Differentiating Professionals: Financial Advisor versus Accountant
When it comes to making major purchases, such as buying a home, or navigating complex financial situations, the services of both financial advisors and accountants can prove invaluable. These financial professionals, while sharing some similarities, offer distinct expertise to help clients achieve their financial goals.
Accountants are primarily focused on tax preparation, audit support, and tax strategies. They help track and organise financial transactions, often preparing annual tax filings. If you need someone to do your taxes, an accountant would be the appropriate choice, especially if you own a business, as they can also help prepare financial statements in addition to tax returns.
On the other hand, financial advisors are often associated with retirement planning and help build investment portfolios for various goals. They provide services such as retirement planning, estate planning, and lifecycle planning. A financial advisor's first task when working with a client is to determine the client's goals and develop a savings and investment strategy that aligns with those goals.
When seeking a debt paydown strategy, or help with retirement planning or investment management, a financial advisor could be helpful. If your overall financial situation is complex and requires assistance with topics such as estate planning, tax strategy, or insurance, a financial advisor may be beneficial.
It's important to note that while state licensure is required for accountants, it is not for financial advisors. However, both professionals have their own certifications. Financial advisors can be certified financial planners (CFP) or chartered financial analysts (CFA), while accountants are certified public accountants (CPA).
Certified Public Accountants (CPAs) have the legal right to represent clients before the IRS, audit companies, and certify financial reports. This is a service that an accountant can provide, but an accountant cannot legally represent clients before the IRS, audit companies, and certify financial statements, which a CPA can do.
Financial advisors and accountants communicate and meet with clients differently. Financial advisors typically meet year-round, while accountants usually communicate more frequently during tax season. To help organise your financial life, an accountant could be hired, while a financial advisor might be more necessary if your financial situation is complex.
When starting or selling a business, it may be beneficial to hire both a financial advisor and an accountant. In such cases, the combined expertise of these financial professionals can ensure a smooth and profitable transition.
In conclusion, both financial advisors and accountants are essential financial professionals who help clients with different aspects of their financial lives. When making major purchases or facing complex financial situations, it may be advantageous to hire both a financial advisor and an accountant to ensure comprehensive financial guidance and peace of mind.
For those seeking a financial advisor, Bankrate's financial advisor matching tool can help find a financial advisor in your area. Always ensure that your chosen financial professional is a fiduciary, meaning they are ethically bound to always act in the best interests of their clients and proactively disclose any potential conflicts of interest.
