A thought-provoking column in the Wall Street Journal here that argues in favor of routine changes of auditors got me thinking.
If we should change our auditors on the grounds that they get too close to us and are afraid to displease us for fear of losing our business, why shouldn’t the same thing apply to other professionals we hire over long periods? Say, financial advisors and even lawyers?
The case for firing auditors is that even though companies hire them and are responsible for paying them, auditors are really there to deliver what can often be “bad news” to company management keen to suppress unpleasant facts from public view. When bad decisions get translated from company spreadsheets into annual reports, bonuses get cut and executives get fired.
So instead of giving independent advice, auditors work for the same company for so long that they end up being “co-dependent,” says the Journal’s Jason Zweig.
Would that ever affect a lawyer or a financial advisor? At least with financial advisors, there are independent benchmarks that can compare your investment returns to those of similarly placed individuals. You can see whether or not your annual fee helps you beat an index, and you can shop around to see if your advisor’s fee is excessive.
What about lawyers? They are bound to a code of ethics, but so are accountants. Lawyers can’t just ignore wrongdoing, but accountants too are supposed to blow the whistle on that kind of thing. The problem arises in life’s hundreds of shades of gray, between best possible behavior and reportable criminal activity.
Many a lawyer reading this can easily recall putting down the phone after an uncomfortable call with a major client who has just instructed that lawyer to do something that gives the lawyer pause. The lawyer might think to himself: “Is it ethical to do this?” but then go ahead and do it anyway. If it just passes the smell test, how many lawyers tell their clients they are treading a very fine line? We hope some, but does yours?
Changing auditors can be a real pain, which is why companies don’t like to do it. Barriers to entry can be high because there are only four big firms to service the world’s largest companies, and because it can take a new audit team a long time to get up to speed on a complex set of accounts.
That can be true of personal investment portfolios and legal issues, but often a lawyer is not tasked with taking care of every aspect of a company’s or individual’s set of legal issues.
So if you don’t feel like firing your longtime attorney or other professional, at least do what you might with your trusted physician. Get the occasional second opinion.