CPA vs. Financial Advisor: Which Do You Need? | Team Hewins (2024)

While there is an overlap between the services of a Certified Public Accountant and a CFP® professional (CERTIFIED FINANCIAL PLANNER™), there are also essential differences. Knowing what services each offers is key to helping you make the best financial decisions for your situation. For example, which professional can best answer your questions about gifting and inheritance? Which can help you with determining how much you need to retire? So read on, find out, and get an understanding of each expert’s role in your financial future.

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Does a CPA help with financial planning?

Let’s cut to the chase. A CPA ordinarily does not provide personal financial planning services. CPAs support their clients on items, such as preparing and filing taxes, and making recommendations on ways to reduce your tax burden. Second, they do the accounting for businesses. If you’re an entrepreneur or business owner, hiring a CPA might be a good move depending on the size and complexity of the operation.

If you are looking for financial planning that goes beyond taxes and accounting, then you should consider a CFP® professional. Many people with high net worth or increasingly complex finances don’t think of it as an either/or question. They use both a CPA and financial advisor as part of their financial team.

A Taxing Dilemma

How do you know whether you need a CPA or a financial advisor? You likely need a CPA if you find yourself searching the internet for answers to tax questions or asking friends and family for advice. If this sounds familiar, it’s time to turn to a professional.

When interacting with the Internal Revenue Service, a Certified Public Accountant is key because the CPA’s primary focus is on accounting and tax planning. In addition, a CPA is an expert on today’s tax code. The more complex your financial situation, the more you’ll benefit from having a CPA in your corner. A CPA will understand the tax implications of your investments, expenses, and other elements that factor into your tax return.

Your financial advisor should be knowledgeable on taxes and able to help you understand the tax implications of your investment decisions but will likely defer most tax questions to your CPA. 

Invest Wisely

When you need an overview of your complete financial picture or help to figure out when you can retire, the best person for the task is a CFP® professional. A financial planner will incorporate all factors of your situation to make recommendations on all aspects of your finances, including cash flow, retirement, investments, your estate planning, insurance, and college savings. It’s a great way to keep on top of your overall financial picture and to ensure you achieve your financial goals.

Your accountant can recommend tax strategies, but your financial planner will help you implement those recommendations and give you investment advice on the most efficient tax approach within your portfolio. Turn to your CFP® professional to make sure you’re staying on track. Schedule your complimentary portfolio review with a Team Hewins financial advisor.

April 15 and Beyond

The deadline to file your income tax return approaches every spring, and it’s the busy season for CPAs. Your financial advisor can respond to general tax inquiries, but the best person for the job of preparing and filing tax returns is your CPA. In addition, tax laws change over time, and your CPA will keep up with the latest developments and how they affect your tax return.

Buying and Selling Real Estate

You may need advice on selling a property and may be considering asking your CPA or your financial advisor. You can discuss the overall financial implications with your CFP® professional, but turn to your accountant to determine what you’ll take home after paying taxes. If the tax bite is too big, consider a Section 1031 exchange.  This could be a good way for you to defer your tax liability on real estate that you’re holding as an investment. Either a CPA or a CF can explain how this works, but it’s your accountant who puts the 1031 into motion.

Best Financial Fit for Business Owners

A CFP® professional can help you look at your overall risks and potential rewards if you are starting a business. But your CPA can tell you if it is best to structure the business as an LLC, a partnership, an S corporation, or a sole proprietorship.

Do you know which accounting method is the best fit? Depending on your business, there might be reasons to choose the cash over the accrual method, or vice versa.  Rest assured that a qualified CPA can explain which is the best choice.

Other areas of CPA expertise include the potential taxation of your estate, sales, and personal property taxes, as well as the best way to structure gifts and the need for estimated quarterly payments to the IRS.

The Difference Between CPA and Financial Advisor: Education Requirements

Both a CPA and financial advisor with a CFP® certification must meet rigorous education requirements for licensing. It is worth noting that there are various financial advisors who may not have a CFP® certification. Be sure you understand what qualifications your advisors have before signing on with them.

Both CPA and CFP® professionals require a bachelor’s degree and a specified amount of college or university-level credits in their respective areas. The CPA education requirements focus more on accounting and auditing expertise whereas the CFP emphasizes comprehensive financial planning knowledge. After meeting the course requirements, a CPA or CFP® needs to pass the CPA Exam or CFP Exam, respectively, and gain a specified number of hours of professional experience.

While both designations demand rigorous study and commitment, the CFP® certification has one final requirement. Financial advisors who wish to become a CERTIFIED FINANCIAL PLANNER™ professional must adhere to an ethical code to act as a fiduciary and always provide advice that is in their client’s best interest. While CPAs are typically not considered to be fiduciaries to clients, they adhere to the American Institute of CPAs (AICPA) Code of Professional Conduct with standards of conduct that are similar to a fiduciary relationship.

As you can see, the educational requirements also delineate the difference between a CPA and a CFP® professional in alignment with the services they can provide you. We recommend making sure your professional team has the right certifications for the job.

CPA and CFP® Professional Working Together for You

While we’ve been discussing the differences between financial professionals, financial success is a team effort. Each expert contributes a specific skill set. And when they work together, their power is multiplied.

Did your situation change over the year? Perhaps you received an inheritance or are going through a divorce or other life transition. You may be planning to buy or sell a significant asset.  Or maybe you changed jobs and received equity compensation in your new package—but you’re not sure how that fits into your total financial picture or what the tax implications might be. Whatever the situation, your team will make sure that you are covered from an overall financial and tax perspective.

An open line of communication allows your team to discuss what is best for you in your specific situation, rather than viewing it in isolation.  For example, your CFP® professional and CPA can discuss a wide range of financial topics to help ensure that you end up doing what is best for your overall financial situation.

While there is an overlap between the services of a Certified Public Accountant and a CFP® professional, there are also essential differences. Knowing what services each offers is key to helping you make the best holistic financial planning decisions for your situation.

In summary, when your CFP® professional and Certified Public Accountant work together, great things can happen.

Team Hewins,LLC(“Team Hewins”) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training, and no inference to the contrary should be made. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas. Certain information provided herein is based on third-party sources, which information, although believed to be accurate, has not been independently verified by Team Hewins. Team Hewins assumes no liability for errors and omissions in the information contained herein. Certain information contained herein constitutes forward-looking statements. Team Hewins does not guarantee the achievement of long-term goals in the portfolio review process. Nothing contained herein may be relied upon as a guarantee, promise, assurance or a representation as to the future.