![](https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F0a514ce9-a0ba-4dc6-b18b-25bfaeb851d3_4458x6413.jpeg)
Before I delegate anything, I like doing things on my own — even taxes. That way I know if they’re even worth delegating. I’ve recently incorporated a company in the U.S., and yesterday I had a tax consultation. So I did a comprehensive research on all the information available prior to the meeting. Paying for talking to an “expert” was the last option for me, and I had very specific questions. Everyone had recommended me this company for international taxation, so I gave it a try.
It turned out to be disappointing.
Maybe I had unrealistic expectations, but I felt as though I knew more of the subject than the consultant herself. The initial consultation resembled a sales call to redirect me to the right specialists. I felt annoyed when it ended — I still didn’t have the answer to my questions, and I had wasted time and money.
Clashing incentives
This isn’t the first time something similar happens. I had another consultation that was underwhelming. Instead of giving me a summary of what we had discussed, they gave me a list of services that could be useful for me after the call. I wanted to do some of the services proposed on my own and I sent a follow up email to inquire about it.
I was met with silence.
I understand that a business needs to make money to survive, but you need to add value to make money. If you refuse to answer a follow up question after I paid for your services, you don’t deserve my trust.
After these two experiences, I’m starting to think the only goal of tax consultants is to get you to hire them for as many services as possible. An initial meeting is an upselling opportunity. Maybe your situation doesn’t require you to do anything, but they won’t tell you because that’s not profitable.
This dynamic applies to other occupations as well. Mechanics might recommend more repairs than necessary to increase revenue, especially if the customer is unlikely to return. Similarly, dentists might exaggerate dental issues to justify more treatments.
This doesn’t mean there are no honest professionals, but in these cases, the incentives are stacked against the customer.
Adverse selection
The phenomenon described above is known in economics as adverse selection.
Adverse selection refers to a situation in which sellers have information that buyers do not have, or vice versa. This asymmetric information can then be exploited.
This concept is particularly relevant in insurance markets. Research suggests that people with poor health conditions are more likely to pay high prices for health insurance and choose the most generous plans. Duh. Conversely, insurance companies target people who are unlikely to file claims. So if an insurance offer seems too good, it’s likely not necessary.
George Akerlof’s seminal 1970 paper, “The Market for ‘Lemons’” discusses how asymmetric information can lead to market inefficiencies. In the used car market, sellers know more about the quality of their cars than buyers. This makes buyers wary of purchasing a “lemon” (a low-quality car) and only willing to pay an average price. Similarly, in insurance and consultancy services, the imbalance of information often results in poor outcomes for consumers.
Managing expectations and finding solutions
While it’s frustrating to feel misled by professionals, here are some tips to mitigate potential pitfalls:
Conduct thorough research: Understanding the basics of the service needed helps in asking better questions and evaluating responses critically.
Seek multiple opinions: Getting several opinions can help identify consistent advice and filter out upselling tactics.
Demand transparency: Request clear explanations and rationales behind recommendations. Trustworthy professionals should justify their advice with evidence and logic.
Verify credentials and reviews: Look for professionals with strong credentials and positive reviews from multiple sources. A track record of satisfied clients can indicate reliability.
Set clear boundaries: Outline expectations before consultations. Redirect conversations back to original queries if they veer towards upselling.
Leverage technology: Use online forums, review sites, and peer networks for insights into others’ experiences. These resources can inform decisions and help avoid common problems..
Conclusion
Finding valuable professional advice is tricky. Being an informed and proactive consumer is crucial. You can’t be an expert on everything, but you can know enough about anything not to get fooled. Make sure you understand the incentives at play. The goal is not just to find a professional, but one that can be trusted.
Photo of the week
I had some friends over this week and I discovered this spot in my nighbourhood. It turns out I live a 15 min walk away from one of the best lookouts in Lisbon.