Taking charge of your finances can be a struggle. In fact, nearly 40% of Americans struggle with their finances in some capacity.
To combat this issue, many people turn to CPAs and CFAs. These financial professionals can help individuals get their finances back in check.
If you’re planning to work with one of these professionals, it’s important to know the difference between a CPA and a CFA. That way you can choose whether to work with a CPA vs CFA.
What Is a CPA?
A CPA is a Certified Public Accountant. CPAs take an exam that is administered by the American Institute of Certified Public Accountants, also known as the AICPA organization. This organization is renowned for its competence, which enables CPAs to be highly regarded.
CPA professionals are considered experts in tax law and in providing advisory services about taxes. They must undergo rigorous training and study extensively in order to handle financial reports and analyses appropriately.
Accountants who want to launch a successful career within the United States or work with clients from the US has to take the AICPA requirement. The exam can be taken in any of the 50 states in the US as long as that state has the license to administer the exam.
Although the test is created and distributed by the AICPA, every state has its own licensing requirements for the exam. That means that it will be slightly different depending on where someone takes the exam.
Why Work With a CPA
Working with a CPA can provide you with numerous benefits. For one, they can save you a huge amount of time. Since these professionals know how to navigate taxes, they can get the job done much more quickly than you could.
On top of that, they help reduce your tax liability. CPAs have the knowledge needed to ensure that your taxes are fully compliant and that you’re paying the correct amount each year. Plus, they get you the best tax refund.
On that note, CPAs help you meet your tax obligations and avoid fines. Since they know how taxes work, they make sure that you are adhering to regulations and steering clear of fines and penalties.
Finally, CPAs take the stress out of tax season. They help you prepare for the tax deadline, ensuring that you are prepared when the due date rolls around.
Why Become a CPA
Are you on the flipside of the equation and thinking of becoming a CPA? Good choice! Getting this certification can help you effectively launch your career.
Becoming a CPA is a great way to launch your career because the CPA certification is considered to be a prestigious qualification. In fact, it’s one of the highest qualifications that an accountant can achieve.
Individuals with a CPA have more career opportunities available to them as well. For instance, they are licensed to practice in the US and to work in multi-national corporations.
If your goal is to work for one of the big four accounting firms, becoming a CPA is a necessity. This shows these businesses that you have the expertise needed to work for them.
What Is a CFA?
A CFA, or a Certified Financial Analyst, is an individual who specializes in strategic advisory and financial planning services within the financial industry. In order to become a CFA, you have to take the Certified Financial Planner exam.
This exam is a certificate course that is given out by the Certified Financial Planner Board of Standards, or the CFP Board, in the US. There is an affiliated body of this organization located in India.
Becoming a CFA is considered a sign of excellence and quality. Individuals with their CFA license are recognized for their competence throughout the financial services industry.
The CFA course involves stringent examination, experience, ethical, and educational standards. Graduates of this course have a wide array of opportunities available to them within their field.
Why Work With a CFA
Working with a CFA can provide you with numerous benefits. For one, a CFA can help ensure that you manage your finances better and always have enough spare cash on hand for savings, retirement planning, or investments.
Speaking of investments, hiring a CFA is a great choice if you have active investments. These professionals know how to help you get the biggest return on your investment and maximize the assets that you have.
They’re also adept at providing professional advice when you feel at a loss. If you’re in a tricky situation with your finances and aren’t sure how to get out of it, CFAs can assist. They’ll help you navigate these issues and come out the other side.
Finally, CFAs are great for helping you achieve your financial goals. Since they know how to help you maximize your income, they can assist you in reaching long-term goals.
Why Become a CFA
If you’re on the other side of the coin and are considering becoming a CFA yourself, you can take advantage of several benefits.
Becoming a CFA is considered one of the best certifications in the financial industry in general. It’s a certification that is accepted around the world, too, meaning that you can use your qualification to work overseas.
What’s more, the certificate has received the Gold Standard Award. That means that it is considered a highly credible award that supports good business practices and sustainability.
Professionals with a CFA certification also receive higher salaries in a variety of industries. Getting this certification is the fast track to earning a six-figure salary in the financial services sector.
Key Differences Between a CPA and a CFA
Now that you have a basic idea of what a CFA is and what a CPA is, let’s take a look at what the key differences between the two are. Here’s what to know about the difference between a CPA vs CFA.
The first major difference between CFAs and CPAs is what criteria each would-be professional must fulfill. To become a CFA, you must have either a bachelor’s or graduate degree as well as working financial planning knowledge.
