WEALTH SERIES 7:6

Accountant vs. Financial Planner: What’s the Difference?

BY GREG DEPERSIO  Updated Jun 8, 2019

Accounting and financial planning provide rewarding and lucrative long-term career options. Both careers offer strong job growth and median incomes higher than the average across all fields.

Accountant vs. Financial Planning: An Overview

Both the accountant and financial planning profession are filled with individuals that are bright and motivated while being good with numbers. Interested parties, however, should understand they are quite different, despite both involving heavy doses of numbers and math.

Accountant

An accountant records, summarizes, analyzes, and creates reports of financial transactions. Public accountants work for third-party firms auditing financial statements—a legal requirement for any publicly traded company. Internal accountants work for private companies and perform duties such as auditing, inventory accounting, and financial forecasting. Sales is not a part of the job, other than the process of selling oneself and services to potential clients.

Financial Planner

A financial planner is a type of financial advisor who specializes in certain aspects of wealth management, such as tax planning, portfolio management and, retirement planning. While a financial planner must be good with numbers and possess a keen understanding of how the markets work, it is arguably more important to have strong sales and networking skills. Coming into the profession, one’s employer is not likely to hand over clients to manage. Financial planners are tasked with building a book of business on their own.

Key Differences

Required Education

Though neither career imposes specific academic requirements, most successful accountants and financial planners have at least a bachelor’s degree. For accountants, the only time a licensing board requires a certain level of education is when pursuing the certified public accountant (CPA) certification. Becoming a CPA requires 150 hours of post-secondary education, which is more than a bachelor’s degree but does not necessarily entail completing a master’s degree. Otherwise, individual firms doing the hiring, not state or federal boards, set education requirements for accountants.

An individual can become a financial planner without a bachelor’s degree, as long as they pass the requisite securities exams. However, financial planners often hold specific licenses and designations, the most common being that of a certified financial planner (CFP). A CFP must pass rigorous exams in multiple areas of wealth management and finances. Gaining the CFP designation requires completion of a bachelor’s degree from an accredited school.

Necessary Skills

Key accountant skills include being focused, detail-oriented, and adept with numbers. The work hours are long for the first few years of a public accountant’s career. Financial planners are first and foremost salespeople. Networking is an around-the-clock job for financial planners. Financial planners also tend to enjoy following the markets.

Starting Salaries

Pay structure marks a huge difference between accounting and financial planning. Accountants receive a straight salary. Bonuses, when applicable, are usually determined by the performance of the firm as a whole. Financial planners, by contrast, receive either a straight commission, charge flat or hourly fees, or receive a mix of commission and fees. It is very much a pay-for-performance career.

For accountants, the Big Four accounting firms—Ernst & Young, Deloitte, KPMG and PricewaterhouseCoopers—typically pay entry-level CPA candidates between $60,000 and $80,000 the first year. Beyond the Big Four, starting salary varies greatly depending on the size of the firm, the scope of the job and the region of the country. First-year financial planners are usually offered a small salary or draw, usually between $25,000 and $40,000, as they built their business..

Job Outlook

While the Great Recession battered the financial industry, accounting and financial planning have strong job outlooks for 2019 and beyond. The Bureau of Labor Statistics forecasts greater than 10% growth for accountants and auditors between 2016 and 2026. The projected growth rate for personal financial advisors is 15% in the same period.

Work-Life Balance

Expect a lot of hours your first few years, either as an accountant or financial planner. As an accountant, the busiest months are from January to April, with weekly work hours during those months being upwards of 60. For the remainder of the year, accounting offers a decent work-life balance, with 40-hour work weeks being the standard.

Most financial planners dedicate a lot of hours their first few years to finding and selling clients. This duty alone can push weekly hours worked to above 40. Developing strong word-of-mouth marketing can ease the hours worked significantly.

KEY TAKEAWAYS

• The accountant and financial planner professions tend to rely heavily on math and numbers but there are major differences.
• Accountants do auditing work, financial forecasting, and putting together financial statements, while financial planners help individuals with wealth management and retirement planning.
• Accountants are usually detail-oriented and good with numbers, while financial planners are better at sales and networking.
• Both professions have above average job market outlooks, but accountants are generally paid a salary while much of a financial planners pay is commission based.

