Advisor Tax Mistake #7 – Not Getting Tax Documents from Clients

This article is the 1st in a series of the 7 most common mistakes financial advisors make on tax planning with clients.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

When I come off stage after speaking about taxes at industry conferences, one of the first questions I get (after trying to get past advisors who want to show off their tax knowledge) is, “I get the importance of tax planning and I think I’m pretty good at it. But many of my clients, and especially my prospects, never provide me with their tax documents.”

I want to show you how to establish a system for getting client tax returns each year.

As a CPA and tax preparer, the idea of clients not providing tax documents is foreign to me. My clients often hand me their tax documents before we even exchange pleasantries. However, in working with hundreds of financial advisors around the country, I’ve learned that for even the best and most tax-focused advisors, getting clients to consistently provide their tax information is a real struggle.

In my experience, there are two reasons clients and prospects fail to provide tax information:

1. We have a tax person. In most clients’ minds, you are their “investment person” and someone else (or themselves, if they self-prepare) is their “tax person.” As such, it makes about as much sense giving you their tax documents as it would be to give it to their dentist. One of our first steps is to get clients to think of you when they think of taxes.

For example, when inviting a client to meet with you (and again when confirming the appointment), add the phrase: “So that we can make the best use of our time together and to double check that you are not overpaying the IRS, please be sure to bring a copy of your tax return to our meeting.”