Have you started looking for a financial advisor and it seems as if you’re running into more and more abbreviations? I agree, it can get a little bit messy looking for financial advice. There are CPAs (certified public accountant), CFPs (certified financial planner), CFAs (chartered financial analyst), and my personal favorite, double stacking MBA (Masters in Business Administration), and insert your certification here.
The two designations that are going to be most common in financial advisors are certified financial planners (CFP), and certified public accountants (CPA). Each can offer tremendous amounts of value to your financial, and retirement goals, but it is important to know the difference between the two – let’s take a closer look.
What is a CPA?
Certified public accountants aren’t always what the TV show The Office makes Kevin, Oscar, and Angela out to be. CPA is a license given by the state to individuals that successfully complete the qualifications and requirements.
It is required to have a CPA to work in public accounting. Public accountants are hired by a company to review and prepare their fiscal year’s taxes or perform external audits. On the flip side, it is not required to have a CPA to work on an individual’s tax return.
How to Get a CPA?
It takes some hard work to earn a CPA license. The CPA Exam has a prerequisite requirement that the individual must have graduated with a bachelor’s degree with 120 hours. It’s also required for the candidate to pass an additional 24 to 30 credit hours in accounting, either in graduate or undergraduate school, although most choose the graduate school route. It can be beneficial to study for the CPA Exam and complete the extra schoolwork simultaneously due to the potential overlap of topics.
The CPA Exam is broken down into four sections: Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting, and Regulation (or the tax test). The four parts aren’t quick and easy, as the current exam is 16 hours.
Once you have completed the coursework and passed the CPA, you still are not an official CPA. Many states demand individuals to have a specified period of time working in public accounting before you’re officially given the letters. It is important to note that there is continued education to retain the license. Similar to the experience requirement, the frequency of your continued education depends on which state you are licensed in.
What Are CPA Jobs?
Certified Public Accountants are business people that often work at public accounting and management consulting firms, such as Deloitte or KPMG. CPAs are also prominent within any business’s finance or accounting departments. Responsibilities include keeping the books clean, preparing taxes, or preparing quarterly and annual financial statements. These individuals often climb to c-suite leadership positions, such as Chief Financial Officer, after years of experience.
Check out the list of certified public accountant jobs, and a few details about their career below.
Chief Financial Officer (CFO)
What do CFOs do?
Chief Financial Officers are C-suite business executives that oversee all financial aspects of the company. Their activity ranges from checking off quarterly and annual financial statements, forecasting cash flows and budgets, signing off on company taxes, and ensuring the overall financial health of the company remains strong.
How much do CFOs make?
According to Salary.com, the average salary of a Chief Financial Officer is $383,879. Obviously, this number can vary from company to company, as well as how your income is paid out. For example, as listed in Oracle Corporation’s 2019 proxy statement, CFO Safra Catz’s total compensation was $965,981. Note that CFO’s can also be shareholders of the company they work at, and if they grow alongside the company to an IPO (initial public offering) capital gains on shares could make them millions, or in some cases, billions.
How to become a CFO?
Becoming a CFO will take a ton of experience working within a business’s corporate finance and accounting departments. It’s almost required for CFOs to have a previous treasurer or financial controller experience. These business executives also tend to have a CPA license, and in some cases, an additional certified management accountant (CMA) certification.
Financial Controller
What do Financial Controllers do?
Financial controllers are senior-level managers responsible for overseeing the company’s accounting duties. Controllers work on longer-term internal projects compare to accountants. This includes managing quarterly and annual functions, such as account payables and receivables, audits, and more. Controllers report directly to the Chief Financial Officer.
How much do Financial Controllers make?
According to Salary.com, the average salary for a financial controller is $200,400. The range fluctuates from $130,860 to a little under $280,000. There is a high demand for financial controllers, and the Bureau of Labor Statistics predicts a 15% growth through 2029.
How to become a Financial Controller?
There is no clear-cut path to becoming a Financial Controller, but all come suited with bachelor’s degrees in accounting, finance, and some cases, economics. CPA licenses are required, along with years of corporate accounting experience. Since they are senior managers within a firm, an MBA is usually almost always preferred.
Tax Accountant
What do Tax Accountants do?
Tax Accountants do precisely what their title suggests; they are accountants that specialize in consulting their client’s tax needs. Common tasks include preparing tax returns and statements. These individuals read and keep up to date with the Internal Revenue Code (IRC) so that their client’s don’t have to. If you are self-employed or have a side hustle under an LLC, consider meeting with a tax accountant to make sure you’re maximizing all the benefits of owning your own business.
How much do Tax Accountants make?
According to Salary.com, the average Tax Accountant salary falls between $52,000 to $64,000. This range can range dramatically depending on if you own your practice, work with personal or corporate clients, and of course, firm size. GlassDoor reported that the big four accounting firms, Ernst & Young (EY), corporate tax partners have been compensated up to $675,200 per year.
How to become a Tax Accountant?
