CPA vs. Financial Advisor: Key Differences You Need to Know

Bryce Welker
·13 min read

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Navigating the decision between a career as a CPA and a financial advisor is pivotal for many in the finance sector. This choice is more than just a job—it’s about selecting a path that aligns with your passion for delving into the complexities of tax laws and accounting or guiding individuals toward achieving their financial goals through strategic planning and investment advice.

So, which designation is right for you, CPA or financial advisor?

In this exploration, I’ll dissect the CPA vs. financial advisor dilemma, highlighting the key differences in job outlook, education requirements, and the unique value each professional brings regarding tax planning, investment management, and personal finance.

Key Takeaways

  • Distinct Career Paths: CPAs specialize in accounting, tax preparation, and auditing, requiring a CPA exam and specific education. Financial advisors focus on guiding clients through investment and retirement planning, often needing licenses like Series 7 and possibly the CFP certification.

  • Education and Certification Requirements: To become a CPA, one must complete 150 semester hours of education and pass the Uniform CPA Examination. Financial advisors need a bachelor’s degree and relevant licenses, with the option to pursue the CFP certification for added credibility.

  • Service Scope: CPAs are essential for compliance, financial reporting, and tax advice. Financial advisors offer broader services, including investment advice and portfolio management, emphasizing personal financial goals.

  • Financial Rewards: Both careers offer lucrative opportunities; CPAs benefit from a structured salary growth, while financial advisors’ earnings are more variable, often based on commissions and the assets they manage.

  • Flexibility and Client Interaction: Financial advisors typically enjoy more schedule flexibility and direct client interaction, focusing on personal financial planning. CPAs often work in more structured environments, focusing on compliance and reporting.

CPA vs. Financial Advisor: Understanding the Roles

Certified Public Accountants

A CPA is a distinguished finance professional who has successfully passed the Uniform CPA Examination and fulfilled all necessary certification requirements mandated by their state’s board of accountancy. This designation allows CPAs to perform specialized tasks beyond the reach of non-certified accountants, such as preparing audited or reviewed financial statements.

CPAs possess a broad range of expertise in accounting practices, including but not limited to tax preparation, financial auditing, and strategic financial planning. They adhere to a strict code of ethics and must earn continuing education credits regularly to maintain their certification, ensuring their knowledge and practices remain current and effective.

Financial Advisor

A financial advisor is a professional who provides expert advice on managing personal finances, investment strategies, and wealth management. Financial advisors may hold various certifications, with the Certified Financial Planner (CFP) designation among the most prestigious. Unlike CPAs, financial advisors focus on helping individuals and businesses achieve their long-term financial goals through careful planning and informed decision-making on investments, retirement planning, and risk management.

Successful financial advisors excel at identifying potential clients, understanding their financial needs and goals, and effectively communicating how their services can help them achieve them. This sales component is crucial, as it involves building trust and persuading clients to take action based on the advisor’s recommendations.

Certification and Education

Navigating the path to becoming a certified public accountant or a financial advisor involves distinct educational and certification processes tailored to these financial professionals’ specific roles and responsibilities.

CPA Requirements

To qualify as a CPA, candidates must complete an extensive educational journey, accumulating:

  • 150 semester hours of coursework

  • Often extends beyond a traditional bachelor’s degree

  • May require a master’s degree or additional college credits in accounting or a related field

Pass the Uniform CPA Examination: A comprehensive test evaluating knowledge and skills in accounting, auditing, and taxation where candidates need to score a minimum of 75 to pass.

  • Auditing & Attestation (AUD): Evaluates your ability to perform audits and provide assurance on financial statements.

  • Financial Accounting & Reporting (FAR): Tests knowledge of financial accounting standards and the preparation of financial reports.

  • Taxation & Regulation (REG): Focuses on understanding U.S. federal taxation, ethics, business law, and regulatory environments.

  • Business Analysis & Reporting (BAR): Assesses skills in analyzing business data to support financial reporting and decision-making.

  • Information Systems & Controls (ISC): Examines knowledge of information systems and controls relevant to the accounting profession.

  • Tax Compliance & Planning (TCP): Tests expertise in tax compliance and strategies for tax planning.

Gain Practical Experience: Work 1-2 years under the guidance of a licensed CPA to get crucial experience for developing expertise in navigating tax laws, managing financial records, and conducting auditing processes.

