The Differences between a Financial Coach, Financial Planner and Accountant
My personal finance journey started on Instagram. After following a few pages, I started seeing recommendations for every financial coach or advisor under the sun. As a newbie, I thought these all fell under the same category. They are, however, all very different.
Before you plunk down money on getting yourself some financial help, let’s break down what each of these is to make sure you are looking for the right person for the job.
Financial Coaches
The first thing to point out with coaches is there are no legal requirements for accreditation or licensing. Meaning, if I wanted to, I could sell my own coaching program. Now realize that means ANYONE can sell their own coaching program regardless of if they know their shit or not.
Because there are no legal requirements for anything, coaches cannot touch your money. They’re not FINRA certified (Financial Industry Regulatory Authority) nor do they have to adhere to GAAP (Generally Accepted Accounting Principles) practices. If you’re looking at someone's program and they’re asking for access to your bank or 401K, that is a massive red flag.
What they can do, however, is give you general advice and help you build financial plans. It’s someone who acts as an accountability partner. You go over your short-term and long-term goals, break down some ways to achieve them, and set some measurable progress points to hit. Financial coaches are great for smaller personal things like setting Emergency Fund goals, help with negotiating bills and debt payments, or putting together steps to pay off debt. This is a relationship where they give you a few options, you pick what works best and you do the actual work.
Financial coaches are great for:
People like me who are low income and need help with foundational things like setting up a budget, making savings goals, and reducing debt.
People that have short-term goals (6 months to 1 year) like prepping for a career change, setting up a plan to take extended time off, or setting savings goals for Emergency Funds, Sinking Funds, weddings, etc.
People with a general sense of their finances but need help clarifying goals or action steps.
Certified Financial Planners
This is like a level-up from a financial coach. This group can work with individuals as well as companies whereas coaches are usually just for individuals. To use a quote from Investopedia so I don’t have to type it out,
“The planner might have a specialty in investments, taxes, retirement, and/or estate planning. Further, the financial planner may hold various licenses or designations, such as Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Financial Consultant (ChFC), or Certified Investment Management Analyst (CIMA), among others. To obtain each of these licensures, the financial planner must complete a different set of education, examination, and work history requirements.”
Important to note that most of these certifications also mean the person has to have a Series 65 license which allows them to handle more investment and retirement situations. The Series 65 exam covers economics, types of investment, and retirement accounts as well as certain laws, regulations, and tax implications. So like, real serious shit.
Certified Financial Planners are great for:
Those with higher incomes looking to maximize their retirement accounts.
Those looking to acquire businesses.
People who have substantial investments accounts.
People looking to shift asset allocations more than just a few small changes.
Accountants
Accountants are for businesses. There is also a reason accountants make good money. CPAs or Certified Public Accountants, have to complete some INTENSE certification and licensing. Each state has its requirements for licensing and it is not easy. For my state (Nevada) here are some of the qualification requirements.
Starting with the education portion, they need to have passed their program with a certain number of credits. So if the program initially completed was only 120 credits but the state requires 150 credits, they gotta enroll in another accredited program for that last 30 credits. You also need to have a certain amount of credit hours in specific areas as well.
Once you have the credit hours, then you need to pass the CPA exam, which is one of the hardest exams in the country. Legit. The pass rate hovers around 50%.
Once you pass that exam, then you need real-life work experience. Like 2-4 years of it along with more specialized training from accredited programs that focus on things like auditing and tax preparation.
After all of that, then you can apply to have your state CPA license. That application has to be reviewed and approved by a state board which may include more testing, letters of recommendation, and moral character reference statements.
Even once you have your license, there’s still ongoing education, license renewals, and keeping up to date with changes in federal and state laws.
To sum up, shit ain’t easy and isn’t for the average person.
Accountants are used by businesses to maintain their financial operations. They have to know how to prepare tax forms correctly, report to shareholders financial information and projections, maintain overhead, and make sure anything in regards to production, labor, and pricing matches those financial statements. It’s a fucking lot and if they get any of it wrong, it could mean massive fines or jail time.
So yea, you probably don’t need an accountant.
Certified Public Accountants are great for:
Businesses that need consistent preparation of tax forms, quarterly financial reports, or project management.
Companies needing internal audits to identify where costs can be saved
Situations that require forensic accountants to find evidence of fraud or illegal activity.
Data analysts that want to learn more about financial trends or economic projections.
There are many different subcategories in each of these segments, but this is the gist of it.
Finance is a big big world and there’s always some part of it that applies to you.
Make sure if you are looking for financial help, you vet your sources. Be clear on what kind of help you’re looking for. A good financial coach or advisor can set you up for a lifetime of good money management so it’s worth it to put in the work to find a good one.
(If you enjoyed this blog post or my content in general, feel free to send an iced coffee my way via my Buy Me a Coffee tip jar or hire me for your next blog post)