To be eligible to take the CPA exam, you have to have the equivalent of a 5-year education. This traditionally means a 4-year bachelor’s degree as well as a master’s degree.
Another big difference between a CFA and a CPA is the organizing body of these certifications.
CPA exams are controlled and monitored by the AICPA in the United States. This board oversees the certification of all Certified Public Accountants and sets the standards for these professionals.
CPAs are not monitored by the same organization. Instead, CPA exams are controlled and monitored by the CFP Board, or the Certified Financial Planner Board of Standards in the United States.
Courses for CPA and CFA qualifications work slightly differently. The CPA course is divided into four different exams. These exams are:
- Audit & Attestation (AUD)
- Financial Accounting & Reporting (FAR)
- Regulation (REG)
- Business Environment & Concepts (BEC)
Exam-takers need to receive passing scores in all four exams in order to receive their CPA certification. They will have to sit for the exams on various days as these are not usually administered at the same time.
The exam for a CFA qualification, on the other hand, is much simpler. To become a CFA you only need to take one level of exam which is typically conducted in one day.
Duration of Course
Because of the structure of the exams, the duration of a CPA and a CFA course is not the same. Individuals wanting to receive these qualifications will have different time periods to study and complete their exams.
CPA candidates usually complete their qualifications in a year and a half. This includes studying for and passing all four of the exams.
In contrast, CFAs usually take about three years to complete their certification. The duration of a typical CFA course, the study, and the exam take a lot more time.
Anyone wanting to receive either a CFA or CPA certification will have to complete a preliminary course. This helps individuals prepare for the topics covered in the final exams.
A CPA course usually covers these topics:
- Entity Federal Taxation
- Individual Federal Taxation
- Professional Responsibilities Ethics & General Principles
- Corporate Governance
- Financial Statement Accounts
- Economic Concepts & Analysis
The topics covered in a CFA course are quite different. CFA courses typically cover the following topics:
- General Principles of Financial Planning
- Professional Conduct & Regulation
- Retirement Savings & Income Planning
- Tax Planning
- Investment Planning
- Estate Planning
- Risk Management & Insurance Planning
- Education Planning
The topics for these courses correspond with the qualifications that professionals need to have to perform their job as a CPA or a CFA. Since these jobs are different, the courses are different too.
Becoming a CPA or a CFA is not free. In fact, it costs quite a bit of money to achieve either of these certifications.
The amount that candidates pay includes license fees, registration fees, application fees, and exam fees. For CFAs, there are added fees depending on how early or how late you register for the exam.
It usually costs about $1,500 to complete a CPA certification. To become a CFA, however, costs between $825 and $1,025 depending on when you register for the course.
Once you complete your CPA or CFA certification, you’ll be eligible for new career paths. The jobs that these individuals can get depend on which certification they received.
CPAs can acquire jobs as:
- Public Accountants
- Financial Analysts
- Internal Auditors
- Forensic Accountants
- Financial Advisor
The jobs that CFAs can acquire are a little different. CFAs can get jobs as:
- Investment Planners
- Risk Managers
- Tax Consultants
- Estate Planners
- Legal Financial Managers
- Retirement Planner
Notice that CPAs can get jobs working in financial advising and analysis, but CFAs cannot get jobs working as accountants. This is because CFAs do not have the knowledge of accounting practices needed for these careers.
Just because both the CPA certification and the CFA certification require you to take a special course does not mean that they have the same difficulty level. Although similar, the difficulty of these exams isn’t the same.
Less than have of candidates pass the CFA exam. With proper study, most candidates are able to retest and successfully complete the exam.
The good news is that the pass rates for the CPA exam are slightly higher. This exam has a pass rate that’s a little over 60%, meaning that individuals are more likely to get their CFA certification.
Exam dates also vary for CPA and CFA certifications. Candidates take their exams at different times of the year depending on which certification they are striving for.
CPA candidates take examinations using a continuous testing model. This means that exams are offered continuously throughout the year, rather than on scheduled dates.
In contrast, CFAs must register for the exam on specific dates. The CFA exam is typically offered in March, July, and November. Candidates can retake the exam at a second or third date throughout the year.
Do I Need a CFA or a CPA?
Are you unsure as to whether a CFA or a CPA will better benefit you or your business? The answer depends on what you’re hiring them for. Let’s take a look at which of these professionals you should use and how to decide.
General Financial Planning
Have you already taken care of your financial planning? In other words, do you have a solid decision made on your estate, insurance, taxes, education funds, and retirement?
For most people, the answer is ‘no’. Sitting down and making a long-term financial plan is extremely complicated and requires many moving pieces.
