Ask an Advisor: When Should I Work With a Financial Advisor versus a CPA?

When managing your money, it’s important to know when to turn to different professionals for help. Two key experts you might consider working with are a financial advisor and a Certified Public Accountant (CPA). While both can help you with your finances, they serve different purposes. Knowing the difference between these two professionals will ensure you get the right advice at the right time.

What is a Financial Advisor?

A financial advisor is a professional who helps you manage your money and plan for your financial future. They offer guidance on a variety of topics, including investments, retirement savings, tax planning, insurance, and budgeting. Financial advisors focus on growing and protecting your wealth, making sure that your financial goals are met over time.

Key Services of a Financial Advisor:

• Investment advice: Help you choose the right investments based on your goals and risk tolerance.
• Retirement planning: Create a plan to ensure you can retire comfortably, including deciding on the best retirement accounts (e.g., 401(k), IRA).
• Insurance recommendations: Advise on life, health, disability, and long-term care insurance to protect your financial future.
• Estate planning: Help plan for how your assets will be distributed after your death, including advice on wills and trusts.
• Tax strategy: Provide tax-efficient investment strategies and help you minimize tax liabilities.

What is a CPA?

A Certified Public Accountant (CPA) is an accountant who has passed the CPA exam and has met state licensing requirements. CPAs are experts in tax preparation and financial reporting, and they can help you with a variety of accounting services. They focus on the accurate preparation of financial statements and ensuring you are compliant with tax laws.

Key Services of a CPA:

• Tax preparation: CPAs prepare your tax returns, ensuring you file them correctly and on time. They help with personal, business, and estate taxes.
• Tax planning: Advise on strategies to minimize taxes over time, such as tax deductions, credits, and investment planning.
• Audits and reviews: CPAs can conduct audits and reviews of your financial records, particularly for businesses.
• Financial reporting: Prepare detailed financial statements that show your financial health, including balance sheets and income statements.
• Accounting services: Help with bookkeeping, payroll, and other financial recordkeeping tasks.

When Should You Work With a Financial Advisor?

1. You Want to Grow Your Wealth

A financial advisor can help you set and achieve long-term financial goals, such as saving for retirement, buying a home, or building a college fund. They offer investment advice to help you grow your money through stocks, bonds, mutual funds, and other investment vehicles.

2. You’re Planning for Retirement

If you’re thinking about your retirement, a financial advisor is the professional to consult. They can help you assess your retirement needs, create a plan, and choose the right retirement accounts and investments to meet your goals.

3. You Need Help with Insurance or Estate Planning

If you need assistance selecting the right insurance policies or planning how your assets will be distributed after you pass away, a financial advisor can guide you through these decisions. They can recommend life insurance, disability insurance, and other products that protect your wealth.

4. You Have Complex Financial Goals

If your financial situation is complex, such as owning multiple properties, investments, or running a business, a financial advisor can help you navigate these challenges and ensure your financial plan aligns with your goals.

When Should You Work With a CPA?

1. You Need Help with Tax Filing and Compliance

CPAs are experts in tax laws and can help you file your taxes correctly, ensuring you avoid penalties and make use of all possible deductions and credits. Whether it’s for your personal taxes, business taxes, or estate planning, a CPA will ensure that your taxes are filed accurately and on time.

2. You Need Ongoing Tax Planning

If you want to minimize your tax burden over the long term, a CPA can help you develop a tax strategy that’s tailored to your financial situation. They can help you take advantage of tax-deferred accounts, tax credits, deductions, and other strategies to lower your tax liability.

3. You Have a Business

If you’re running a business, a CPA can help you with a variety of services, including bookkeeping, payroll management, tax filing, and financial reporting. They can ensure your business complies with tax laws and that your finances are organized and transparent.

4. You Need to Prepare for an Audit

If you’re facing an audit from the IRS or another tax authority, a CPA can help you navigate the process. They can represent you, organize your financial records, and communicate with the IRS on your behalf.

Key Differences Between a Financial Advisor and a CPA

Can a Financial Advisor and CPA Work Together?

In some cases, you may benefit from working with both a financial advisor and a CPA. For example, a financial advisor can help you create a financial plan, while a CPA can help you implement tax strategies and ensure you’re in compliance with tax laws. They can collaborate to provide a holistic approach to your financial needs.

Conclusion: Who Should You Work With?

• Work with a financial advisor if you’re focused on building wealth, planning for retirement, or need help with insurance and estate planning.
• Work with a CPA if your primary need is tax preparation, tax planning, or accounting services for yourself or your business.

Both professionals can offer valuable insights, and depending on your financial situation, you might need one more than the other at different times in your life. When in doubt, it’s always a good idea to consult with both to ensure all aspects of your financial health are well-managed.