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Showdown: CPA vs. Financial Advisor

… It’s a showdown, in a no-man’s land 
For the cowboy of the modern day.
Come on, sundown, don’t be hangin’ ’round,
‘Cause the cowboy will blow you away…

In today’s financially complicated world, a man or woman should be quite satisfied with one close advisor.  Seldom does one have more than one.  Especially one that isn’t a neighbor or brother in law.  But occasionally one may hit the jackpot and find themselves with multiple sources of help into their finances.  

Generally, the two possible professions that are possibilities for this trusted advisor are tax preparers (typically only a CPA will fill this role as most simple tax preparers don’t offer the help that I’m talking about in this article) or a financial advisor – a profession typically associated with the investing of assets.  Bankers, lawyers and insurance agents are often so specialized that they can’t be of service, at least not beyond their own profession.  

CPA Strengths And Weaknesses

While we’re throwing out generalities, let’s go ahead and say it.  CPA’s like to hide.  Years ago, they chose the profession of accounting, not because they love selling things, but because they enjoy back, smoke-filled rooms, green visors and the quiet solitude of a spreadsheet.  OK, maybe that was 100 years ago.  But the spreadsheet part is still mostly true.  

The point is, CPA’s are sometimes difficult to get to, and when a client does succeed in getting an appointment, they are often leave feeling like they weren’t heard.  CPA’s often don’t bill for advice, unless they fit the cost into the tax return.  And you know that the service you get from anyway is often what you pay for it.  

CPA’s are uniquely situated to help.  They have a built-in, annual review in the form of a tax return.  They have, or could easily have, all of the information needed to help a client, and yet they are often so busy (April 15 bottleneck) that they really don’t have time, unless they can schedule a follow-up with a client after tax season.  Many clients would be happy enough to pay for a follow-up meeting with a client, but CPA’s are so busy in March and April, the last thing they want is more business in May and June.

CPA’s are smart.  They got a degree, and passed an brutal exam that proved that.  They are typically proficient with the complicated, with amortization schedules and compound interest.  They understand the intricacies of retirement accounts and trusts, and have the ability to work numbers to optimize a client’s situation.  But because they’re often unwilling, or unavailable, the quantity of advice they are willing to dispense with sometimes lacks.

Most opinion polls suggest that CPA’s are client’s most trusted advisors.

Financial Advisor Strengths And Weaknesses

Having worked a lot with Financial Advisors over the years, I can tell you one thing for sure.  They’re all over the board.  On one side, there are the stockbrokers.  Commission-driven salesmen who know less about your situation than your grocer, and unwilling to help even if they could.  They are a dime a dozen in this field, but fortunately, they are easy to spot, often because of the “products” they sell.  Variable annuities, indexed annuities and Variable Universal Life are words that you may want to note.  Run, and don’t walk.

On the bright side however, many advisors are very knowledgeable and very helpful when it comes to planning.  Good advisors are often proficient with the multiple aspects of one’s financial life. Taxes, health insurance, life insurance, investments, education, and retirement are issues that good advisors are often able to bring together to help you make informed decisions.  Make yourself knowledgeable on the various types of financial advisors in the field, and choose one who is experienced.  Choose a fee-only advisor, and choose one at the referral of your CPA.  Accountants see a lot of client investment statements, and hear a lot of complaints from their clients.  They have an inside track on being able to separate the good and the bad.