CPA vs Financial Advisor

Certified Public Accountants (CPA) and financial advisors are both dedicated to a common objective, increasing your annual income. However, in the context of CPA vs financial advisor, the significant difference between the two is that while the former handles your taxation and auditing needs, the latter caters to your investment needs.

Both these professionals are sought-after in the business world for providing a wide range of financial services. So, choosing the right professional depends on your unique situation. Moreover, each holds distinctive expertise in its specific area of operation. However, remember that a CPA can perform the tasks of a financial advisor but not vice-versa.

Comparative Table – CPA vs Financial Advisors

BasisCPAFinancial Advisor
RoleAccounting, taxation, auditing, and financesInvestments, stock market, risk management, and wealth management
Licensing bodiesNASBA and the 55 US State Boards of AccountancyFINRA
Licensing examinationAICPA-administered Uniform CPA ExamFINRA-administered
Series 6 (Investment Company and Variable Contracts Products Representative Qualification Examination) Exam 
Series 63 Uniform Securities Agent State Law
Series 65 (Uniform Investment Advisor Law) Exam
Series 7 (General Securities Representative) Exam
Series 66 (Uniform Combined State Law) Exam
Exam requirementBachelor’s degree or 120-150 hours
Accounting or business coursework (may vary as per your state board)
To take the exam, a candidate must be a sponsored member of FINRA or a self-regulatory organization
Average approx. salary $73,560 per annum$89,330 per annum

What is a CPA?

A CPA is a state board-licensed accounting professional authorized to practice the profession in the licensed US jurisdictions. To attain the license, a CPA must meet the education and experience requirements (as per the state board) and pass the CPA ExamCPA ExamThe CPA Exam assesses accounting professionals not just on their financial knowledge, but also on their ability to review and seek out key abilities.read more.

CPA Exam

The American Institute of Certified Public Accountants (AICPA) partners with the National Association of State Boards of Accountancy (NASBA) and the 55 US State Boards of Accountancy to conduct the CPA Exam.

The entire syllabus is divided into four exams which takes place in an 18-month period. Each state board has its qualifying criteria. It will help you prepare better if you have your bachelor’s in a relevant accounting or business course. Also, prior working experience in taxation would contribute immensely to your preparation for the taxation exam. 

Roles and Responsibilities

CPA’s significant roles and duties involve advising on the subject matters of auditing, federal taxation, financial planningFinancial PlanningFinancial planning is a structured approach to understanding your current and future financial goals and then taking the necessary measures to accomplish them. Because this does not begin and end in a specific time frame, it is referred to as an ongoing process.read more, corporate accounting, and many more. Their primary role is to audit and maintain financial records. With their access to the financial records of an entity, they are the right person to seek financial advice in case of any trouble.

Besides, they also specialize in tax preparation and planning. With extensive knowledge of the tax laws, they can guide you through your tax problems with ease. In addition, they can leverage their years of learning and experience in this field to suggest ways to minimize your tax liability and maximize benefit while adhering to the law.

Career Prospects

As vast as the scope of CPA, the salaries are pretty lucrative too. This makes it one of the most impeccable career options. Moreover, their understanding of a wide range of financial aspects makes them apt to take up any financial role in any industry.

The US Bureau of Labor Statistics predicts the demand for CPAs to grow by 22% in the coming years. A promising career coupled with a greater professional reputation and a handsome pay package is a dream of any professional. Being a CPA guarantees that.

Benefits of Hiring a CPA

In making a hiring decision on CPA vs financial advisor, you are most likely to prefer a CPA. This is because by hiring a CPA, along with the right financial advice, you also get professionally handled accounting, auditing, and taxation services. This ensures you don’t end up spending more on hiring multiple professionals for different tasks.

What is a Financial Advisor?

Financial advisors are the finance professionals who help people manage their money. A financial advisor is a broader term that covers other financial experts such as financial planners, investment advisors, wealth managers, stockbrokers, etc. Let’s discuss them in brief.