If you want to get these plans under control, a CFA is the appropriate professional to speak with. CFAs have financial expertise that covers a wide range of topics and are able to provide their clients with good advice on planning for the future.
There are many different financial planners out there, however, and the one you choose will depend on what your long-term goals are. A few common goals include:
- Planning for retirement
- Saving money for college education
- Purchasing a home
- Getting insurance coverage
- Making investments
Financial planners are well-equipped to help you accomplish these goals and make smart decisions about your money.
It’s not uncommon to have some debt on your hands. Whether you’ve taken out loans or need to pay down credit card debt, a financial analyst can help you out here.
CFAs have technical experience and deep financial understanding. They know how to give you advice and counseling that will help you reduce your debt and start developing long-term financial goals.
CFAs are also great for properly managing money. They can provide you with education that helps you change your financial habits and avoid getting back into debt further down the road.
Accounting, whether it’s for business or personal needs, is best left in the hands of a CPA. CPAs can answer tax-related questions and tackle bookkeeping and accounting services. They have a strong technical understanding of these types of actions.
CPAs can also offer you assistance with managing:
- Sales tax reports
- Estate tax returns
- Business consulting
- Quickbooks training
- IRS interactions
- Tax audits
Difficult Tax Situations
Not all taxes are simple. Whether you have multiple jobs, live in two countries, or have moved between several states, many different factors can affect your tax return and make it difficult to file.
If you’re in a tricky tax situation, a CPA can provide you with assistance. CPAs have a deep understanding of tax law and can assist you with minute details and the consequences of certain tax situations.
CPAs are also great at helping mitigate potential tax issues before they arise. They’ll make your taxes easier to sift through and organize so that you can avoid paying fines and fees for improper filing.
Tax season is rough, whether you’re paying business taxes or navigating your individual tax return. If you need assistance preparing for tax season, a CPA is a good choice.
CPAs are trained in tax preparation. They can help answer your tax questions as well as get your taxes ready for you. They’ll also submit your taxes for you so that you don’t have to worry about mailing your forms to the IRS.
There are many virtual CPA services out there, too. CPAs often use accounting software to help you submit your tax forms and get your refund more quickly.
Investment Advice and Support
Sometimes what you really need is a bit of advice and support regarding your investments. If you’re trying to improve the ROI on your investments or better manage your portfolio, it’s best to hire a CFA.
CFAs help both companies and individuals manage investment portfolios. They know how to manage and move large sums of money to ensure that you get the most out of your investments.
On top of that, CFAs know how to handle complex investments. CFAs can tackle difficult investing situations and make your money work for you.
What Should I Look for in a CPA or a CFA?
Before you sign any contracts, make sure that you’re selecting the right professional. Whether you’ve chosen to hire a CPA or a CFA, there are a few key traits you can keep your eyes peeled for.
You’re going to be spending a lot of time with your CPA or CFA, which means that you need to have a good relationship with them. When looking for a financial professional, look for someone who is personable.
Make sure that you connect with your chosen professional and that they are excited about you and your finances. If they’re not interested in your situation, they’re not going to put their energy into providing you with the best services.
Before signing on with a CPA or a CFA, make sure to check their qualifications. Ask them who they are licensed with and where they got an education.
This will help you have an idea of whether they adhere to professional standards. And, in the event that they fail to do so, you can report them to the governing body of their certification.
Laws change all the time. Any financial professional should have a strong understanding of what’s going on in the financial world and what the current laws and legislation are.
A good financial professional stays up-to-date on what’s happening so that they can answer any question you have. That also prepares them to tackle even the most complex problems that arise.
You want to make sure that you’re able to get in touch with your chosen professional when you need them. Read reviews about how easy they are to reach and how fast they respond to emails and phone calls.
In addition, ask how frequently they provide you with updates. You want to make sure that they can meet your needs in terms of support and reporting.
Finding a financial professional that has experience tackling your particular issue can help you get the most out of their service. They’ll be able to provide you with unique insights that a generalist might not have.
For example, if your business is in the real estate sector, look for a CPA or CFA who has experience in this industry. Ask questions to get a feel for what clients from this industry they have worked with previously. That will help you determine whether or not they’ll be a good fit.
Know the Difference Between a CPA and a CFA
Although similar, these two types of financial professionals are not the same. Knowing the difference between a CPA and a CFA will help you make the best financial decisions and choose to work with a professional that can help you with your situation.
Do you want to find more helpful advice on taxes, business, and finance? Check out our other articles and get all the resources and information you need to properly manage your financial wellness.
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