Tuesday, August 18, 2009

Professional fees in a recession - expats beware!

One of the advantages of having a blog is that it permits one to ramble on about anything that catches one’s attention. I always try to keep to the subjects related to expats and their affairs (of the non-romantic sort of course!) but I’m not sure I’ve done so in this case – but here goes anyway!

I have noticed recently how the prices of some things continue to rise even though there is a recession on across the globe. Food and some commodities do so in most countries and this is blamed on global supplies. OK, perhaps believable.

What I am less clear on is why some professional services costs are also rising in some countries. While the papers across the globe talk about mass layoffs, wage cuts, bonus reductions/eliminations and the ‘new harsh reality’ that people must learn to live with, at the same time lawyers, surveyors, accountants, architects, auctioneers, dentists and assessors, are all putting their hourly rates and fee charges up. Does this make sense to anyone? I ask because many of these categories of people are those that expats rely on very heavily when moving into or out of their new countries.

I don’t know if this is a common perception around the globe (comments gratefully received!) but in several European countries it seems to be so. I have yet to see any widespread discussion of this in the media but at least one person in the above categories recently ‘explained’ this phenomenon by saying that he’d had to increase his fee percentage as his overall volume of business had fallen due to the recession and he needed to keep his income levels up.

Pardon me? As there were now fewer customers around he had to charge those he had a lot more to keep his income level up?

I have actually seen a similar explanation elsewhere and when reading these I started to doubt my own sanity. How can this be sensible or justified? If a supermarket loses 10% of its customers to another or just because of a recession, do they put up all their prices by 10% to compensate for the lost income? If they did, what would they expect the result to be? How is it that some categories of professional seem to be immune from the law of nature that states prices should come down in a recession rather than go up?

The trouble is that many of these professions are guaranteed a role in aspects of life by the law. There are many things that cannot be legally completed without the intervention of these parties. You may not be able to put in that window without planning permission, and in some countries that means mandatory certified architect’s drawings. House moves usually require the high cost services of a solicitor or Notaire (sometimes both). In most countries a qualified accountant is mandatory for all but the tiniest of businesses and their accounts. Etc etc etc.

As a result, one can’t really ‘do without’ their role and the law protects their business and function in effect. Worse, in many countries these professional groups operate what are in effect pricing cartels. Shopping around can be useless in terms of finding lower fees.

As I said, expats are particularly vulnerable to high costs in these areas. This is not only because of house moves but also because many expats purchase property overseas and are obliged to use the services of architects and surveyors and so on – sometimes even for minor renovations. A high percentage of expats are also self-employed compared to national norms.

What can we do about this? Probably nothing – but sounding off is sometimes therapeutic!

1 comment:

Alejandra y Alan said...

This is very true in all countries within most if not all professions. It is largely motivated by personal greed and ever expanding belts (note that, unlike the rest of us, these people have no belt-tightening protocols)!

Like governments they all play on emotive sound-bites to encourage you to believe their lines. Remember the one about "there is a housing shortage" did you see any estate agents with "Sold Out" in their windows? All it did was give estate agents the opportunity to talk up prices and raise sellers' expectations to an untenable high, back that up with banks and building societies offering people finance that they couldn't afford, to pay for those talked-up prices and you have all the building blocks for a bubble to eventually burst with a recession to follow!

Blame the overpriced professionals, they'll still be around to charge higher prices for handling your bankruptcy and have the nerve to complain that the recession is affecting their businesses!