The right way to lose a client
As an accountant, you won’t always have control over a client leaving, but you can control how the separation is managed.
- It can be a difficult and sometimes emotional issue when a client leaves.
- Both the incumbent and receiving practitioner should manage client separations in an ethical way.
- Disputes over clients cause a number of the cases brought before CA ANZ’s Disciplinary Tribunals.
The Chartered Accountants Advisory Group (CAAG) provides guidance to members on many matters, but one that recurs again and again from members in practice is what to do when a client chooses to change their accountant.
Sadly, it’s also at the heart of a number of cases brought before our Disciplinary Tribunals. And as I assist with CAAG and sit on Disciplinary Tribunals, it’s one that I am very familiar with.
It can be a difficult and sometimes emotional issue when a client leaves.
I recall vividly how I felt the first time I received an ethical letter asking if I had any professional reason why a fellow CA should not assume responsibility for one of my clients.
I recall the disappointment, the questions and even the anger that, after so often going the extra mile with this client over many years, they would leave me. I felt betrayed and hurt. However this unwelcome event taught me some valuable lessons.
Why do clients change accountants?
In the course of professional practice it’s almost inevitable that some clients will decide to leave you, even when you have served them well.
But why do these separations happen? Consider this typical case study.
Your client is a family business where Mum and Dad are the founders and the driving force. As the business grows, they bring in their son.
That business growth means your clients need increased professional services. While you assign staff at various levels to fill these needs, you remain hands on and retain a close professional relationship with the parents. You are unaware, however, that the son has begun to form a close friendship with your manager.
As the parents begin to look more to the future and their eventual retirement, the son becomes more involved and influential in the business.
While this is evolving your manager, who is a newly qualified CA, begins to consider his future. When it becomes clear that there is no short-term opportunity for a partnership in the firm, he takes the decision to go into practice with a friend.
The son then convinces his parents that they should help your manager establish a viable practice by transferring their work to him or her. The rest, as the saying goes, is history.
Ethical standards are your guide
Clients are not your property and they have the right to change professional associations as and when they please. But while you won’t always have control over a client leaving, you do have control over how a separation is managed.
“Clients are not your property and they have the right to change professional associations as and when they please.”
Your responsibility as either sending or receiving practitioner is to manage wisely and ethically separations when they do come.
As a professional adviser, your best protection is to maintain your professional independence at all times, to uphold your professional responsibilities without fear or favour, and to provide your clients with the highest level of competence and timely service at a reasonable fee.
Too many train wrecks are caused by accountants getting their money mixed up with their clients’ through a personal relationship. Doing so erodes your independence and clouds your professional advice. You must avoid conflicts of interest at all costs.
You must know the ethical standards of our professional body not just on paper but in your heart. You must live by the spirit and not just the letter of the law.
Issues for the incumbent accountant
- Never take clients for granted. Remain hands on at an appropriate level. Listen and be prepared to refer a client to a trusted colleague for specialist advice where you do not possess sufficient competence in a specific area.
- Ensure engagement letters are not just formalities but address the circumstances of each individual client. Discuss the provisions of the engagement letter with the client so they fully understand.
- If a client proves to be undesirable for any professional reason, (e.g dishonesty) do not wait for the client to terminate the engagement. I am sometimes asked what I would have done differently if I had my time over. My response is always that I would have terminated a very small number of professional relationships earlier than I did.
- Where appropriate, enter into enforceable agreements with senior staff that include provisions relating to clients and intellectual property in the event of an employee leaving.
- After obtaining the client’s consent, answer honestly and unambiguously ethical letters, and generally cooperate in the transfer of the client’s work. If a matter is sensitive, and it’s deemed appropriate, phone the succeeding accountant and briefly refer to the call in the written response. (Although, if you need to raise a matter that may prevent a succeeding accountant from accepting the client, why didn’t you terminate the client engagement before this?)
- Ignoring the ethical letter is not an option, if your response is not a positive one, seek legal advice before sending the letter.
- Do not, without proper reason, withhold client records or client information needed by the succeeding accountant to properly and efficiently attend to the affairs of the client.
- Seek to understand the reason for a client separation so that some lessons are learned and benefits obtained to offset the cost.
- Do not take the loss of a client personally and never be vindictive. Seek to part on good terms for your sake, if not for the sake of others.
Issues for the receiving accountant
- Receiving accountants must understand it’s not an insignificant matter for a fellow practitioner to lose a client. In cases where an employee leaves a practice and takes clients with him or her, the incumbent might head off a further erosion of the client base by lodging a complaint with CA ANZ if there has been any breach of ethical standards.
- If there are employment, service, partnership or other agreements in place, take great care to abide by the terms of the agreement(s). If you’re leaving employment to set up a practice, do not retain client records or intellectual property in any form including electronically.
- Do not directly approach people, especially clients of your former firm, to transfer their work to you. At CA ANZ we see and hear of many (sometimes subtle) breaches in this regard. If you are approached by a client of your former firm, do proper due diligence and do not accept the engagement or start work until the ethical requirements are complete. If the incumbent accountant fails to respond promptly to an ethical letter, that’s a breach of ethical standards and can be grounds for a complaint to our professional body.
- Pay due regard to any negative feedback provided by the incumbent accountant in response to an ethical letter. This communication should not be regarded as a formality.
- Encourage the incoming client to pay any reasonably based fees owing to the incumbent accountant.
- As the receiving accountant, don’t try to vindicate your appointment by undue criticism of the incumbent accountant. This is not a good way to start a professional relationship and it also undermines public perception of our profession.
CA Advisory Group
It’s hoped this article may be of assistance to all practitioners, but members of the Chartered Accountants Advisory Group will be happy to engage with members who may wish to further discuss this matter.Contact the CA Advisory Group