There are two reasons … why you might want to use an expert. One is the obvious reason. You want their advice … and their statements. You want to rely on them. But the other reason … usually from the client’s point of view … is to appoint someone … who will support their own view. To back up their own view. I’ve come across that a few times … and once I actually was an expert. I was acting for an English insurance company … who was selling a life fund to another insurance company. And I didn’t know anything about insurance … or anything like that. But I was just making sure the deal happened. But there was a problem … because the buyers said there was a £10m hole in the life fund. Their actuary said there was a £10m hole in the life fund … and therefore there was an impasse … because my clients didn’t agree. And their actuary said ‘this’ … and their actuary said ‘that’ … and so on. And it wasn’t getting anywhere.
And I was at one of the meetings … where these complicated mathematical things
were discussed. The following day my client telephoned me and said: “Look, we’re going to have a special meeting … just on this subject … with the actuary on the other side. And we’d like you to negotiate on our behalf … to illustrate that they’re wrong.” and I paused … and I said: “Look here, I can’t possibly do that. I know nothing about being an actuary. I’m the wrong person to ask to do that.” And my client said: “No, if you don’t mind me saying so…” he said “…the reason why I’d like you to do it … is because you know absolutely nothing. And that’s a great advantage. A great advantage to know absolutely nothing … on this particular type of negotiation. And, also … you can negotiate reasonably aggressively. And that’s what we want.” I said
“But I still don’t know anything about being an actuary.” He said “Don’t worry. We’ve got that fixed.
We want you to come round to our offices … and we’ll spend one hour … teaching you how to be an actuary.” I said “All right” I said I’d go along with this. A couple of days later … we had this meeting … where it was their actuary … and a few other
people … and myself and our clients … and so on … just to talk about this particular point. And their actuary … who actually was a person who (how can I say this) … he wasn’t very good after lunch. He tended to drink quite a lot. And therefore … the meeting had being scheduled by my clients … for 3 o’clock in the afternoon … which was quite a good negotiating point. Anyway, the meeting started off … and their actuary … ingratiatingly (because, obviously … I wasn’t an actuary) … began to explain to me exactly how he’d calculated ‘this’ … and ‘that’ … and these various things. And I listened very intently. He was leaning back in his chair … in a fairly confident sort of way. And I listened very carefully. But I did pick
up one thing … which I thought was odd. I picked up … he was valuing the assets at
one discount rate (one interest rate) … and he was valuing the liabilities at another
discount rate. I don’t know why he was doing that. But when he had finished … I said:
“Well, that’s very interesting. But I think it’s very peculiar … you should be valuing the assets at one rate … and the liabilities with another rate. And I think that’s not a very sensible thing to do.” Then, he sort of fell into the trap.
He leaned back in his chair … and he said: “Mr. Baden-Powell…” he said “… I’ve been an actuary for 35 years … and I can tell you … I don’t need to go into any more detail … I can tell you …this is how we value life funds.” And I leaned forward … and I said:
“Mr. So-and-so … I’ve been a stockbroker for 25 years … and I think that’s a remarkably stupid way of valuing. If I valued my clients’ funds … and my clients’ investments … on that basis … I’d deserve to get the sack. It’s ridiculous. A ridiculous way to value a life fund.” I had no idea what I was talking about … but that doesn’t matter. You’re negotiating. He went apoplectic. He was absolutely
furious. Because people don’t normally call other professionals ‘stupid’ … in front
of other professionals. He was very, very annoyed. I wouldn’t say he began to rant … but he really lost the plot. And his own clients were rather embarrassed … and they drew the meeting quickly to an end. And the following morning my client rang me … and said: “The negotiations were entirely successful. The other side were so annoyed with their actuary for behaving so badly … that they’ve taken him off the case … and they say they’re not going to consider the £10m hole any longer. It’s obviously a matter of opinion … and they’re going to let it go.” Now, both insurance companies were quite large. In fact, very large … so it didn’t really matter.
But it’s just an interesting way to use an expert. You either use them for their own opinions … or you use them to support your opinion.