Financial advisors and accountants are both financial professionals who help clients with various aspects of their financial lives. Although both jobs involve financial analysis, there are significant differences between the two roles. Here’s what you need to know about financial advisors and accountants, including when it makes sense to hire one or the other.
- Accountants versus financial advisors in figures: In 2023 there were almost five times as many accountants and auditors (1.5 million) than there were personal financial advisors (327,600), according to data from the U.S. Bureau of Labor Statistics.
- Financial advisors are a popular source of informationOf the 57 percent of Americans who sought financial advice in 2023, about 35 percent spoke to a financial advisor — the second most popular source of financial information after friends and family, according to a December 2023 Bankrate survey.
- Financial advisors are a reliable source of information: 35 percent of Americans say financial advisors are the most trusted source of financial advice, outpacing spouses, family members, business news, friends and social media, according to a 2023 survey by Northwestern mutual.
- Expected increases for both professionsEmployment for accountants and auditors is expected to grow 4 percent between 2023 and 2032, while the number of personal financial advisors is expected to grow 13 percent over the same period, much faster than the average for all occupations, according to the Bureau of Labor Statistics .
- Accountants are busy at tax time: The average billable staff hours for accounting firms during the 2023 tax season was 1,467 hours, according to the CPA Journal.
What does a financial advisor do?
A financial advisor helps clients with various aspects of their financial lives, but they are most commonly associated with retirement planning. Financial advisors help build investment portfolios for different goals and can also assist with things like budgeting, insurance, tax strategy, estate planning and more.
One of the first things a financial advisor does when he or she starts working with a client is to determine the client’s goals. From there, they help develop a savings and investment strategy that aligns with these goals. Clients typically meet with their financial advisors a few times a year to monitor their progress toward their goals and see if any changes are needed.
The best financial advisors are fiduciaries, meaning they are ethically obligated to always act in the best interests of their clients and proactively disclose any conflicts of interest. If a financial advisor is not a fiduciary, chances are they work for an insurance company or financial institution, and the advice they give may be biased.
What does an accountant do?
The role of an accountant is usually more limited than that of a financial advisor. Accountants help track and organize financial transactions and often help prepare annual tax returns. Often clients only have contact with their accountant around tax season, while they can contact a financial advisor at different times during the year.
Accountants may be more involved in cases where the client has a business. In addition to tax returns, the accountant can also help prepare financial statements for the company. Accountants generally do not provide investment advice.
Key differences between financial advisors and accountants
While financial advisors and accountants may seem similar, there are some major differences in the services they provide. Here are some of the key differences between the two.
Certifications
A financial advisor may have a number of different professional designations, such as certified financial planner (CFP) or chartered financial analyst (CFA), while accountants typically go by the designation of certified public accountant (CPA).
Services offered
Accountants typically provide services related to tax preparation and may also be involved in financial statements or tracking and organizing transactions. Financial advisors help with retirement planning, investment management, estate planning, tax strategy and more.
Frequency of meetings
You may meet with a financial advisor a few times a year, discussing your investment results and whether your goals have changed, while clients typically meet with their accountants during tax season.
Should you work with a financial advisor or an accountant?
There are several scenarios in life where it may make sense to hire a financial advisor, accountant, or both. Here are some situations where it makes sense to work with it.
When should you hire a financial advisor?
- You are looking for help with retirement planning or investment management.
- Your overall financial situation is complex and you want help with a variety of topics, such as estate planning, tax strategy or insurance.
- You are looking for a strategy for paying off debt.
When do you hire an accountant?
- You are looking for someone to do your taxes.
- You want someone to help you organize your financial life.
When should you hire a financial advisor and an accountant?
- You start or sell a business.
- You are making a major purchase, such as a house.
- You have considerable assets and your financial situation is complicated.
In short
Whether or not you hire an accountant or financial advisor depends on your individual circumstances, and what makes sense for you may not make sense for someone else. Generally speaking, accountants are used for tax preparation, while financial advisors are used for investment advice and retirement planning, as well as a number of other financial issues. Consider using Bankrate’s financial advisor matching tool to find a financial advisor near you.