Financial Advisor Requirements

The journey to becoming a financial advisor involves several key steps, starting with foundational education and leading to specialized certifications:

Obtain a bachelor’s degree in finance, economics, or another relevant discipline. This education lays the groundwork for understanding:

  • Investment strategies

  • Financial planning

  • Economic principles

Licensing Requirements: Depending on the services provided, financial advisors may need to obtain specific licenses, including:

  • Series 7: Authorizes the sale of most types of securities

  • Series 65: Qualifies individuals as Investment Adviser Representatives

  • Series 66: Combines the qualifications of the Series 63 and Series 65 exams

Professional Designations: Many financial advisors aim to earn professional designations to showcase their expertise and commitment to ethical standards. One of the most recognized is the Certified Financial Planner (CFP) certification, which requires:

  • Completing specialized coursework in financial planning

  • Passing rigorous exams to demonstrate proficiency

Scope of Work

CPA Services

Certified Public Accountants offer a comprehensive suite of services critical to maintaining their clients’ fiscal integrity and growth. Their expertise spans:

  • Auditing and Assurance Services: Ensuring financial statements accurately represent a company’s financial position.

  • Tax Preparation and Planning: Strategizing to minimize tax liabilities while adhering to tax regulations.

  • Financial Consulting and Advising: Providing insights to optimize financial performance and strategic decision-making.

  • Representation before the IRS: Advocating on behalf of clients in dealings with tax authorities.

Financial Advisor Services

Financial advisors are instrumental in helping clients navigate their financial futures with confidence. Their advisory services include:

  • Investment Advice and Management: Tailoring investment strategies to meet individual financial objectives.

  • Retirement Planning: Designing plans to ensure a secure and fulfilling retirement.

  • Estate Planning: Arranging for the orderly handling of a client’s estate to meet personal wishes and family needs.

  • Risk Management and Insurance Planning: Identifying and mitigating potential financial risks through appropriate insurance products.

CPA vs. Financial Advisor: Career Opportunities

CPAs have access to a variety of career paths across different sectors, including:

  • Public accounting firms: specializing in areas like auditing and tax advisory.

  • Corporate finance departments: playing a key role in financial reporting and analysis.

  • Government agencies: overseeing and ensuring the proper use of public funds.

  • Non-profit organizations: managing finances and ensuring regulatory compliance.

Financial advisors can explore diverse career opportunities, such as:

  • Financial advisory firms: offering bespoke financial planning services.

  • Banks and investment firms: providing clients with investment guidance.

  • Insurance companies: focusing on financial protection products.

  • Self-employment: building a personal brand and client base in financial advising.

Both CPAs and financial advisors are integral to the financial well-being of their clients, each bringing a unique set of skills and services to the table. Whether through detailed financial record-keeping and tax strategy by a CPA or investment and retirement planning by a financial advisor, professionals in both fields play crucial roles in helping clients achieve their financial aspirations.

CPA vs. Financial Advisor Salaries

This comparison aims to highlight the average, low, and high salary ranges for these two crucial positions within the financial industry to provide insights into the potential earnings and financial prospects associated with each role, reflecting the value and demand for their expertise in the marketplace.

CPA Salaries

CPAs in the US earn an average salary of $97,000 annually, with entry-level positions starting at about $61,000 and experienced roles reaching up to $153,000. How much a CPA makes can vary by experience and location, with senior roles in major financial cities earning the highest and can exceed well over $200,000. CPAs typically also get a 401(k) that adds to their benefits.

  • Average Salary: $97,000

  • Low Average: $61,000

  • High Average: $153,000

Financial Advisor Salaries

Financial advisors have an average annual salary of $80,000, with starting salaries at $43,000. The upper salary range can reach $149,000, depending on experience and specialization. Additional commissions average at $18,000 annually.

  • Average Salary: $80,000

  • Low Average: $43,000

  • High Average: $149,000

  • Commission: $18,000

Deciding Between CPA and Financial Advisor

When choosing a career path as either a CPA or a financial advisor, several critical factors come into play. These considerations reflect one’s personal interests and career aspirations and the commitment to education and certification required by each profession. Understanding the implications of each choice on long-term career opportunities and earning potential is crucial.

What Are You Drawn To?

  • Analyzing and interpreting financial statements, tax laws, and regulations, then becoming a CPA might be the right path. CPAs specialize in:

  • Helping individuals and businesses achieve their financial goals through planning and strategy, consider a career as a financial advisor. Financial advisors focus on:

Consider the Following Factors

  • Personal Interests:

  • Career Goals:

  • Willingness to Invest in Education and Certification:

  • Impact on Long-term Career Opportunities and Earning Potential:

Making Your Decision Between CPA and Financial Advisor

  • CPA if you value structure, specialization in accounting, and a clear regulatory role within the financial sector.

