Although advisors vary a lot in preferring to work with bigger or smaller accounting firms, they all agree the best firms have a plan for smoothly handling seasonal booms in workload. "The financial markets are not going to wait because the CPA's busy with tax season," said F. Dennis De Stefano, founder of De Stefano Wealth Management in Kihei, Hawaii.
Another red flag: Below-market fee schedules, which can be a sign the accountant's desperate for any kind of client.
To avoid sending clients into a nightmare scenario, informal background checks are also a good idea. Advisors should start by contacting states' accountant licensing boards. After that, check with industry groups, like The American Institute of Certified Public Accountants, some of which have peer-review programs that rate firms.
Russell McAlmond, president of Evergreen Capital Management Inc. in Portland, Ore., once referred clients to an accountant that later ended up in prison.
McAlmond's clients escaped being victims of the accountant's fraud, in part because they hadn't authorized him to sign bank checks on their behalf-a key difference between them and the victims.
Said McAlmond: "It was an excellent lesson."
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