Can My CPA Serve As My Financial Advisor?
I often hear people make a dangerous assumption: “I use my CPA as my financial advisor.”
I definitely don’t have anything against CPAs. I mean, I am a CPA! But people misunderstand what CPAs do, and the assumption is they are fluent in all things financial.
No doubt the requirements to become a CPA are rigorous. Some of the requirements (in Texas) include:
- Have a college degree
- Complete 150 semester hours of college credit, including at least 30 hours of “upper level accounting courses” (can be financial accounting for businesses, managerial accounting, auditing, control and risk assessment, taxation, financial reporting, fraud examination, etc.)
- Pass the CPA exam, which is a 16 hour test that covers auditing practices and standards, how to account for (prepare journal entries for) various business transactions, how to report financial transactions in business financial statements, business law, and federal taxation. There are other topics covered, but these are the main ones.
This test covers an insane amount of detailed information to know. You can ask Kaimey how many hours I spent preparing for my exam back in 2007! CPAs, who are often known for their hilarious sense of humor, like to joke that CPA actually stands for “Couldn’t Pass Again” when referring to this hellacious test.
But did you notice what is not covered in those requirements nor the test? Choosing the best accounts to use to save for retirement. Analyzing investments to choose the ones most appropriate for your goals, which they help you define. Reviewing insurance coverage to ensure you have the right protection. Creating an estate plan to take care of your loved ones when you pass away. Guiding you on big purchases like houses, cars, and vacations. This is knowledge that good advisors gain during their CFPⓇ exam coursework.
CPAs are great at what they do. But what they do is accurately report what happened in your financial life the previous year.
They are reactive to what happened in the previous year. They are generally not proactive in planning for the next year. A CFPⓇ, CERTIFIED FINANCIAL PLANNERTM professional is trained to be forward-thinking in evaluating your financial life to make it work the best for you.
I use a CPA to prepare my tax returns and have for the past 15 years. (Yes, I am a CPA and still hire a CPA. This should tell you how much delight I find in preparing taxes…I don’t even do my own!) She’s worth her weight in gold, and I never hesitate to pay her bill. But I don’t confuse what I am paying her for. I pay her to keep me squeaky clean in the eyes of the IRS. She is not skilled nor trained in planning for my future.
A winning combination really is to have a good, fee-only, proactive financial advisor who can create great strategies to help you accomplish your financial goals. And then pair that with a knowledgeable CPA who can work with your financial advisor to evaluate tax strategies and accurately report the result.
I’d love to be a part of your winning team! If you want to hear more about the proactive strategies I can create in your financial picture, reach out to me!
