Do I Need a Financial Advisor or an Accountant?

Financial planner vs accountant, which one should you choose? If you are stuck between the two, the first step is to slow down and understand what each professional actually does. Both play essential roles in your financial life, but the services they offer can significantly differ.  

A financial advisor offers a more comprehensive set of services. An accountant, or Certified Public Accountant (CPA), is more focused on tax-related matters. But this is a very surface-level comparison. The fundamental difference between a financial advisor and an accountant goes much deeper, and knowing this is important. This article will break down their roles in detail so you can decide exactly who you need.

What is an accountant?

The term accountant usually refers to a Certified Public Accountant, or CPA. These professionals are usually tax experts first. However, they are also qualified for other financial planning tasks. Their foundation is tax law and accounting rules, but they may step into advisory roles.

A CPA is licensed by the state and required to pass an exam. They can help you with a number of things, starting with legal representation. A CPA can legally represent you before the Internal Revenue Service (IRS) during an audit. CPAs can also file taxes on behalf of clients under their license.

As a tax professional, a CPA’s core job is to help you stay compliant and avoid unnecessary tax bills. They prepare and file your tax returns, help you claim suitable tax deductions or credits, and make sure you meet all deadlines. They may also offer tax planning. They are also experts at bookkeeping and financial reporting. 

Not just individuals, but businesses also hire accountants, such as CPAs, for budgeting, cash-flow management, payroll, and choosing the right accounting systems. They can help you understand your business’s profitability and provide guidance on how to distribute profits and plan for expansion. If you run a business, you can maintain accurate records, prepare profit-and-loss statements, track expenses, and keep your accounts organized.

In fact, CPAs have the authority to prepare audited statements that regulators like the Securities and Exchange Commission (SEC) or the IRS will accept. 

What is a financial advisor?  

A financial advisor helps you look at your entire financial life, which may include tax planning as well as other services. They help you create a comprehensive financial plan that addresses your varied long-term goals. Their role is much more nuanced than you may realize. Instead of focusing on just one area, like taxes or bookkeeping, a financial advisor can help manage your wealth through every stage of your life.

Financial advisors focus on your income, expenses, age, family responsibilities, how you think about money, your savings capacity, risk appetite, and even your lifestyle goals. For instance, you may want to buy a house or send your kids to college. Or you may have no intentions of having children and just want to retire by 40 and build wealth steadily while still enjoying life today. A financial advisor uses all of this information and helps you achieve your goals, no matter what they are. 

Financial advisors can help you with a range of services. For starters, they specialize in investment planning. They can help you decide how and where to invest your money to balance risk and return. They can recommend stocks, bonds, real estate, mutual funds, retirement accounts, or other long-term tools. They can help you build an investment portfolio suited to your risk appetite and goals.

Some of their other services include retirement planning, insurance planning, debt management, budgeting, tax strategies, education planning, estate planning, and other financial decisions that come up along the way. Your advisor can help you figure out how much money you will need in the future for your retirement. They can help you plan for healthcare costs and ensure you are prepared for long-term care expenses. They can help you protect what you have built and secure your loved ones through life insurance, long-term care insurance, disability insurance, and more, based on your situation. 

In short, they can be the sole mentor for all of these needs and more.

What are the differences between a financial advisor and an accountant?

Let’s break down the differences between a financial advisor and an accountant in a simple, detailed way and understand their certifications, the services they offer, how often you meet them, and how their responsibilities affect you. 

1. Certifications and licensing  

A financial advisor’s certifications can vary widely. Some advisors are generalists who help you with basic investment planning, while others hold more advanced designations, such as Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA). These certifications demonstrate that the advisor has met specific educational and examination requirements and adheres to strict ethical standards. For example, if a financial advisor is a CFP, it implies that they have passed the CFP Board exam. In many cases, financial advisors must register with regulatory bodies such as the SEC or the Financial Industry Regulatory Authority (FINRA), especially if they provide investment advice. For this, they also need to pass exams such as the Series 7, Series 65, or Series 66. 

Accountants, on the other hand, typically need to achieve the gold standard in the profession, known as the CPA. To reach this level, an accountant must usually hold a bachelor’s degree in accounting or a related field, have passed the Uniform CPA Exam, and have at least two years of public accounting experience. They also need to meet state-specific requirements, as every state issues its own CPA license. While the exam itself is administered by the American Institute of Certified Public Accountants (AICPA) at the national level, each state has its own rules regarding education hours, training, and residency. And unlike financial advisors, accountants absolutely need a state license to call themselves a CPA.

2. Services offered by each professional  

Now let’s talk about what each professional actually does for you. A financial advisor looks at your entire financial life and helps you map out how to grow your wealth, protect it, manage risk, and basically live a comfortable life where money is no longer a stressor. Their services can include retirement planning, investment management, saving for your kids’ education, estate planning, insurance guidance, and budgeting support, as well as tax strategies. They can help you build a portfolio that aligns with your goals and risk tolerance, and ensure you are saving, investing, and preparing for financial emergencies.