The choice between accounting and financial planning depends more on personality than anything else. Both careers require mathematical proficiency and a strong work ethic. Beyond that, for those that hate sales, financial planning likely isn’t a great career choice. Similarly, for those not keen on crunching numbers, preferring to interact with people, accounting will likely come up short as a fulfilling career.

Career advice: Financial planner or wealth manager

BY GREG DEPERSIO  Updated Jan 7, 2018

Financial planning and wealth management represent subsets of financial advising. A financial advisor provides financial advice to customers in exchange for compensation. The definition of financial advice, however, is extremely broad. The type of advice given, along with the products offered and the types of clients served, determine whether you are considered a financial planner or wealth manager.

Financial planners primarily assist with lifestyle planning. This includes budgeting, cash flow planning, and saving for college and retirement. Though a financial planner’s client list may span the income gamut, most are middle class and have a strong need to make their money go as far as it can.

Wealth managers, by contrast, provide services mostly needed by high-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs), such as capital gains planning, estate planning and risk management.

A simple way to think about the distinction between a financial planner and a wealth manager is that a wealth manager manages literal wealth, while a financial planner manages the finances of everyday clients who are trying to get ahead.

Both careers attract bright young finance professionals from top colleges and universities, and each career has advantages and disadvantages. For example, financial planning jobs are more abundant, but wealth management jobs typically pay more. Financial planning firms are more likely to take a chance on a recent graduate with no experience, but wealth management firms tend to offer better hours and come with less stress.

If you are considering a career as a financial planner or a wealth manager, here are some things to consider. 

Education

Most successful financial planners and wealth managers possess at least a bachelor’s degree, and one earned from a top-ranked school, such as the University of Chicago or one of the Ivy Leagues, provides an advantage over the competition. Beyond that, individual firms within each industry set educational requirements for potential hires rather than state or federal licensing boards. Many wealth managers are licensed attorneys or Certified Public Accountants (CPA), though neither are requirements for the profession. Fewer financial planners have these designations, but they never hurt.

Aspiring financial planners will want to get a Certified Financial Planner (CFP) designation. This requires passing a comprehensive exam that covers specialties in financial planning, such as real estate, portfolio management and tax planning. A CFP designation is as a huge asset on your resume, and if you go into business for yourself, clients love to see it.

Wealth managers can also pursue several designations to beef up their resumes and convey confidence and expertise to clients. Perhaps the most prestigious is the Chartered Wealth Manager (CWM) designation. Before trying for this designation, you must have three years of verifiable experience in the industry.

Skills Needed

Though you might consider becoming a financial planner or wealth manager because of your math skills or knack for the markets, your sales ability is much more important to your success. As a rookie, it is doubtful your employer will hand you clients to work with, particularly the kind of high-net-worth clients that make people wealthy in these professions. So, your first order of business as a financial planner or wealth manager is to pound the pavement and build your book of business.

If you are not gregarious, a natural people person and an insatiable networker, the odds are stacked against you. Being good with people is the single most important skill for almost anyone under the broad umbrella of financial advising.

Apart from sales ability, you must love the markets and enjoy keeping up with them around the clock, no matter which of the career paths you choose. Finance is more fast-paced than ever, and clients demand financial planners and wealth managers who are high-energy and stay ahead of the curve.

If you choose wealth management, having a strong “natural market” of HNWIs, while not a necessity, certainly will make life easier during the early years of your career. Finding HNWI clients is tough, and getting them to trust you with their vast wealth when they do not know you and you have little experience is tougher. For candidates with good connections, wealth management can prove more lucrative than financial planning.

Starting Salary

Salary is somewhat of a misnomer, given the majority of income from either career comes in the form of commissions. Firms typically offer small base salaries to get you through the early months of building your book of business. In exchange, you will be expected to hit sales targets. If you are unable to do so, your employer is not likely to pay you to warm a seat for long.

The average annual income for wealth managers, as of 2018, is roughly $94,000, according to Glassdoor. For financial planners, the average is $57,000. However, a huge gamut of data comprises these averages, and depending on performance, your income could be much higher or much lower.

