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The Best Ways for CPAs and Tax Specialists to Offer Investment Advice

Offering clients investment advice is inherently challenging and somewhat risky. Though financial planners and investment advisors are expected to provide such guidance, investing is outside of the niche of CPAs and tax professionals.

If you work in either of these professions and your clients seek investment advice, consider the suggestions detailed below.

Recognize Clients’ Need for Investing Guidance

Acknowledge the fact that you are not an investing guru and relinquish all legal liability for potential losses. Make it clear that your advice might lead to significant losses before making a single comment about a prospective investment.

Be General Rather Than Specific

It is a mistake to invest your limited time at work delving into the subtleties of prospective investments on behalf of your clients. Instead of providing highly specific advice pertaining to the nuances of individual stocks, mutual funds, ETFs, and other securities, speak in general terms.

Document all Client Interactions

If your client asks you to review an investment, document every piece of correspondence and information that changes hands and is discussed, be it verbally, in writing, or through email. All questions you pose to your clients pertaining to investments should be made in writing in order to provide you and your firm with the necessary legal protection. Documenting the exchange of information pertaining to client investments ensures an ensuing IRS audit will not conclude you or your firm have legal liability for the client’s legal violations such as the use of an impermissible tax shelter.

Refer to the Engagement Letter

CPAs and tax professionals often transmit engagement letters at the outset of providing services to a client. These letters are provided for the purposes of providing services in compliance with tax law. The language of the letter should state-specific services such as investment planning do not fall within the scope of the services rendered.

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