, and investments. They may be certified (CFP) or may not be, so clients should research potential financial planners before hiring one. Try asking for recommendations from friends and family, and hire the best fit for your business and personal situation so you can take control of your financial future.
It is important to trust your financial planner and accountant. They should be able to explain any issues related to your money in a way you understand. You should also be able to comprehend the risks of each investment before you make it. You should understand how to keep your books and the information you need to input daily.
Frequently Asked Questions (FAQs)
How much does a CFP earn?
The Bureau of Labor Statistics indicates that the national average annual income for “personal financial advisors,” which includes investment advisors and insurance specialists, was $94,170 in 2021.
How can you become a certified accountant?
Every state sets its own professional principles for obtaining a certified public accountant designation, but they typically require applicants to have a bachelor’s degree and pass the CPA exam. For example, in California, you will need a bachelor’s degree with 24 college semester units in accounting or related business fields and one year of professional experience, along with passing the CPA exam and the California professional ethics exam.
Source: https://www.thebalancemoney.com/is-an-accountant-or-a-financial-planner-better-2386020
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