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The Difference Between Your Accountant And Your Financial Planner

Posted on October 01 2020

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Many business owners have a presumption that their accountant can do both the job of accounting and financial planning (or vice versa), therefore, the two roles complement each other. Neither the professional can do the entire job of the other.

For example, when a person was a Certified Financial Planner (CFP), it took him years of both study and to earn professional experience. He boasted a broad base of knowledge that included some pretty difficult tax planning dialects and strategies. When it comes for me to file my tax return then I know much more than enough to get my work done.

What Your Accountant Can Do For You

The main word for accountants is "taxes" and everything related with taxes. Their main focus is to strategize, budget and tax preparation. This is also quite a broad category that encloses so much more than what it appears on the surface.

If your business is still small, or if you are experts with numbers, you may be wondering why to spend money on an accountant. Your tax preparation software is automatic, and your situation is fairly simple, right?

What your accountant can also do is to identify the big picture of opportunities and strategies which will help you to get or stay ahead. Are you deteriorating all the right assets in the most productive way? Is your business structure good for you now and in the long run? How does the change in the tax law affect you and are there any opportunities therein? With this kind of issues your accountant should have deep knowledge about it.

There are some of the issues that an accountant can help you out with:

Tax preparation

Financial statements

Depreciation

Breakdown of expenses

Appropriate tax shelter recommendations

Tax laws and how they affect you

Business structure recommendations and advice

Business growth and succession strategy in relation to taxes

Audit representation

Accountants generally charge a fee on an hourly basis for their advice, and hence are quite task-oriented. You are generally required to be specific about how you want the accountant to help you out but their knowledge can be deep.

What Your Financial Planner Can Do For You

If accounting is all about taxes then the financial planning is all about investments, but just as the accountants can offer you so much more apart from filing your taxes, so it is the same for the financial planners who even do more than investing your money.

Financial planners are also focused on the big picture, but the picture in the main question which is little different from that of the accountants to look at. Financial planners are very goal-oriented and holistic, with an eye to build the wealth in the most effective manner while taking into account the life goals and the requirements of the clients as individuals. For business owners, the financial planners generally provide a more comprehensive look at how your business will fit into your life, both from a logistical perspective as well as an emotional one.

Similar to accountants, the financial planners are experts in their field and will identify the opportunities that you may not have any idea about even if you are educated and financially experienced. Have you ever thought about how can your business be affect with emergency or unforeseen circumstances of your family? What is your business succession plan, and are you maximizing succession opportunities? Are you truly invested within your comfort zone while maximizing your opportunities for the growth? Can you take the emotion out of investing to make the best decisions for you and your family in the long run?

There are some of the things that your financial planner will focus on:

Budgeting

Investing (short, medium, and long-term, in a variety of vehicles)

Asset allocation

Estate planning

Insurance planning (disability, life, investment, shareholder protection)

Changes in the industry that affect you

Business structure and strategy tips

Wealth accumulation and protection

In contrast to accountants, the financial planners can be paid in a variety of different ways i.e., commission-based, fee-based and asset based. Commission-based planners earn a percentage of commission on the money that you invest with them or insurance policies that you buy. This unfortunately means that all the commission-based planners may not have your interests at heart, but not all the commission-earners are to be judged as assertive salespeople. Fee-based planners will charge a medium fee for a set of service and asset-based planners will charge a percentage of your overall assets which is invested with them. In selecting the best advisor for your requirements you are supposed to ask how they should pay is important but not solely crucial.

Grey Areas

You may find a financial planner or an accountant who seems to provide the whole enchilada. For example, increasing the numbers of accountants are broadening their expertise to include additional designations in the financial planning so that they can do just that; separate advisers, financial planners and the accountants have many extending areas of knowledge and advice.

While it may be appealing to have an adviser who can provide advice for you, your business, and your family, It is better to have a financial team to support you, especially your accountant, financial planner and lawyer. Each of them has a broad base of knowledge which will keep you aware of everything and will even help you to keep a check on the other advisers. No one advisor can truly do all the three person work or even two without letting anything to slip through the cracks.

What to Look for in a Financial Planner and Accountant

When looking for a financial planner or accountant, the best way to get somebody who you can trust upon is by referral either by your family, friends and colleagues who has taken help after having a meeting with them.

The meeting should be free of charge and should take interest in your personal and professional problems. You may even ask how accessible they will be when you are in need of any advice and what their proposed service strategy will be for such situations.

You should look for a professional with a designation or a degree, such as they are internationally recognized by the Certified Financial Planner designation. You may also ask how are they paid, it is an hourly wages or monthly or yearly, get the annual evaluation by giving them the knowledge of your situation.

You should even be aware of the fact that the professional in question is familiar with all the specific legislation that may be applicable to your situation. For example, if you have an international or location independent business and your accountant should be an expert on the international tax law and your financial planner should know how to structure your assets to be internationally accessible.

By building a team of experts who can support you and your business when you reach the greatest chance of achieving everything that you wanted, professionally as well as personally. You work hard on and in your business. Aren't you worth it?

Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.

With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.

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