Types of financial advisors

#1 – Investment advisors

Investment advisors specialize in managing your investment portfoliosInvestment PortfoliosPortfolio investments are investments made in a group of assets (equity, debt, mutual funds, derivatives or even bitcoins) instead of a single asset with the objective of earning returns that are proportional to the investor's risk profile.read more. Their focus of work revolves around stocks, bondsBondsA bond is financial instrument that denotes the debt owed by the issuer to the bondholder. Issuer is liable to pay the coupon (an interest) on the same. These are also negotiable and the interest can be paid monthly, quarterly, half-yearly or even annually whichever is agreed mutually.read more, mutual fundsMutual FundsA mutual fund is an investment fund that investors professionally manage by pooling money from multiple investors to initiate investment in securities individually held to provide greater diversification, long term gains and lower level of risks.read more, and other such securities. Investment advisors registered with SEC (Securities Exchange Commission) or any other state regulatory body are known as Registered Investment Advisors (RIAs).

#2 – Financial planners

Financial planners specialize in personal finance. They offer you holistic advice on areas ranging from retirement, inheritance, taxation to insurance and estate planning. Unfortunately, there are no professional bodies to regulate uncertified financial planners. However, certified financial planners (CFPs) are controlled by CFP Board.

#3 – Wealth or money managers

Wealth managers usually manage the assets of high-net-worth individuals (HNWI). Like financial planners, they provide advice related to all financial aspects of a client. But unlike financial planners, they cater only to HNWI.  RIAs also manage the financial assetsFinancial AssetsFinancial assets are investment assets whose value derives from a contractual claim on what they represent. These are liquid assets because the economic resources or ownership can be converted into a valuable asset such as cash.read more of HNWI.

#4 – Stockbroker

Stockbrokers are individuals or firms authorized to buy and sell shares in the stock market on behalf of their clients. They also provide consultations on what to buy and when depending upon the market conditions and their client’s goals.

Professional certification

It is not mandatory to hold a university degree to work as a financial advisor. Any finance professional can act as a financial advisor. However, finance professionals must seek registration and license with the US Financial Industry Regulatory Authority (FINRA) to sell investment products.

FINRA administers specific exams to license practicing financial advisors. These exams are Series 6, Series 63, Series 65, and Series 7 (to be taken along with Series 66). Financial advisors can choose the exam depending on their area of specialization.

With a regulatory body overlooking the finance professionals, clients place greater trust in them. Also, a license guarantees integrity and quality in the services rendered by them. Finance professionals can also get certified from:

  • National Association of Professional Financial Advisors (NAPFA)
  • Certified Financial Planner Board of Standards (CFP Board)
  • Chartered Financial Analysts Institute (CFA Institute)
  • US Securities Exchange Commission (SEC)

Roles and Responsibilities

Financial Advisors help you plan your budget based on your earnings, appetite, and risk-bearing capacity. Depending on their area of specialization, they must possess a good understanding of taxation, insurance, retirement, and other fund schemes. Besides, they must communicate with the clients, understand their financial goals, build a bond with them, and suggest ways to maximize their income.

Career Prospects

Financial advisors are paid fees or commissions as per their agreement with their clients. They earn well depending on the amount of new business they create. Also, they enjoy greater flexibility at work. As per the BLS, jobs of financial advisors are likely to grow by 4% in the coming years.

Benefits of Hiring

Any argument over hiring a CPA vs financial advisor can be brought to an amicable agreement by understanding the distinctive nature of their services. Though CPAs and financial advisors both offer consultancy services, financial advisors have niche knowledge specific to their area of specialization.

Moreover, they provide only financial counselling, unlike CPAs, who also offer tax, auditing, and accounting services. This leaves them with enough time to focus on a client completely. As a result, they can build a strong bond with them. With a friendly relationship in place, clients willingly share their confidential information and future goals with ease. In this scenario, clients also place greater confidence in their decisions.

CPA vs Financial Advisor Infographics

This has been a guide to CPA vs Financial Advisor. Here we discuss the difference between CPA and financial advisor along with infographics and a comparative table. You can learn more from the following articles –

Reader Interactions

Leave a Reply

Your email address will not be published. Required fields are marked *