Personal Accountant vs. Financial Advisor: Which Do You Need?
Financial planners and personal accountants specialize in helping you manage your money situation so you can focus on other goals. But the question is, which one do you need?
With the right tools and information, you can successfully manage your personal finances most of the time. However, certain situations can be too complex to handle alone. That’s when you should consider recruiting some expert assistance.
In this article, we’ll break down what personal accountants and financial advisors each do differently and offer guidance to help you determine which one might be right for you.
Financial Advisors vs. Accountants
Personal accountants and financial advisors are essential roles filled with professionals who are good with math, numbers, and money. However, while there is some overlap between the jobs, they provide distinctly different services.
What Are Financial Advisors?
A financial advisor’s primary role is to develop strategies for achieving your financial goals. They handle things like wealth management and debt elimination plans and can be experts in the stock market, investment vehicles, retirement accounts, or anything else related to building long-term wealth.
On the wealth management side, most people can manage their own long-term investments with a little research. However, some people find IRAs, ETFs, and 401(k)s so foreign and intimidating. They would rather just hand off responsibility to a trained professional with a proven track record.
Regarding debt, sometimes it can be so crushing and demoralizing that people give up all hope. A good financial advisor can formulate a debt management strategy and provide guidance and encouragement to stick with it.
What Are Personal Accountants?
A personal accountant’s primary goal is to track and analyze your financial transactions. They generate statements and reports, forecast budgets, manage audits, and generally ensure you’re financially healthy and square with anyone you might do business with – including the IRS.
Again, most people are perfectly capable of handling their own personal finances. However, as your investment portfolio, business portfolio, salary, and wealth all expand over time, tracking financial information becomes increasingly difficult and time-consuming.
In the case of a tax audit, it’s even more important to have professional support to ensure your financial dealings get accounted for adequately. What you pay in accountant fees will probably be less than what you would pay in fines to the IRS.
As an analogy, think of an accountant as a doctor and a financial advisor as a personal trainer. If you need a simple checkup, surgery, or cancer treatment, you need a doctor. If you need to lose weight or build muscle, you need a personal trainer.
Think of personal accountants and financial advisors in a similar way. Both roles focus on your physical health and well-being but have different approaches and responsibilities. Which one you need depends on your specific problem.
Like personal trainers, financial advisors need sales, marketing, and networking skills to communicate their value and develop a client base. Most people don’t even realize how a financial advisor can help them or who to trust if they hire one.
Like doctors, accountants must undergo certifications and years of schooling to provide their services. The job is meticulous and done by detail-oriented experts who must adhere to specific legal and professional standards.
The Difference Between Accountants and Financial Planners
Now, let’s take a look at the different uses for these professionals and how each one might be able to help you in your current situation. Of course, this will depend on several factors, but we can provide an overall approach to help you think through the problem.
You Might Need an Accountant If…
- You have complicated finances. You might have diverse investments, real estate, rental property, high income, or all of the above. At some point, the whole situation becomes complicated enough that you’re better off handing it to a pro than trying to manage it yourself. Less headache is worth the cost.
- You hate dealing with numbers. Maybe you find the whole process confusing or intimidating, or you hate math and want an expert to handle it just to be safe. That doesn’t mean you need an accountant on the payroll all year, but maybe it’s a good idea when it’s time to pay taxes. One less thing for you to handle.
You Might Need a Financial Advisor If…
- You’re clueless about investing. If the whole idea of stocks, bonds, and investing terrifies you, a financial advisor can take the lead. They can explain how the system works, help you understand the risks, and help you start planning and saving for retirement. Sometimes, the hardest part is just knowing where to begin.
- You’re in serious debt. It’s challenging to imagine planning for retirement when you’re buried in debt, but a financial advisor can help. They provide the insight, expertise, and guidance you need to climb out of debt and get your finances in order.
You Might Need Both If…
- You don’t have the time or the interest. Managing finances takes time. Some people like doing it and are happy to spend nights or weekends crunching numbers and making spreadsheets. Other people would rather get a root canal. If you’re in the latter group, you might want to hire professionals to carry the burden.
- You’re rich. Most wealthy people have complex finances and investments and need professional money management. Employing accountants and advisors costs much less than you might lose through large-scale accounting errors or poor investing. If you can afford it, hire the pros.
Choose One, Both, or Neither
We hope you understand the responsibilities of both personal accountants and financial planners and how these professionals can help you in certain situations. Ultimately, it will come down to your personality and knowledge on which tasks you can afford to spend time and money on. When in doubt, we recommend hiring a professional.
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