Many of us may have heard this saying, ‘Behind every good Business is a great Accountant”. Yes, it is true. But can we ascertain an Accountant for every successful investment? Can an Accountant help you with your investment plans? The answer is no. Let’s find out why with this small example.

Suresh had a small IT firm which provided cloud based solutions to clients. His accountant handled his accounts and the financial statements and was quick with numbers. He managed and audited the books of accounts for Suresh. When Suresh wanted to invest his money, he sought the help of his Accountant. However, the accountant could not be of much help. Finally, Suresh got help from a Certified Financial Planner (CFP). The CFP wanted to discuss Suresh’s savings and provided him with a list of questions. Suresh showed this list to his Accountant. The questions were related to Suresh’s asset allocation and fixed maturity plans. When Suresh asked his Accountant if he can help him with the answers, the accountant had no idea about the topics. He could only give information about Suresh’s saving account. The Accountant was not wrong on his part as his job is completely different as compared to the Financial Planner. A CA’s job is completely different, and he is an expert in tax and related issues. Hence the accountant was not able to provide any further inputs related to the investment questions. Finally, Suresh talked to his Financial Planner, who made him understand his investment plans and portfolio. A proper investment plan was provided by the planner based on Suresh’s goals and risk appetite.

This example tells us that it is important to understand that your Chartered Accountant can’t be your Financial Planner. Understanding the differences between the two will help you to know the advantages and the disadvantages of working with the two.

Who is the Chartered Accountant?

Your CA is mainly your tax professional. With the years of education and experience, an Accountant will help you to strategize your year-end taxes, prepare a budget for the coming year and prepare your tax returns for the government. The main tasks that a Chartered Accountant focuses on are:

• Tax related aspects
• Financial statements like income statements, balance sheets and cash flow statements
• Depreciation related aspects
• Recommendations on various tax shelters
• Recommendations on the business structure
• Business growth strategies which are tax related
• Auditing
• Expense breakdown

Role in Taxation:

A Chartered Accountant is a tax expert, both personal or corporate tax related concepts. All the latest tax laws are on the tip of his fingers, and hence he can help you plan your taxes well.

Role in Accounting:

An Accountant is an expert in financial statements related concepts. He can give you the exact details of various accounting standards available and can help you prepare the financial statements like income statements, balance sheets and cash flow.

Role in Auditing:

An Accountant is the authorized person to perform audits. Accountants perform business audits for the company and can certify the same.

When to hire a Chartered Accountant?

1. When you own a business and you want to know the laws relating to the book-keeping process.
2. An accountant can help you predict the cash flow in case you have a real estate property and rentals.
3. Get an Accountant’s help when you want to do your taxes for your business or your personal needs.

Who is a Financial Planner?

Just like an Accountant is all about taxes and audits, a Financial Planner is all about investments. He helps you to see a bigger picture involving you goal-oriented investment plans. He has the detailed knowledge about the economy and individual assets. He has an eye for building your wealth in the most effective manner. While investing, a good Financial Planner will make sure that you have no debt left on your account. He focusses on the following tasks:

• Budgeting
• Estate planning
• Wealth accumulation
• Insurance planning
• Short-term and long-term investing
• Asset allocation

Role in investment planning:

As he has a sound knowledge of the various investment products, he can help you to plan your investment in different asset classes based on your goals and risk appetite.

Role in estate planning:

A Financial Planner helps you to have an estate plan according to your investment plans and goals.

Role in budgeting:

He will play a significant role in your budgeting by giving you knowledge about your cash inflows and outflows. The budgeting role helps you track your income and expense.

Role in tax planning:

A financial planner will suggest you the investment products for your tax planning.

Role in retirement planning:

He will give you suggestions for monthly investments and asset classes based on your retirement corpus amount. He will plan your retirement corpus to suffice rest of your life.

When to hire a Financial Planner?

1. Hire a financial planner when you are ready to start investing in the market. He will help you determine the best suited investments options.
2. When you want to plan for your retirement.
3. If you need a plan to get out your debt and do a proper future budgeting.

Quick glance at the major differences between an Accountant and a Financial Planner:

Image Source: The Financial Literates

A Chartered Accountant helps you understand your:

• Current income and expenses, pay your taxes
• Plan for future income and expenses related to your tax filings.
• Keeps your yearly financials in place

A Financial Planner helps you understand:

• Benefits and drawbacks of your investments
• Wealth building process
• Investment strategies for portfolio creation

Conclusion:

Having learned the major differences between a CA and a CFP, it is essential to understand the scenario in which you will need their help. When it’s a big picture, know who and where to put your trust in. Your chances for growth in the right direction will increase when you can rightly leverage these professionals to build your wealth.

If you are looking for a professional advice for your wealth creation, visit FinEdge Advisory website to get your customized financial plan.