Hello, this is Bradley Bailyn, and this is episode number seven of the Surprise! Legal podcast.

Today’s surprise is going to be adviser agreements.

On a regular basis I have clients come in to me because they are all excited. They found the greatest adviser in the world and the adviser is going to do this and that for them. And all the advisor needs is to receive fifty thousand dollars in cash over the next year or two, plus some equity in the business and who knows what else.

So I take a look at these agreements and quite frequently I’m not too impressed with what I see.

The deliverables are quite vague while my clients’ duties are quite well defined. So I would like to give you a few tips for dealing with advisors.

Tip number one is to speak with a few current clients who are satisfied with that advisor, no matter how good of a salesman they may seem like they are.

It’s incumbent upon you to do your own homework and say, All right, if you’re such a great adviser, I’d like to speak directly with a few people who will recognize that you were a large part of their success. And if they’re not still working with you, why are they not still working with you?

So that that’s the first issue. Second issue is you need to define very well what are their deliverables.

In my own companies, I have had a not so great experience and certainly a lot of clients have also come to me with not so great experiences where they thought the advisor was going to accomplish some things and it turns out the advisor really was just peddling B.S. more than anything else.

And then they wanted to get rid of the advisor’s shares because they didn’t want to dilute equity for no reason and it’s been very difficult to get that to happen.

So, before you go out giving your precious capital or your precious equity away, you really need to make sure that there are very clear standards in place of what will define the milestones that the advisor is going to need to hit.

Next, you’re going to want to make sure that intellectual property is adequately dealt with. The advisor may bring ideas and experience and information to the table and and contacts. And you want to make sure that the advisor cannot attempt to reclaim those things when they don’t meet their milestones or otherwise interfere with your business and cause you problems.

I in particular would advise being careful of advisors who want to get paid a lot of cash for their services.

Frequently, advisors either work only for equity or only get paid on some kind of liquidity event.

For example, I recently had lunch with an advisor who helped somebody arrange mezzanine financing. The company wasn’t in good shape financially, but he knew how to turn them around and do what he needed to do. He got them a lot of mez financing and he helped out a lot and he got paid out of that financing, which is fine.

But if there is no clear financial light at the end of the tunnel, then I don’t know that I would want to go giving lots and lots of money to an advisor.

There are many more issues that are specific to the agreement that the advisor provides. But also, you want to take a look at the advisor’s history.

How many lawsuits has the advisor been involved with?

What are the Google results and the press for this particular advisor?

What is this advisor’s entire history?

Because you need to keep in mind that real good top advisors are very skittish about joining boards.

And they typically will not want to be involved unless all of the shareholders and the other board members and advisors and whoever else are people of upstanding character and reputation.

So for that reason as well, you want to make sure that you’ve only got the right people invested in your company and you need to see that over the long term, their mission, as shown by their actions, not by their words, is lined up with your mission. If you’ve got one mission and their only mission is cashing out, then you may end up with someone who’s causing you more harm than good.

At any rate, there’s a lot more to say about this. If you are thinking to work with an advisor or if you’ve already got a problematic advisor that you need to try and part ways with as peacefully as possible, or if you have any questions you’d like me to address on this podcast, please feel free to give me a call.

If there’s a subscribe button on whatever platform you’re watching and listening to this on, please go ahead and click subscribe so you don’t miss out on anything.

And again, as my standard disclaimer, I cannot provide you with legal advice or services unless I’m working with you and I know the facts of your situation.

I can make a mistake just like anyone else can. Anything on this video could be simply not true in your particular set of circumstances. So don’t rely on anything in here. Seek the help of a competent lawyer. Either me or somebody else. And if you do rely exclusively on this video, then you will not hold me liable for that.

Thank you and have a wonderful day.