  • Financial advisor if you prefer flexibility, direct client interaction, and the opportunity to directly influence individuals’ and businesses’ financial success.

Real-World Insights: CPA to Financial Advisor Transition

The transition from a CPA to a financial advisor is a path some professionals consider, driven by the desire to shift from tax and auditing to a more advisory role focused on financial planning and investment management. This section draws real-world insights from commenters on this thread contemplating or making this career change, highlighting the considerations, challenges, and potential benefits.

Key Considerations

  • Sales Aspect: A common theme among those considering the switch is the realization that many financial advisor roles have a strong sales component. As one user, ninjacereal, mentions, “It’s a sales job, the CPA might make people trust you more, but if I were doing sales, I’d probably sell sprinkler system installations to luxury NYC skyscrapers because you just need one sale a year and you’re set.” This perspective highlights the significant role of sales in financial advising, contrasting with the more analytical nature of CPA work.

  • Fee-based vs. Commission-based: The type of firm can greatly affect the role’s nature. Working in a fee-only Registered Investment Advisor (RIA) firm may align more closely with those seeking to avoid the traditional sales model of financial advising. As one user pointed out, “Some financial advisor told me that you don’t really sell the product if you work in a fees RIA firm only.”

  • Passion for Sales: The transition might not be suitable for everyone. DataAggregator, with over a decade of experience as a licensed financial advisor, advises, “Unless you know you love, and have a natural knack for, sales, DO NOT DO THIS. It’s a dead-end career with zero transferable skills unless you’re shooting for another sales position.”

  • Utilizing CPA Skills: The CPA designation can be a strong foundation for a career in financial advising, especially in areas like tax planning and estate planning. However, as one commenter reflects, “I thought about going into financial advising but stopped myself when I thought about giving up the title of ‘most trusted advisor’ just to do sales.”

  • Industry Shifts: The financial advisory industry is evolving, with a growing focus on planning over product sales. islandbmd notes, “The industry is shifting its focus away from managing investments to actual planning since, as others have mentioned, active management doesn’t outperform passive indexes.”

Direct Quotes and Testimonials

  • “I’ve thought about it, but modern financial advisors are just salespeople.” — highlighting the sales-oriented nature of many financial advisor roles.

  • “I got my CFP as a CPA senior manager... It helped with my job in private client advisors.” — illustrating how CPA skills can complement financial advising, though the shift might not align with everyone’s career aspirations.

  • “If you build your own business, you’ll need some sales knowledge...” — islandbmd, acknowledging the necessity of sales skills even in more planning-focused advisory roles.

Conclusion

Choosing between a career as a Certified Public Accountant and a financial advisor involves weighing personal interests, career goals, and the commitment to education and certification. Each path offers unique opportunities: CPAs focus on accounting, tax preparation, and compliance, while financial advisors guide clients through financial planning and investment strategies.

The transition from CPA to financial advisor can be challenging, often involving a shift towards sales-oriented roles and starting anew in the advisory field. Ultimately, the decision should align with one’s professional aspirations, with a willingness to embrace each career path’s distinct challenges and rewards.

FAQs

What are the main differences between a CPA and a Financial Advisor?

CPAs focus on accounting, tax, and auditing, requiring a CPA exam and specific education. Financial advisors concentrate on investment and retirement planning, often needing licenses like Series 7 and possibly the CFP certification. CPAs deal with compliance and financial reporting, while financial advisors guide personal financial strategies.

How do the education and certification requirements differ for CPAs and financial advisors?

CPAs must complete 150 semester hours of education and pass the CPA examination. Financial advisors need a bachelor’s degree and relevant licenses (e.g., Series 7, 65) and may pursue the CFP certification for advanced credibility.

Can CPAs provide the same services as financial advisors?

While CPAs can offer tax and financial planning advice, only financial advisors are typically licensed to give investment advice and manage investment portfolios, especially if they hold the CFP certification.

Is one career more financially rewarding than the other?

Both careers can be lucrative; CPAs have a strong start with structured salary growth, while financial advisors’ income often depends on commissions and the assets they manage, offering high earning potential with successful client relationships.

Which career path offers more flexibility and client interaction?

Financial advisors generally have more flexible schedules and direct client interaction, focusing on personal financial goals. While interacting with clients, CPAs often have a more structured environment focused on compliance and reporting.

Are financial planners and financial advisors the same?

No, they are not. Financial planners focus on long-term wealth management strategies, often holding a CFP certification overseen by the Certified Financial Planner Board and becoming Certified Financial Planners. Financial advisors provide a broader range of services, including investment management and tax advice, and may hold different licenses. While their roles can overlap, their core focus and certifications often differ.