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With the financial services industry nearly halving its size in recent years, CEOs need to ask critical questions when engaging a new advisor.
Last month the Australian Financial Review reported that over 12,000 financial advisors had left the industry since the financial services royal commission half a decade ago. “The exits represent a 43 per cent decline in the size of the workforce in just five years,” wealth editor Aleks Vickovich wrote.
This news comes as no surprise to those in the industry, and knock-on effects are being felt far and wide.
For founders and CEOs looking to engage a new accountant or financial advisor, with a much smaller pool of talent to choose from, it’s critical to know what to look for, and what you need from them.
We asked four experts from the field for their advice, along with the one question they wish all potential clients would (read: the one question you should) ask them before signing on.
Warren Strybosch
Founder and Managing Director of Find Accountant Pty Limited
When selecting an advisor, there are several important factors to consider:
- Qualifications and experience: Check the advisor’s credentials on the ASIC professional register.
- Fiduciary duty: Ensure that the advisor has a fiduciary duty to act in your best interests at all times.
- Services offered: Make sure they can provide the type of services you need based on your financial goals.
- Communication style: Consider the advisor’s communication style and how well it aligns with your preferences. Communication is key to a successful relationship.
- Fee structure: Understand the advisor’s fee structure and how they are compensated for their services. Ensure that the fees are transparent and reasonable.
- Investment philosophy: Understand the advisor’s investment philosophy and approach to managing investments. Make sure it aligns with your risk tolerance, investment goals, and time horizon.
One question you should ask your advisor before signing on is, “How do you manage conflicts of interest in your practice?”
This will help you understand how the advisor handles potential conflicts of interest that may arise in their recommendations or actions, and whether they prioritise your best interests above all else. It’s important the advisor acts in your best interests at all times.
Also on The Big Smoke
Andrew Hubbard
Director of OneLedger
When looking for an advisor or accountant there is no shortage of competitors out there, so taking the time and finding someone you connect with on a personal level is very important, as well as the technical side.
Whilst the tax rules are the same, getting along and communicating well with your accountant or financial advisor is paramount to you achieving your goals. If you are not aligned with your accountant or advisor it will make achieving your goals harder. When picking who that advisor is, it is important to ask whether they have had similar industry experience and to be specific about that experience – do they know the software you are using, your supply chain, your biggest cost pressures?
One of our biggest strengths as accountants is getting new clients to meet existing clients in similar industries to share their experience, which is often outside of our direct expertise but this knowledge is invaluable to a new founder or CEO.
In addition to this, CEOs and founders should look at their advisor to see if they have directly run a business/had that experience and/or success, as that can make all the difference from one who has not.
Also on The Big Smoke
Brendan Lucas
Founder and Managing Director of Next Dimension Accounting
Your decision to appoint an accountant is important, as a good accountant enables informed decisions that add value to a business.
Look for an accountant with the right skillset for your business plus general attributes such as being tech-savvy, which will save time and money over the long term. The accountant should be experienced in producing accurate historical numbers for reliable budgeting and forecasting, and financial scenarios for growth options.
Wider expertise, such as a strong network of legal, marketing and finance experts, can help address a range of business issues. Rather than relying on a sole operator, engaging an outsourced accounting team will mitigate key person dependency risks.
A prospective accountant should also demonstrate responsiveness to your future business needs, such as taking an interest in your business’ “why”; your “exit strategy” so that decisions support your end game; and your business “pain points” – plus the strategies to address these.
As the founder of an accounting service, the one question I wish all prospective clients asked was, “Can you introduce me to a client whom you have helped through a similar situation?” This shows that the client is doing due diligence on the decision, and understands its importance.
Also on The Big Smoke
Andrew Jeffers
CEO of Shuriken Consulting
When you employ new staff, you interview, don’t you? You may use a recruiter or place an ad, get a bunch of CVs and then run a short list. You then interview a potential candidate and do reference checks, have a meeting, maybe two, and if you’re really on it, see if their culture aligns with that of the organisation.
I’ve found, over 30 years, that when choosing an external accountant, most small businesses don’t interview the potential accountant this way.
This is a massive relationship that can determine both your, your company’s and your family’s financial future. This is a relationship to be entered slowly, with caution and plenty of questions. You need to have the same ideology, the same values and the same commitments.
Some important things to ask:
- Are you doing the work in Australia or offshoring my work?
- Are you using an overseas company – if so, where are they based, and are they your company or are you subcontracting my work?
- What security measures do you have in place over my data?
Like most relationships there will be good times and bad times. Success is always in the planning, so:
- Do your homework on the new advisor.
- Interview them like they are going for a job.
- Make sure you have a clear exit clause should it be required.
These should help you get the heads up on your new accountant. Don’t forget just because they are competent, does not mean the relationship will work. And if it doesn’t, that’s ok.
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