An accountant’s work is more technical and compliance-driven. They focus on tax planning and preparation, bookkeeping, financial reporting, and anything related to the accuracy and legality of your books. They can prepare your tax returns, help you reduce your tax liability legally, and guide you through an audit if one ever happens. They can prepare financial statements, audit corporate accounts, and ensure your records comply with the rules. For individuals, they are the person you go to when you want your taxes done properly, or when you need help understanding deductions, credits, or how to handle business income. If you run a business, you can hire them for payroll, budgeting, and regulatory filings, too.

3. Relationship style

A financial advisor is someone you usually talk to a few times a year, and not just meet them during tax season. You should ideally catch up with them regularly for discussions and progress reviews. They would help you alter your financial planning strategies as your life would change and you would get married or divorced, have children, retire, and more.

An accountant, however, would typically only offer seasonal advice unless you have a business. For most people, the accountant comes into the picture only during tax season and maybe once or twice a year for other tasks. Businesses, on the other hand, may work with an accountant monthly or quarterly.

4. Fiduciary duty

Some financial advisors are fiduciaries, which makes them legally liable to put your financial interests first. Certified Financial Planners (CFPs) and Chartered Financial Analysts (CFAs) usually fall under this category. However, not all financial advisors are fiduciaries. Some financial advisors may operate under a suitability standard, and only recommend something suitable, not necessarily the best. 

For accountants, CPAs in particular are required to act in the public’s best interest. But their fiduciary duty depends on the service they are providing. If they are handling an estate, acting as a trustee, or providing investment-related advice, they may carry fiduciary responsibility for that role. 

Financial planner vs accountant – Who should you choose?

To answer this, you need to understand a few things about both professionals.

Let’s start with the financial advisor. You can consider hiring a financial advisor for multiple reasons, both big and small. For instance, a financial advisor can be hired if you are planning to sell your business and want to understand how the sale affects your long-term wealth. Or if you are planning to sort out your estate and pass on some assets to your children and grandchildren, without creating unnecessary tax headaches. You can hire them if you want to plan for retirement and need help with creating a portfolio that can support your future lifestyle. Or, if you have children and college is around the corner. You can hire a financial advisor for guidance on investments, too. They can create a diversified portfolio for you. They can also help you keep your debt under check. 

One thing people forget is how emotional money can be. You can hire a financial advisor if you are unable to keep your emotions out of your financial decisions. They can help you avoid impulsive decisions and bring a rational voice to the table. 

Now let’s talk about accountants. You usually meet with an accountant during tax season, but their role does not end there. If your primary concerns involve filing your taxes, understanding deductions, preparing for an audit, or dealing with a complicated tax situation, you can hire a CPA.

CPAs are trained specifically in tax law and accounting standards. They can file your taxes, represent you in front of the IRS, handle audits, and help with bookkeeping. If you run a business, an accountant can help you manage cash flow and offer advice on day-to-day operations. 

A CPA might be a better fit if you mostly need help filing taxes or handling a tax audit. They can also help if you want someone to manage your monthly bills or provide strategies specifically aimed at reducing your tax load.

You do not always need to choose between the two. A financial advisor and an accountant can work together if that is what you want. One can cover investment, insurance, savings, and debt strategies. The other can cover tax filing, audits, and compliance. 

CPA vs financial advisor – Summing it up

At the end of the day, you can absolutely hire both a CPA and a financial advisor. However, it still helps to understand the differences between a financial advisor and an accountant. When you are clear about what each professional does, you can choose the right person for the job and match their services to your specific needs. Once you are sure who you want to hire, you can use our financial advisor directory to find someone who aligns with your goals. 

Frequently Asked Questions (FAQs) about the differences between a financial advisor and an accountant 

1. Are financial advisors and accountants the same?

No, they are not. A financial advisor helps you with investing, saving, retirement, insurance, and other life goals. An accountant, especially a CPA, focuses on taxes, compliance, and audits. 

2. What are some tasks a financial advisor can help you with?

You can hire a financial advisor for a wide range of tasks, like managing debt, planning for retirement, saving for your child’s education, buying a home, building an investment portfolio, and more.

3. Are accountants and financial advisors expensive?

The costs can vary depending on the services you need and the fee structure they use. That said, hiring these professionals is not always expensive, and many offer customized options that fit different budgets. 

4. Is it better to hire both a financial advisor and an accountant together?

It depends on your situation. Some people only need a CPA during tax season. Others only need a financial advisor for long-term planning. But you may also hire them together if you need better overall support. You can also hire them at different times based on what you need most.