Job Outlook

Financial advising jobs, under which financial planning and wealth management are classified, are expected to grow by 14% between 2016 and 2026, double the 7% growth outlook across all occupations, according to the Bureau of Labor Statistics. The subcategory of financial planning tends to track closely with the trend for financial advising as a whole. Wealth management, by contrast, enjoys explosive growth when the economy booms, but it contracts more than financial advising as a whole during down economies.

Work/Life Balance

You can expect some long hours working as a financial planner or wealth manager. Young financial planners, in particular, spend a lot of time on client acquisition during the early years of their career. The sales aspect of the job alone could exceed 40 hours per week. On top of that, you still must service your clients and track the market. Wealth managers also must devote time to building a book of business. Because they manage so much money per client, however, it takes a smaller client base to become successful. On average, a wealth manager enjoys a better work/life balance than a financial planner.

Which One to Choose

Both careers require the same skill set: You must be able to sell, you must love the markets, and it helps to be good with numbers. If you have a robust natural market of HNWIs, you may want to lean toward wealth management, as you will have an advantage few young professionals enjoy, and wealth management provides the best opportunity to exploit it and become successful quickly. If your natural market is not so robust, financial planning is a much easier field to break into. If you persevere through the difficult early years and build a substantial book of business, you can enjoy a successful career.

Retirement Planner

REVIEWED BY JULIA KAGAN  Updated Jun 7, 2018

DEFINITION of Retirement Planner

A retirement planner is a practicing professional who helps individuals prepare a retirement plan. A retirement planner identifies sources of income, estimates expenses, implements a savings program and helps manage assets. Estimating future cash flows and assets is also a central part of a retirement planner’s work. He or she may use a web-based calculator or software program that will predict future cash flows and assets based on the data entered.

BREAKING DOWN Retirement Planner

Although most retirement planners deal with the financial aspects of planning for retirement, some planners also deal with the non-financial aspects, including how to spend one’s time in retirement, where to live and when to quit work, to name just a few.

Today, retirement planners rely heavily on online tools and retirement-planning software, but, like any kind of forecast, the information produced is only as good as the data used. The plan created by a retirement planner is in no way a complete predictor of retirement spending or income needs, but it is a good starting point.

Retirement Planner Credentials

Anyone can call themselves a retirement planner, which is why it’s wise for consumers to look for credentials and references before hiring one. Here are three major credentials worth considering:

Retirement Income Certified Professional designation is offered by the American College of Financial Services.

A Certified Financial Planner (CFP) is bound by rigorous requirements set by the Certified Financial Planner Board of Standards, Inc. (CFP Board). There are four parts to the initial CFP certification; education, examination, experience and ethics. A CFP candidate will need to put in up to 1,000 hours to complete the required coursework and the exam. The CFP applicant must have a minimum education level of a bachelor’s degree and coursework in financial planning. 

The prestigious investing credential of Chartered Financial Analyst (CFA) is issued by the internationally recognized CFA Institute. The CFA is especially important in the areas of investment research and portfolio management. Similar to the CFP, there are rigorous educational, experience, and examination requirements for the CFA. “To become a regular member of CFA Institute you will need to hold a bachelor’s degree from an accredited institution or have equivalent education or work experience,” according to the CFAinstitute.org website. The CFA holder must also have 48 months of related professional work experience in an investment related field. The most challenging aspects of obtaining the CFA certification are the three required examinations. Each are six hours and must be taken over several years. The CFA examination tests topics from these disciplines: accounting, economics, ethics, finance and mathematics. 

The Personal Financial Specialist (PFS) is credentialed by the highly regarded American Institute of Certified Public Accountants (AICPA). This professional is a Certified Public Accountant (CPA) with additional expertise in all aspects of financial and wealth management. The PFS studies estate planning, retirement planning, investing, insurance and additional areas of personal financial planning. This designation also requires three years of work experience, rigorous continuing professional education, and high ethical standards. Similar to the prior high level certifications, the PFS must pass an exam.

WEALTH SERIES 7:6