“How much do I need to save for retirement?” “Do I need to invest money in a 529 plan to save for college?” These are examples of the types of questions that we are often asked by our individual clients – we get these types of inquiries from our clients that are best answered by a qualified CFP. While Sousa & Weber prides itself on being the first stop on our clients’ list of trusted advisors, we often give general advice and guidance on personal financial planning matters but defer to a CFP as a follow up for specifics. We thought it was worth a few moments to discuss the differences between CPA’s and CFP’s.
When it comes to financial and tax advice, both CPAs (Certified Public Accountants) and CFPs (Certified Financial Planners) are trained to provide counsel on a wide range of topics. While there is certainly some overlap between the two certifications, each expert has different specializations, so choosing the right professional for your needs is highly dependent on the job at hand. However, sometimes it can be difficult to know whether you’re better off working with a CPA or a CFP for a given project. So what exactly is the difference between the two certifications?
First, let’s consider the training that each expert receives. To become a CPA, a person must pass the Uniform CPA Examination and receive the designation of CPA from the relevant State Board of Accountancy. In addition to passing the exam, a CPA must hold a bachelor’s degree in finance, accounting, or business administration and demonstrate 150 hours of education, plus two or more years of public accounting experience. They must also adhere to the code of conduct set out by the AICPA and State Boards of Accountancy, which delineates the ethical standards that CPAs must follow.
The requirements for becoming a CFP are slightly different–in addition to a bachelor’s degree, a CFP candidate must complete a list of courses in financial planning as specified by the CFP Board and pass an examination comprising 170 questions about more than 100 topics related to financial planning. These topics include financial planning principles, risk management, tax planning, estate planning, and retirement planning, to name a few. The exam also tests candidates’ competence in developing recommendations for clients and their ability to successfully communicate, implement, and monitor these recommendations. CFPs must also demonstrate at least three years of full-time professional experience in the industry and are subject to standards of professional conduct set by the CFP Board.
Though the procedures for both certifications follow a similar trajectory, the topics covered under each certification are quite distinct. To put it simply, CPAs and CFPs specialize in distinct subfields within the world of finance. CPAs often go on to work as public or corporate accountants, whereas CFPs’ specialized knowledge about financial planning, coupled with the training they receive in advising clients on how to best plan for their financial futures, make them uniquely qualified to advise on specific accounting topics pertaining to personal investments and their associated tax implications.
If you are looking for advice about planning for retirement, saving up to buy a house, planning for a child’s college education, or any other topic related to how best to invest your money towards a future goal, you’ll likely want the advice of a CFP. However, if you are looking for help with individual or business income tax or budget planning, business accounting, financial statements, or business strategic planning, you would benefit from getting a CPA firm’s expert advice on these topics.
If you still have questions about whether you should work with a CPA or a CFP, Sousa & Weber is happy to advise. We can help you determine whether one of our expert CPAs is right for the job, or refer you to a qualified unaffiliated CFP. Don’t hesitate to get in touch with us!