Accountant Vs. Financial Planner: What Are The Differences?
Some people use the terms “accountant” and “financial planner,” interchangeably, but in truth each offers a unique suite of services. A Certified Public Accountant, or CPA, can help you with complicated tax situations, most commonly from owning your own business or rental properties. Some CPAs also offer financial planning services, but you do not need a CPA for that.
In contrast, financial planners help clients plan their budget. While many people do not need an accountant, nearly anyone may potentially benefit from speaking with a financial planner.
Do You Need An Accountant?
Accountants are best utilised when your tax situation is too complex to easily figure out on your own. This is often true for entrepreneurs, who need a perfect knowledge of all of the financial regulations pertaining to their industry to avoid running afoul of the law.
If you own rental property that generates income for you, that’s effectively a business. Therefore, an accountant may be able to advise you on the tax implications of your rentals.
Finally, accountants are a good investment if you are wealthy (say an income of $200,000 a year or more). The wealthy stand to lose more if their taxes are audited, so it often makes sense to pay somebody to make sure that they’re right the first time. A CPA may also be able to advise you on investments and so-called “tax havens” to help you keep more of the money you’ve earned.
Finally, you might need an accountant for a one-time expense such as purchasing a new property or adopting a child. In this scenario, you may not need to meet with them more than once a year.
What Does A Financial Planner Do?
Financial planners advise clients on how to budget their financial resources in order to build wealth. The first step is generally learning how to create a budget and stick to it, as many people have no idea where their income goes. Once this step is out of the way, the next step depends on your financial situation.
If you are in debt, a good financial planner will emphasize getting out of debt before providing any investment advice. Sticking to a budget is the first step in this regard, and your financial planner may be able to help you refinance your debt to make it easier to pay off.
When you’re out of debt, a financial planner can start recommending investments (stocks, bonds, etc.) to you according to your unique needs. If you need help saving for retirement or a child’s education, a financial planner can also help you with these major life milestones.
Is It Possible To Need Both?
Yes! Many business owners need an accountant to keep their books in order, but also need a financial planner to keep their own finances in order. In this scenario, it is important for both your accountant and your financial planner to work together to keep you on the right track. Choosing a company that provides both services can be beneficial. Roy A McDonald is one such company. Their team of accountants & advisors work closely together to ensure the right outcome for their clients.
How Do I Choose The Right Financial Professional?
The most important thing for either an accountant or a financial planner is to choose somebody you can trust. It’s also important to select somebody who can explain your financial situation in terms that you can understand, as otherwise you might get swindled.
Financial planners and accountants often charge a commission on the products they sell you, so make sure that it’s actually your needs driving their recommendations. Finances can be complicated, so having an expert to handle all of your questions is often a prudent idea.