CPA vs CFP: Which One Do You Need?

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Creating a well-rounded financial plan for yourself or your family can be daunting. In such situations, it is advisable to consult financial professionals instead of settling for an investment portfolio or plan that you are not too sure about. But, finding a professional to help your finances is not a single-step process. Given the number of financial services available in the market, you may make the mistake of engaging advisors who do not fit your unique financial needs or requirements. This, in turn, can lead to a situation wherein your portfolio is not growing optimally or in alignment with your short-term and long-term goals.

It is thus important to choose your financial advisor only after careful consideration. The first step in selecting the right financial advisor is verifying whether the advisor is qualified to guide you on financial matters and has the required expertise in the area. One tried-and-tested method to vet a financial advisor is their certification. They are likely to have a niche, which can be identified based on their certification type. Again, all certified financial advisors cannot offer comprehensive financial advice. In addition to confirming their expertise in the field, the type of certification can also help you differentiate between a financial expert who fits your requirements and one who doesn't. If you are looking for guidance on how to secure your financial future, reach out to a professional financial advisor who can create a customized financial plan based on your needs and future goals.

This article discusses two sought-after and trusted professional certifications - CPA and CFP. Read further to know more about their differences and the different kinds of services provided by professionals holding these certifications.

CPA vs. CFP: What’s the difference?

Certified Public Accountant (CPA) and Certified Financial Planner (CFP) are two of the most popular certifications. A CPA primarily handles matters related to taxes and accounting, and a CFP, on the other hand, is responsible for creating and implementing financial plans for investors. While there are a lot of services that overlap between these advisors, there are also several differences between them. These distinctions are important to understand if you are searching for a financial advisor. 

What is the CPA certification?

A Certified Public Accountant is a financial advisor who primarily specializes in taxes and accounting. The CPA certification is granted upon the successful completion of the CPA Exam. The test is developed and conducted by the American Institute of Certified Public Accountants (AICPA).

A candidate must have adequate educational qualifications to appear for the CPA exam. First, CPAs must finish 150 semester hours and hold a bachelor's degree. Most CPAs hold a Master's degree since a Bachelor's degree usually spans only 120 semester hours. Moreover, separate states in the USA may add their specifications to the previously mentioned eligibility criteria.

The qualifying test covers various subjects, including but not limited to accounting, corporate, taxation, economic concepts, and professional ethics.

The assessment of CPAs can be divided into four main categories:

  • Financial accounting and reporting
  • Business environment and concepts
  • Audit and attestation
  • Regulation

The CPA certification is granted only if a candidate can score over 75 in every section separately, within a period of 18 months.

Additionally, CPA certification also requires work experience in the field of public accounting. However, the number of years required may differ from state to state.

What services does a CPA offer?

CPAs can audit financial accounts for a range of clients – from individual parties to multinational corporations. However, those with the CPA certification usually work at accounting firms or accounting divisions of larger companies.

Additionally, CPAs are also considered to be authorities on tax law and are engaged to provide taxation advice. The scope of clientele and the services provided vary with the CPA and the organization they are affiliated with.

Financial planning by CPAs includes various services such as preparing audits, bookkeeping, forensic accounting, business consultation, and financial management for corporations. While some CPAs may focus on one area of expertise, others may extend their services to multiple areas.

What is the CFP certification?

Certified financial planners, referred to as CFPs, are individuals skilled in financial management. To obtain the CFP certification, individuals must pass the certificate course offered by the Certified Financial Planner Board of Standards.

Like CPAs, CFPs also require specific educational qualifications to be eligible for CFP certification. All CFPs must have a Bachelor's degree and a college-level qualification in business education or financial planning. This degree should also translate to at least 150 credit hours of coursework (As mentioned above, since most Bachelor's degrees extend up to 120 hours of semester work, most CPAs tend to hold a Master's degree).

In addition to the exam, CFP applicants should have an apprenticeship program experience of 4,000 hours or 6,000 hours of financial planning experience.

Unlike the CPA, where there are four assessment categories, CFP certification consists of only one level. Most CFPs take on advisory roles, such as wealth managers, asset managers, financial advisors, and financial planners. The scope of services of CFPs typically involves them as advisors to individual clients.

Additionally, during financial planning, CFPs must comply with a strict fiduciary duty standard. This implies that the primary objective of CFPs is to work in the best interest of their clients and not their own. For instance, a CFP cannot ask you to invest in a scheme in order to obtain a commission for themselves.

What services does a CFP offer?

Compared to CPAs, financial planning by CFPs involves more personalized financial services. Their expertise is mostly used in personal finance and planning. For instance, some of the most commonly sought-after services by CFPs are retirement planning, financial planning, tax consulting, risk management, legal, financial management, estate planning, and insurance services, among others.

These services require a more intimate knowledge of the client as the CFPs play a vital role in designing personal financial strategies.

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CPA vs. CFP: Which is better?

The scope of CPAs and CFPs, though appear similar at times, remains relatively distinct. Finding the better option between CPAs vs. CFPs hinges on identifying your needs as a client. CPA services tend to be more project-oriented, while CFPs are authorized to advise on your financial strategies and how to optimize your savings.

Consider a situation where you are interested in saving money for retirement. A CPA can advise you on starting an individual retirement account and explain how it can be a critical tax-saving tool. They will also be able to explain how it will affect your asset value over the years.

However, your CFP will be better equipped to tell you how to balance your portfolio to include the said IRA scheme and different ways to achieve your goals within your current economic situation.

Financial planning by CPAs is beneficial for clients with a complicated tax framework. This could include individuals with multiple income channels, business owners, and firms with numerous operational and business branches. For instance, engaging a CPA is a good idea if you are a business owner looking for expert advice on managing your taxes and analyzing your accounts to optimize returns.

On the other hand, if you are looking for advice on a comprehensive investment plan that covers critical areas such as insurance, children's funds, legacy planning, and diversification of assets, a CFP could be a better fit.

To conclude

The expertise of both CPAs and CFPs can be highly advantageous to investors. The primary objective of any financial professional, whether CPA or CFP, is to work in their client's best interests. The type of financial advisor you need depends on your financial situation. The kind of assets you own, the economic challenges you are looking to solve, and short-term and long-term financial goals will determine whose services you need more. CPAs and CFPs also levy a service charge which varies depending on the financial provider. So, you can choose a financial advisor who suits your budget and financial situation.

Use the free advisor match tool to match you with experienced and certified advisors who can help you secure your financial future and live comfortably in retirement. Give us basic details about yourself, and the match tool will connect you with 1-3 professional financial fiduciaries that may be suited to help you.

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The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.