Tax Accountants have bachelor’s degrees in accounting or finance, and due to CPA Exam requirements of 150 credit hours, have an additional master’s in accounting. Individuals that successfully complete the higher education requirement and CPA Exam have a greater chance of being recruited from a larger firm, such as Ernst & Young.
How to Find a CPA?
Finding a CPA for your tax return really comes down to comparing the fees. There are many choices to consider, both in-person and with tax software giants such as TurboTax or H&R Block. Everyone should do your research on their choices if he or she claims to a CPA license. States have public databases that you’ll be able to check if your accountant’s CPA is real, and/or not expired.
What is a CFP?
CFP stands for a certified financial planner and is a designation overseen by the Certified Financial Planning Board of Standards. Similar to a CPA, there are education requirements, as well as an exam.
Financial planners help people create and achieve their financial goals. This includes advising on investments, retirement plans, insurance and risk needs, taxes, and estate planning (i.e. wills, trusts, etc.). CFP has a fiduciary duty towards your assets at the end of the day, meaning they are there acting in your best interests.
How to Become a CFP?
CFP candidates must have a bachelor’s degree. The CFP Board also requires candidates to complete coursework across various financial topics before taking the CFP Exam. The exam’s topics include:
- Professional Conduct and Regulation
- General Principles of Financial Planning
- Education Planning
- Risk Management and Insurance Planning
- Investment Planning
- Tax Planning
- Retirement Savings and Income Planning
- Estate Planning
There are loopholes that can get you out of the CFP’s coursework. Individuals with the following designations may only be required to take the Capstone course:
- CPA (certified public accountant)
- CFA (chartered financial analyst)
- CLU (chartered life underwriter)
- ChFC (chartered financial consultant)
- Licensed Attorney
- Ph.D. in Finance, Business Administration, or Economics
- International CFP Certification
What are CFP Jobs?
Certified financial planners typically work to some extent in financial planning or investment planning. Since the CFP is a designation earned by many different personal finance professionals, their job titles can vary. Common titles include Wealth Management Advisor, Investment Advisor, Financial Planner, or Financial Advisor. The CFP designation helps these professionals enhance their skills.
Financial Advisor
What do Financial Advisors do?
Financial advisors are consultants that help manage individuals’ and families’ financial needs. Typical areas financial advisors work with savings and retirement planning, investments, insurance, taxes, and estate planning. These consultants help identify your financial goals and create a plan and benchmarks for you to work towards.
How much do Financial Advisors make?
According to the Bureau of Labor Statistics, the 2019 median pay for financial advisors was $87,850 per year. These earnings are made up through a blend, if not all, of three different ways: management fees (either hourly consulting fees or a percentage of assets of under management), commissions, and/or salary – this can range depending on which firm you work at.
How to become a Financial Advisor?
It is common that financial advisors have some sort of formal business education, typically a bachelor’s in finance. Managing people’s money isn’t as easy as an application, interview, and then the job is handed to you. For example, advisors must have a Series 65 to legally be able to charge clients for advice. These licenses are administered by the Financial Industry Regulatory Authority (FINRA for short).
Series 7 is one of the most common licenses found among finance professionals. Individuals with Series 7 can sell securities, such as stocks, bonds, options, and packaged investment vehicles (i.e. Exchange Traded Funds and Mutual Funds). As of 2018, FINRA began requiring individuals to pass the Securities Industry Essentials (SIE) and Series 7 exam to become a General Securities Representative.
Most states require advisors to obtain a Series 63 to work with clients in their state. If your advisor only works in Michigan, you could assume they only have a Series 63 in Michigan. This is a much smaller exam compared to the beefy Series 7, and its topics are mostly orientated around state regulations and ethics.
Lastly, to be compensated from fees rather than just commissions, an advisor must pass a Series 65. This exam tests individuals on rules and regulations. It’s said that the Series 65 can be pretty easy for individuals holding a Series 7 because the tested topics overlap.
How to Find a CFP?
There are advisors all over the country available to help you assess your financial needs and goals. If you are strictly looking for those with a CFP certification, advisors will often disclose if they have one on their business card, email, LinkedIn, and/or on the website’s directory.
Both the SEC and FINRA offer free services to look into a firm or advisor’s regulated information. This includes their history, licenses, and registrations, customer disputes, and more. Simply insert the firm or individual’ss name and location into BrokerChecker, or IAPD system, to start reviewing now.
CFP vs. CPA How to Choose Which You Need?
The question comes down to what advice you are looking for help on – if your concerns are strictly tax-related, a tax accountant or CPA would be the correct person to see. If you’re concerned about how to save for retirement, or maybe just to see if you can increase returns on your portfolio, I would recommend seeing a financial advisor or certified financial planner.
If you are receiving advice from a financial planner and realize you may need tax advice, don’t stress out, they should be able to refer you to a CPA colleague of theirs, and vice versa for investment advice! It is very common for financial advisors to be paired with accountants within the firm, or have separate partnering firms.