What is the Difference Between Financial Planner and Accountant?

source: thebalancemoney

There are a host of professionals to help you manage your finances. However, knowing whether you need an accountant or financial advisor can seem to be a tricky decision. Although both of these professionals focus on the financial domain, their area of operation is different.

An accountant prepares financial statements, performs auditing, and provides tax advice, while a financial advisor helps individuals achieve their financial goals by retirement planning, wealth planning, estate planning, etc.

So, to understand the difference between accountant vs. financial planner, keep reading.

A professional who deals with various financial aspects and activities of a company or entity is known as an accountant. They help organisations and individuals by recording transactions, reporting financial data, compiling and analysing financial records.

Accountants also require generating financial statements, auditing, account analysis, etc., in order to figure out the prevailing financial status of the organisation. In addition, they deal with various other issues like investments, cash flows, taxation, etc., and get involved in keeping financial records of private and public entities as per the laws.

A financial planner is a certified financial or investment advisor who is specialised in several fields of wealth management, like tax planning, retirement planning, portfolio management, etc. Financial planners provide expert advisory to their clients about the ways to manage their money and wealth efficiently. This includes insurance assets, asset tracking, retirement funds, taxation planning, etc.

Financial planners also advise on other aspects such as automobile or home finance, reducing expenses, mortgages, bank debts, etc. Even though the primary role of a financial planner is to assist individuals to meet their financial goals, it is equally important to monitor, evaluate, and update the plan whenever required.

Following are the crucial roles and responsibilities of professional accountants:

• Book-Keeping: Accountants play a vital role by recording ‘inwards’ and ‘outwards’ financial transactions systematically. This way, they can track all necessary transactions to compute the net profit or loss of the organisation and its financial position at the ending of financial year.
• Financial Statement Analysis: For nearly every business whose turnover goes beyond average limit repeatedly, a need to audit their financial statements is necessary. These accountants scrutinise the documents and financial statements by conducting a thorough financial statement analysis to make sure that the organisation is running their business seamlessly and lawfully. Additionally, it exhibits the financial position and activities of the business to their shareholders and investors. Furthermore, accountants ensure that the financial statements prepared by the management follow the accepted accounting principles, guidelines and legal concerns.
• Preparation of Budget: An accountant is involved in formulation and budget preparation of an organisation. They plan several responsibilities of an organisation accordingly by formulating pre-determined strategies in order to balance the costs and revenues of the organisation. Also, they analyse the cash flow to check a business’ financial status and ability to overcome challenging situations.
• Taxation: Tax is a vital aspect of every single business, which is placed on incomes, services, and supply of goods. An accountant has a very critical role to play in taxation. Generally, accountants deal with tax problems, accountability to tax authorities according to the laws, returns filing, etc. These accountants can advise on investments, tax planning and other financial activities.
• Auditing: Accountants play an important role in analysing and auditing the financial statements of an organisation. They ensure that these statements are made according to the standard accounting policies followed by the company. Also, due to proper auditing, the organisation will be able to avoid manifold discrepancies or flaws in accounting and consequently not pay penalties.
• Carrying Out Investigations: Accountants also have the right and potential to perform investigations at specific intervals to determine the financial situation of the organisation at that stage. However, for the legitimacy and privacy of an investigation report, external professionals are better than internal members.
• Other Roles: Accountants also play different roles, such as liquidator, cost accountant, arbitrator, budget analyst, tax accountant, accounts payable specialist, forensic accountant. etc., depending on the type of responsibilities they are associated with. This way, their roles range from not just businesses and finances but also to other aspects. This helps a business to run smoothly with good financial health.

Following are the major roles and responsibilities of a proficient financial planner:

• Balancing Finances: The hectic professional and family life often prevents you from maintaining a disciplined and goal-based financial life. Financial advisors will assist you to determine your priorities and objectives. Subsequently, they set strategies in the first place on the basis of your net worth. This way, they will help you achieve your future goals without hassle.
• Systematising Post-Retirement Life: In general, financial planners advise you to focus on the future and post-retirement period rather than looking at present. They formulate the financial plan by evaluating your wealth as well as properties and make investment decisions as per the lifestyle you want to lead after retirement.
• Developing Ideal Insurance Strategies: A plethora of insurance companies provide many insurance plans with substantial coverage. Financial planners or advisors thoroughly assess your financial status alongside your personal and family needs to decide the insurance options. By doing so, they will be able to figure out the insurance policy which suits you and your family the best. This way, you will get security for a long term.
• Planning for Future Generations: A sound financial plan helps you to take care of the upcoming generations. While attorneys may help you execute your will, financial planners will assist you to make an ideal estate plan. ‘Estate' encompasses your assets, finances, wealth, etc.

Estate planning means passing down wealth from one generation to the next generation. To trigger a successful estate plan, you must formulate a will and declare which property or how much will be passed on and to whom after you expire. Simply put, estate planning secures the future of your dependents and loved ones.

One might need to choose an accountant as well as a financial planner as per their needs. An accountant does jobs such as auditing, forecasting the finances for a family or business. However, a financial planner’s responsibilities are limited to providing financial strategies , investment plans, etc.

Now you have a crystal-clear understanding of accountant vs. financial planner and their roles. Having this idea will be helpful for you to figure out whether you should hire an accountant or financial advisor to help you make your financial decisions and reach your life’s goals.