Now, about those "proactive tax strategies"

[Michael Plaks]

This post was prompted by a discussion with an investor who approached my firm for tax strategizing. The investor was particularly concerned about receiving proactive tax advice. As opposed to, you know, retroactive tax advice. Very common and very fair.

But what does it mean? It's a term so widely (ab)used that it kind of lost any specific meaning. Everyone implies something different.

I'd compare it to medical advice. (Warning: I'm ignorant in medicine, so bear with me.) You come to your doctor and say: I want to lose 10 pounds. The doctor discusses your lifestyle with you and recommends some changes in your routine and your nutrition and suggests some supplements. Was it proactive advice? In my book, yes. Important for me to point out that this advice was given in response to you as a patient being proactive in stating your immediate concern and goal.

Contrast it with you going to the same doctor with an infection. He gives you an antibiotic and sends you home, without giving you any proactive advice on losing weight. Do I blame this doctor? I don't. He had no idea that it was your concern or goal at the moment. Should he have taken your full blood profile, noticed an increase in some pre-diabetes parameter and brought up his concern about your weight? Maybe, if this was the arrangement you had with him regarding monitoring your health, but still only if he had a significant reason to get concerned.

One other thing. 10 lbs was likely a realistic goal. 50 lbs? Not sure. It depends on so many factors. Yet, social media (and BP) are full of statements like "but my buddy did lose 50 lbs by following..." Do you expect your doctor to give you a fail-proof recipe to drop 50 lbs?

Back to the initial example of you stating your 10-lbs goal and your doctor's recommendations. Next month after the visit, you decide to start weight lifting and taking supplements recommended by your trainer. Turns out that the supplements for muscle growth interact with the supplements recommended by your doctor. This creates some digestion issues. Do we blame the doctor now? I don't. He had no idea you would start a new hobby and start taking something else. Your goal of losing weight, by the way, also becomes muddy. You may be gaining muscles now, so while your body is getting stronger and healthier, your weight does not go down. One might say that not only your doctor "failed" to give you proactive advice, but he also "failed" you in achieving your weight loss goal.

I hope that doctors/accountants are on the same page with their patients/investors from day one. This should, at a minimum, reduce the number of complaints posted on this forum.