So maybe it’s natural that today’s FD tends to be less gullible about the advice he gets from his corporate finance accountant. Instead of swallowing every bit of advice dished out, he increasingly questions methodology, integrity and motivation.
FDs are becoming streetwise for good reason, believes Amin Amiri, managing director of corporate finance firm Venture Catalysts. He argues that with the demise of M&As and IPOs, corporate finance accountants have become too focused on fees to do a good job. The typical revenue target a partner needs to meet forces them to spend less time with clients than they need to get a proper grip on their financial picture. Instead, they send junior accountants, who lack the essential experience, to select critical financial factors, while partners only reviews what is put in front of them.
Amiri further warns that ‘fee focus’ drives corporate finance accountants to neglect longer-term terms and conditions of finance contracts, as long as it provides cash for the immediate deal and secures their fee. ‘I’ve seen corporate finance accountants take companies to the worst financiers,’ he said.
It is time for a change, Amiri suggests. Instead of relying on fees, he believes accountants should be content with taking a stake in the companies they are advising. The philosophy is simple – if the advice is good, the company grows and the corporate finance accountant earns money through the increased value of his stake. But if the advice was bad or holds long-term drawbacks, the accountant stands to lose his investment as the client does. Of course the world is not quite this simple, and it shouldn’t be too difficult to shoot holes in Amiri’s theory. But it is an interesting point. After all, should we trust advice from consultants not willing to put their money where their mouths are?
- Liesbeth Evers is chief reporter on Accountancy Age.
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