Speculating Accountants

Pfäffikon SZ, Switzerland – “Ordnung muss sein (There must be order)” they sometimes say here in Switzerland. The first signs of trouble appeared in the small Dutch village of Laren when former ABN AMRO executive, Jan Peter Schmittmann, committed suicide; now it’s leafy Blaricum’s turn. My eyes were drawn this week to the news surrounding KPMG accountants who were speculating in real-estate. Up to ten partners are allegedly involved in a real-estate conflict with the local Blaricum council that seized the private property of the KPMG top brass in 2009. Even the KPMG chairman of the board – Jurgen van Breukelen – is involved in the conflict. And then there is also the ‘tax dispute‘ – read: FIOD raid and OM research – around the construction of its headquarters in Amstelveen.

I leave all the dirty ‘ins and outs’ of the conflict in the hands of the skilful investigative journalists in the Dutch lowlands. Looking behind the curtain, my columnist colleague, Pieter Lakeman, reveals plenty of useful information about the comings and goings of the accountant in general. However, I am concerned about something entirely different. For many years, I have been disturbed by the speculative activities of accountants. Whether it’s a vineyard in South Africa or a failed real-estate project in Blaricum, accountants are simply not there to speculate.

Simple Business Model
The accountant’s business model is fairly simple. When you ascend to the lofty position of partner, you have access to lots of interesting information about companies and entrepreneurs of all types. This that the accountant picks up investment ideas where he may all too often feel that, privately, he can also make a quick buck. An accountant is an accountant, not a speculator. If an accountant wants to make a little extra money, he should just teach at a secondary school. If he wants to invest or speculate, he should give his money to an asset management company and maintain his credibility. This is how a CEO with a little integrity behaves – he allows his property to be managed by a trust.

The Task of the Supervisory Authority
The supervisory authority has a job to do here; they have, quite rightly, already expressed scepticism and criticised the quality of the accountant. It seems that KPMG has devolved into the wild west where the CEO is setting the wrong example by acting like a complete cowboy. Everyone knows what must be signed when an accountant wants to accept a job from you. It is a legal maze to exonerate the accountant. We should always read the order confirmation very carefully and amend the text when we do not agree. Fair enough, but as a customer, you may at least expect flawless conduct from the accountant. KPMG has crossed the line in every respect. What you may not know is that the Italians invented the accountants trade.

Buy at the Top
Today, many entrepreneurs still take the accountant’s investment advice, which is often tax-driven. I recommend not taking their advice (anymore). On the recommendation of his accountant, a Rotterdam entrepreneur got up to his neck in debt and, at the top of the market in 2008, bought some property in the city centre – a purely tax-driven decision. I do not need to explain how that panned out. It is but one of many examples.

Lesson from KPMG
Your accountant thoroughly checks your books and stamps and signs them when everything is correct – nothing more, nothing less. For investment advice, you can go to a licensed asset management company with trained staff. That is the free lesson that the heads of KPMG gave us this week.

It remains for me to wish you a good weekend.


Jan Dwarshuis is a senior asset manager at Thirteen Asset Management AG, where he is responsible for the Thirteen Diversified Fund. Dwarshuis writes his columns in a personal capacity and is not paid for them. Nor is he paying for his columns to be placed. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in the above shares and has no intention of doing so in the next 72 hours.