A REGRETTABLE NARROW FOCUS

There are very few, if any, businesses in Australia (or elsewhere I suspect) that can operate for any real length of time without obtaining any form of external advice.  The complexities of running a business in our regulatory environment are now such that anyone with a business of any real size will indeed fall foul very easily; and quite likely without even realising it!

The real issue of course is the question of whether or not the advice is good, bad or indifferent.  Bad or indifferent advice should be worth nothing!   Today however, much is played over the relationship with the adviser rather than their professional ability, technical expertise or experience.  Presumably it is the latter that should be of the greatest importance.

By way of example, some time ago I was at the launch of a new business and was chatting with various people present.  As the time evolved I found myself in a one-on-one conversation with a local accountant who had recently been involved with another insolvency practitioner.  He told me the story of having referred a client who had a company that operated a small painting business to this practitioner as it had run into financial problems with total creditors of some $80,000 or $90,000.

The practitioner ultimately took action against the director for trading whilst insolvent and recovered in excess of $130,000 from the director. Alas, not one cent of this was to ever be received by the creditors; the whole amount being consumed in liquidator and legal fees. I looked at the accountant in puzzlement and queried, given the information that he had just given me, would not the better advice have been to simply tell the director to pay the debts in the first place, his creditors would have been happier, they would have been paid, and the director would have saved some $40,000 or $50,000, or even more!  He looked at me in an understanding confusion.

The accountant then went on to say that he was currently dealing with a new client who was also suffering from financial distress; I quickly offered him my card. Whilst the accountant agreed that the earlier matter had not gone well, and he was unable to explain how the situation had come about, he was still intending to refer his future client to the same practitioner.  He either could not, or would not, explain why.  It was beyond logic and common sense (sorry Mr Spock!).

In my years of experience those who practice in the dark arts of ‘phoenixing’ and the like, can be clearly identified by having a very limited and selective choice of advisers who are willing to provide them the advice they want and the actions/behaviours that they are looking for.  This point has been repeatedly reinforced by the regulators who are in pursuit of the proponents of such behaviour; both the protagonist and the adviser.

However, the downsides of having limited or selective advisers are in fact rife at many other levels.  The situation is less evident in the many other situations because the incumbents are not referred to as the selected few, but in fact as “the panel”.  Larger organisations go through a process of identifying advisers who they know will provide them with advice in line with the way they wish to operate, even if it’s not necessarily in the most professional, community minded, or whatever, manner.

The advice does not necessarily have to be the best, the most economical, in the interests of all parties, or for that matter any other raft of variations. It is simply the advice built around a set of behaviours that they are willing to accept as their normal way of doing business.  Once begun the client and the adviser then begin to feed off each other.

The questionable nature of any of the behaviours, in any of these situations, will always be completely dependent upon the experiences of the observer; to society however, it will be based on what has become the norm.  The repeated use of the same advisers, particularly through generational change, will breed relationships which develop off each other, and will follow noticeably consistent patterns. If you add to this either a component of bullishness, that runs uncontrolled, or in the alternative, a societal system that fails to control it, then the behaviours can reach catastrophic proportions.

Being open to new ideas, and new input, is genuinely a factor that does provide for long-term survival.  Regrettably, as we move forward in an increasingly ‘logarithm’ driven world; it will be consistency, regardless of how bad, that could well become the norm.

The real issue comes though when someone in the future looks back on what has been done … then the issue becomes how do they view it, and more importantly, what will be the consequences?

The evidence of this is increasingly becoming a regular occurrence in our media as we continually pull apart the past. Examples can be drawn from a wide arena of banks, financial planners, police, child supervisory bodies, government bodies and the list goes on.  As systems that can manage, sort, manipulate and analyse data grow, so will too our ability to review and question our past; at least our recent past anyway.