Do You Need an Accountant or a Financial Planner?

Couple talking to financial advisor in living room
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When looking for financial advice, you may be faced with deciding between hiring an accountant or a financial planner. Depending on your circumstances, you may need one or the other – or both.

There will come a point in your finances when it makes sense to have additional help figuring out the best way to invest or to file your taxes. Then you’ll need an accountant. You may also be faced with a time when you need someone to help manage your money, your investments, or help you manage a sizeable inheritance.Then you’d need a financial planner.

Below, we explain when you’ll need an accountant, and when it makes sense to hire a financial planner.

When Should You Use an Accountant?

Most people do not need an accountant. An accountant is best utilized when you have a very specific tax situation, such as owning your own business, making above $200k, expect to give money to your children, owning rental properties, or anticipate receiving a large capital gain.

Putting it simply, an accountant is there to help you with specific issues that most people do not have. However, there are 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.

  • If you have real estate property and or own rental properties, you may need to consider getting an accountant. Owning a rental property is essentially like owning your own business, so hiring an accountant is likely necessary for this situation. 

  • Another big impetus for hiring an accountant is 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 CPA or tax specialist to do your taxes for you.

  • If you experienced a big life change, such as adopting a child, buying property, or making a large amount of money, then getting an accountant can put your mind at rest. You may only need to visit the accountant that one year, 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 Should You Use a Financial Planner?

If you are looking for advice on budgeting, getting out of debt or investing, it may be time to hire a financial planner. A financial planner can work in two different ways. One way is as an adviser who you pay a fee to help you plan a budget and work out a financial plan for you to build wealth.

Alternately, you can hire a financial planner who receives a commission on the products that he or she sells to you or specific investments tailored to you.

However, a good financial planner will encourage you to get out of debt before you seriously begin investing your money. If you need help setting up your plan to get out of debt or your budget you may be better off finding a financial planner who you pay to meet with.

Then, when you’re ready, this financial planner can help you when you are ready to begin investing your money.

Your bank may offer financial planning services or you can ask friends for referrals to their financial planners. Below are situations when hiring a financial planner may be the best choice for you:

  • You may need a financial planner if you are ready to start investing your money in the market. Your financial planner can help you determine the best investments to help you reach your financial goals.

  • A financial planner can also help you create a budget and work on getting out debt. He or she can help you create a long-term financial plan for things like retirement and saving for college for your kids.

Do You 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 to trust both your financial planner and your accountant. Putting it simply, your financial planner should be able to explain the issues regarding your finances in a way that you understand. You should understand the risks of each investment before you make it. On the other hand, your accountant should be able to clearly understand your tax situation each year, 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.

Then you can truly be in control of your financial future.

Updated by Rachel Morgan Cautero.