Do You Need an Accountant or a Financial Planner?
There may come a point when it makes sense to have additional help figuring out the best way to file your taxes, for example. Then you’ll need an accountant. You may also be faced with a time when you need someone to help you manage your money, plan your investments, or assist with a sizeable inheritance. Then you’d need a financial planner.
To understand the difference, it helps to know the primary services each kind of adviser offers.
When You Should Use an Accountant
Most people do not need an accountant. However, there are certainly some cases in which you'd want their expertise. Consider whether you:
- Own your own business
- Make more than $200,000
- Plan to leave an inheritance to your children
- Own rental properties
- Anticipate receiving a large capital gain
Simply put, an accountant will help you with specific issues that most people do not have. They can review your tax situation and help you structure your finances. There are also situations where using an accountant can help you save money.
If you are extremely wealthy or own a business, you may consider getting an accountant to help you understand the laws surrounding your bookkeeping and taxes.
Owning a rental property is much like owning your own business, so hiring an accountant will help you with the books and the tax implications.
You may also wish to hire an accountant if you have a complicated tax situation. Most people will be able to do their taxes with tax preparation software, but if you own your own business or own several large investments, you may consider finding a certified public accountant (CPA) or tax specialist to do your taxes for you.
Also, if you experienced a big life change that affects your finances, such as adopting a child, buying property, or receiving a large amount of money, then getting an accountant can put your mind at ease. You may only need to visit the accountant once, or only speak to them once a year around tax time. Either way, it’s financially prudent to have an expert you can consult if you have questions.
When You Should Use a Financial Planner
A financial planner is different from an accountant. If you are looking for advice on budgeting, getting out of debt, or investing—any sort of planning for your money—it may be time to hire a financial planner.
Hiring a financial planner can work in two different ways. One way to hire a financial planner is by paying them a flat fee to help you develop a financial plan so you can build wealth. An adviser that works solely in your best interest, not to line their own pockets, is said to be acting as a fiduciary.
Alternatively, you can hire a financial planner who receives a commission on the products that they sell to you, or on specific investments tailored to your situation. However, with this setup, you run the risk that the planner is focused on their profit instead of what's best for your situation.
A good financial planner will encourage you to get out of debt before you seriously begin investing your money.
Some services a financial planner can help you with include:
- Creating a budget and getting out debt
- Saving for college
- Planning for retirement
- Making the best investments
- Insurance planning
- Estate planning
Your bank may offer financial planning services, or you can ask friends for referrals. You should check the qualifications of any planner you intend to hire. Ask about their experience and expertise, whether they are certified, and what they had to do to earn that certification. Beware of exaggerated credentials and misrepresentations, however.
When You May Need Both
If you own your own business, your accountant and financial planner should be working together with you to help you stay on track financially. Additionally, some accountants also work as financial planners.
It is important that you can trust both your financial planner and your accountant. They should be able to explain any issues regarding your finances in a way that you understand. You should also be able to understand the risks of each investment before you make it. And your accountant should help you understand how your books are set up and the information you need to input each day.
You should carefully choose both your accountant and financial planner. Try asking friends and relatives for recommendations, and hire the best fit for your business and personal situation so you can be in control of your financial future.
Updated by Rachel Morgan Cautero.
U.S. Department of Labor. "How to Tell Whether Your Adviser Is Working in Your Best Interest: A Fiduciary Guide for Individual Consumers." Accessed March 20, 2020.
SEC.gov. "Financial Planners." Accessed March 20, 2020.
Investor.gov. "Beware of False or Exaggerated Credentials." Accessed March 20, 2020.