Do you practise safe advice?

Most members of STEP hold qualifications governed by other professional bodies including legal, accounting, financial planning, insurance, investments or banking bodies. Each professional body has specific rules and regulations around rendering advice, and STEP members are expected to adhere to them in the conduct of their duties. For example, I am a chartered professional accountant. I also hold a TEP designation with STEP, as well as Family Enterprise Advisor (FEA) qualifications. In respect of giving advice, I am governed by the rules of Chartered Professional Accountants of Ontario, in addition to those of STEP and FEA.

It was through observing how financial planning specialists could master the art of giving general tax advice without implementing the advice (and not getting sued) that I learned the important difference between giving mainstream tax planning advice and giving specific tax advice. Some of the key differences are as follows.

Liability under written engagement letters

Professional tax advisors who provide tax advice as their primary revenue source, such as tax lawyers, accountants or fee‑for‑service financial planners, typically enter into written engagement letters with clients who pay for their time and rely on their advice. The client engagement letters would typically clarify the tax advice and related execution services to be provided.

Tax specialists, on the other hand, who simply provide general tax planning ideas and advice tend to earn their primary compensation from other fees and commissions earned, and should not purport verbally, in writing or in any marketing materials to give specific tax advice.

Written correspondence to exclude tax advice

Tax experts who provide tax advice normally define the scope of their work to include tax advice. On the other hand, tax advisors who provide general planning ideas need to adopt wording with clients that clearly confirms the contrary.

Strong advice disclaimers

Tax advisors should adopt wording with clients that confirms that they do not provide specific tax advice and that clients need to seek independent advice. A strong disclaimer is needed in any client correspondence or presentation.

Know your limits

Know your own advice limits and the limits imposed by STEP and local professional rules and regulations. It is important to seek out the definition of what is permitted in your local jurisdiction and under your primary professional body, so you clearly know where the line is drawn. Each jurisdiction is unique.

Arrange adequate insurance cover

STEP requires members to annually certify that they have adequate professional indemnity cover or have cover provided by their employer. There is personal and professional liability attached to providing tax advice and it is in your best interests to protect yourself from any liability claims.

Check and check again

As tax advice is governed by statutes, common-law precedents and the assessing practices of the tax authorities, all of which are subject to frequent changes, it is a very complicated area to advise on. For that reason, it is prudent to check the rules and check again. Just as professional firms have a second set of eyes review the advice they provide, it is wise to ask a colleague or specialist you know to review your work.

In a complex, cross-border world, it is hard to be all things to all clients. Understanding our limits and the liability attached to sticking to our individual expertise will hold us all in good stead.

One of the best elements of being a TEP is that STEP’s membership comprises many of the world’s best tax, trust and estate experts. There is no reason for any of us to step over our comfort boundaries when we have such a qualified group of professionals to turn to.

Let us all be aware of our limits and practise safe advice responsibly.