A reader writes in, asking:
“I’m looking for a ‘fee only’ professional who can take care of everything including tax returns, tax planning, financial planning, and handling the portfolio. I’m getting to the point where I no longer want the hassle, and my wife won’t want to handle it at all once I’m gone. Does such a person exist? Would I be better off looking among CPAs or CFPs?”
Let’s tackle the question of certifications first, since it’s relevant for anybody seeking an advisor, then we’ll move on to whether it makes sense to use a single person for all of the services desired.
Which Certification is More Relevant?
The sections of the CPA exam are:
- Financial Accounting and Reporting (dealing with, for example, the statements that publicly traded companies must provide to shareholders),
- Auditing and Attestation,
- Regulation (dealing with individual taxation, business taxation, and business law), and
- Business Environment (a catch-all category for other business topics such as economics, operations, finance, and information systems).
And the topics covered by the CFP exam are:
- General Principles of Financial Planning,
- Insurance Planning,
- Investment Planning,
- Income Tax Planning,
- Retirement Planning,
- Estate Planning,
- Interpersonal Communication, and
- Professional Conduct and Fiduciary Responsibility.
As you can see, the CFP exam is definitely tailored more precisely to personal finance than the CPA exam is.
However, there are two important caveats to note here.
First, there’s an additional, lesser-known credential that some CPAs go on to earn: Personal Financial Specialist (PFS). The PFS curriculum is very similar to the CFP curriculum, as are the topics covered on the exam.
Second, it would be rare to find any professional who is truly an expert in each of the topics covered by the exam for their certification. As you might expect, a professional’s expertise is going to depend much more on what field they work in than on what certification(s) they have. To use myself as an example, despite being a CPA, I know next to nothing about auditing, because I have never worked in that field and because my exam on the topic was approximately 4 years ago, meaning I’m well on my way to forgetting what little I once did know.
In summary, if you’re looking for a very comprehensive financial planner/professional, a CFP or somebody with the CPA and PFS certifications is likely to be your best bet. However, a person’s expertise will depend at least as much on their experience as on their certifications.
Is One Professional Really a Good Idea?
It’s easy to find a tax preparer who also does financial planning. Alternatively, it’s easy to find a portfolio manager who also does financial planning. But somebody who does tax preparation, financial planning, and portfolio management would be pretty rare. (And frankly, that makes sense. Trying to become an expert in all three professions would be exceedingly difficult.)
The most common solution would be to use two separate professionals: a tax preparer and a financial planner/portfolio manager. (In some cases, you may find it convenient to find a firm that has both types of professionals.)
Alternatively, you may not even need to pay a professional, per se, for portfolio management. Developments in the last few years — specifically, the rise of all-in-one funds and so-called “robo-advisors” — have made it clear that portfolio management is a commodity service, the cost of which is rapidly declining (and even approaching zero).