Five Things You Should Consider When Retaining a Financial Expert

Practitioners need to be keenly aware of how to best go about retaining a financial expert in a commercial litigation.

Fresh from our recent virtual CLE presentation to the Nassau County Bar Association, below are five best practices to follow.

1. Engage Experts Earlier Rather Than Later

Far too often, practitioners delay the retention of experts due to fee pressures from clients. While fee pressures are a reality that must be managed, there are many circumstances where failing to engage an expert early in the process can be costly. Consideration should be given to retaining an expert when drafting your complaint and document requests for financial records, or when deposing witnesses regarding financial matters. Retaining an expert when drafting a complaint that references accounting language can help ensure accurate usage of accounting terminology. The assistance of a financial expert in formulating document requests and deposing financial witnesses can improve the quality of the document production and other information gained during the discovery phase. Missteps at these phases of the litigation process can result in the failure to obtain the documents or information necessary for the expert to prepare the most effective expert report for your case.

Financial experts can also add value in early case evaluation. Most clients need financial information in order to weigh the cost of litigation against potential damage awards. Financial experts can help manage client expectations and aid decision making by more accurately estimating the value of possible damage awards.

2. Always Check Credentials

Before hiring a financial expert, be sure to confirm that the expert’s credentials are valid and in good standing. For an expert that is a  CPA, check with the state board of accountancy to verify that the individual is  currently licensed and that there are no disciplinary actions against the expert. Even if the individual has previously qualified as an expert, do your own homework. There are several documented cases of experts misstating their credentials, such as educational degrees and certifications that were never earned. Research opposing experts as well. You might be surprised by what you discover.

3. Understand the Professional Standards that Govern Financial Experts

Experts are bound by professional standards and ethical codes promulgated by the governing bodies of the organizations that issue their credentials. Experts that are CPAs must adhere to the consulting standards issued by the American Institute of Certified Public Accountants (AICPA). An important aspect of these standards is to “serve the client interest… while maintaining integrity and objectivity.” The objectivity standard is an important distinction between CPAs and attorneys. Attorneys are advocates for their clients, while CPAs are advocates for their opinions.

In order to maintain objectivity, a CPA is required to consider all available information in forming his or her opinion. For this reason, it is important to understand the need to provide all information your expert deems relevant. Failure to do so may result in having the expert criticized for failing to follow professional standards, or worse, disqualified as an expert witness.

4. Make Sure the Expert Stays Within His or Her Expertise

Sometimes the lines between expert opinions and legal opinions become blurred. However, experts should only issue opinions that are within their relevant expertise and should not be forming legal opinions.

Similarly, be careful not to pressure your expert to include arguments that are not strongly supported by the data. Trust the expert to know which arguments he or she can vigorously defend. Sometimes the inclusion of a weaker argument can tarnish the valid arguments presented by the expert.

5. Consider Whether the Expert Will Be a Good Testifying Witness

What are the qualities that make an expert a good testifying witness? Ultimately, the role of a testifying expert is to educate the judge or jury. The expert must walk the fine line of telling the financial story of the case in a way that is easy to understand, yet not “talk down” to the judge or jury. An expert could be very well-credentialed, but if they are not able to present the information in a way that will be understood, those credentials will not matter.

The next time you retain an expert, please keep these tips in mind. This  will expand your understanding of the expert’s role and help to maximize their effectiveness. .

If you have any questions or would like to discuss the recommended strategies above, please contact Margaret Kolb, a Director in the Litigation, Forensic & Valuation Services Group (LFVS), or Anthony Bracco, Partner and Leader of LFVS, or your Anchin Relationship Partner.