Financial Adviser vs. Accountant: Key Differences
Many people turn to accountants for financial advice. Accountants are financial experts who can help you make sense of your financial data. Yet, there are others who work specifically as financial advisers.
This can lead to some confusion if you aren’t familiar with the difference. Technically, both an accountant and a financial adviser offer financial advice. However, the scope of their work is different.
- An accountant and a financial adviser are not the same role, although there is overlap.
- Financial advisers (or business advisers) offer guidance on how you can meet your financial goals.
- Accountants fully manage your finances for you.
- Advisers are best for when you feel capable of handling your own finances with additional advice.
- Accountants are best for when you don’t have the time or confidence to handle your finances.
In this article, we’ll cover:
- What is a Financial Advisor?
- What is an Accountant?
- Financial Advisor vs. Accountant: What’s the Difference?
- When to Consult a Financial Advisor
- When to Consult an Accountant
- Frequently Asked Questions
What is a Financial Adviser?
Financial advisers offer guidance on how you can improve your financial planning strategies. They analyse your current circumstances and provide suggestions on how you can meet your financial goals based on their observations.
You may also hear them referred to as “business advisers,” “investment advisers,” or “financial planners.” Advisers who focus on certain areas, such as mortgages or insurance, may also be called “brokers.”
There are 2 main types of advisers.
- Independent Financial Advisers (IFAs): These are advisers who offer unbiased advice that leverages a wide range of financial products to help you meet your goals.
- Restricted Financial Advisers: These are advisers who are typically sponsored by a particular business and will only offer advice that leverages financial products from said business.
Regardless of the type of adviser you work with, their primary duties remain relatively the same. This means that all financial advisers in the UK must adhere to the rules of the Financial Conduct Authority (FCA). If you encounter an adviser who is not registered, you can report them to the FCA.
What is an Accountant?
Accountants ensure that every financial document makes sense and adheres to tax laws. Their business is to fully manage your finances instead of simply to advise you on how you can do it yourself. This makes them ideal for complex financial tasks like filing taxes.
An accountant and a financial adviser both follow regulatory standards. However, accountants must meet stricter regulations. They may also have a higher education level to help them meet these standards.
There are a few different types of accountants in the UK. Every business and individual has different needs, so understanding the differences helps you pick the right one.
The different types of accountants include:
- Chartered: These accountants have special accreditation to perform higher demand duties. They’re often CFOs who handle large business finances.
- Management: These accountants are narrowly focused on a specific aspect of a company’s business finances, such as profits per product type.
- Tax: These accountants help businesses or individuals file their taxes in accordance with tax law.
- Business Valuation: These accountants assess a company’s business performance to help the owner predict their future financial outcomes. They may also act as business advisers.
- Nonprofit: These accountants help charities and other nonprofit organisations with their unique money matters.
- Government: These accountants manage and maintain financial records for government agencies.
Forensic: These accountants work with lawyers to investigate suspected fraud or other forms of financial misrepresentation.
All accountants can speed up reporting without compromising information integrity. All they need is the right online accounting software tool for the job. Try FreshBooks Accounting.
Financial Adviser vs. Accountant: What’s the Difference?
Some financial advisers are trained as accountants. However, one does not need an accounting degree to become a financial adviser. They need a Diploma in Financial Planning and authorisation from the FCA. This applies to both independent and restricted advisers.
An adviser’s responsibilities may include:
- Conducting a detailed analysis of your current financial circumstances
- Reviewing and responding to changes that occur after their initial analysis
- Providing advice on how you can improve your financial health based on your circumstances
- Creating your financial plan before you start a business
- If restricted, promoting products that will help make financial management easier
- Negotiating with suppliers on your behalf, if a financial product would be helpful
- Creating financial reports for your reference
- Preparing financial strategy plans that align your needs and the law
- Offering advice on specific financial decisions
Advisers don’t fully manage your financial records. So, this means that they are best for situations where you feel comfortable managing them yourself. They simply offer additional tips and tricks to help you improve your own skills.
By comparison, accountants take over your financial management. Their clients typically trust them with all of their financial tasks. As a result, they need a much higher level of education. They require a bachelor’s or master’s degree in accounting at minimum.
Another key difference is that accountants primarily work with past financial data to build their reports. This contrasts with an adviser’s focus on improving your future financial situation.
While there are slight differences between different accounting types, most accountants perform the following duties.
- Managing your financial transactions
- Financial reporting
- Managing balance sheets
- Ensuring timely payments
- Conducting financial audits
- Financial forecasting and comprehensive risk analyses
- Reconciling business accounts payable and receivable
- Helping business owners through insolvency
The best time to hire an accountant is when you don’t feel capable of handling your own finances. This could be due to lack of time, skills, expertise, or any other reason.
It’s also worth noting that accountants are trained to keep up with changing laws. So, it may be worth periodically consulting one to keep yourself up-to-date.
When to Consult a Financial Adviser
Consult a financial adviser when you need strategic advice to help you meet your long-term financial goals. They analyse your current situation to identify potential risks and opportunities. From there, you can work together to build an informed financial plan.
Consult a financial adviser for:
- Financial management advice for a new business
- Retirement planning
- Investment advice
- Wealth management
- Figuring out how to decrease debt
- Improving cash flow with better strategies
There are several online resources to help you find a financial adviser in the UK. You should also check to make sure your firm or consultant is registered with the FCA. Checking is simple with the FCA’s online registry.
When to Consult an Accountant
Consult an accountant when you need someone to manage your finances. Please note that some accountants will only work on tax planning. Do your research to ensure that you find one that will meet all of your needs.
Consult an accountant for:
- Cash flow management
- Filing tax returns & tax preparation
- Ensuring timely payments
- Managing rapid growth in your business
Finding a reputable professional is crucial. Certified or chartered professionals will be the most reputable options. However, they’re also more expensive. It is possible to find good accountants without this status for a lower price.
One excellent place to look is FreshBooks’ Online Accountants page. Find reputable accountants in your area who can meet your needs within your budget hassle-free.
How you handle your money is crucial to business performance and personal stability. Although most of us know that we need to be careful with our money, not all of us know how. Professionals in both roles discussed are trained to offer insights into how anyone can make smarter financial decisions.
FAQs on Accountant vs. Financial Adviser
Can an accountant give you financial advice?
An accountant can provide financial advice. However, their focus is full financial management, not simply advice-giving. If you’re confident in handling your own finances and only need periodic consultation, an adviser is the better option.
Can a financial adviser also act as an accountant?
Some financial advisers can also act as accountants. Many advisers have an accounting background and are capable of performing accounting duties.
Do not assume that someone who was hired as a financial adviser can work as an accountant. It varies based on their background and expertise.
Do I need both a financial adviser and an accountant?
You don’t need both, but you can choose to use both. You may find it useful to start with one and later hire both as their business grows.
Many accountants can act as business advisers and vice versa. You can save money by seeking a professional who can fulfil both roles.
What are the fees associated with hiring a financial adviser?
The FCA claims that advisers charge 2.4% of the amount invested for a one-time service and 0.8% yearly for ongoing service. This amount is charged per hour. So, if you pay £1,000, they would charge £24 an hour for a one-time service or £8 an hour for ongoing service.
Who should I hire first: a financial adviser or an accountant?
Whether you should hire an accountant or financial adviser first depends on your needs. Accountants are better for people who need someone to manage their finances. Advisers are better for people who can manage their own finances, but want consultation.