How to Choose Experts Wisely: Vetting Criteria for High-Stakes Calls

The credibility of a due diligence exercise or investment decision is never just about asking the right questions, it also requires the knowledge and accountability of the person answering them.

When it comes to experts, if their credentials can't be verified, if they don't disclose any potential conflicts of interest, or if there are unexplained gaps in their employment history, they will potentially undermine any further analysis that is based on their input.

It’s safe to say that the risk can be substantial, and mitigating this to the best of your abilities is absolutely vital.

This is precisely why expert networks are invaluable in these scenarios. They act as compliance buffers, ensuring that what you get is vetted and truly knowledgeable input.

But it’s important to underline that not all vetting can and should be delegated to expert networks. As an organization, you have a wealth of context that a network simply cannot fully assess.

Therefore, if you require insights from a high-stakes expert, you will need a set of vetting criteria in place, too.

In this article, we walk you through the most important things you should know before choosing the right expert.

Building a compliance foundation

Organizations that use expert networks need to acknowledge that they are subject to strict regulatory frameworks that establish compliance standards, depending on the geography in which they operate:

• 1. MiFID II (Markets in Financial Instruments Directive II) is a set of EU regulations introduced in early 2018 to standardize market integrity, investor protection, and ensure that the consultancy of this kind prevents insider trading.

Under this directive, investment companies that operate in advisory, asset management, or trading capacities must maintain a detailed paper trail of all their communications with clients, whether over the phone, via email, or in live chat, for a minimum of 5 years.

This includes all the discussions they have with clients, plus any expert advice they use to inform investment decisions. Expert networks must make sure their procedures for working with external experts comply with these record-keeping rules.

• 2. In the U.S., the Regulation Fair Disclosure (Reg FD) was passed by the Securities and Exchange Commission (SEC) in 2000 and implemented in the same year.

It also restricts companies from disclosing non-public information to certain parties, which could include analysts and institutional investors, without simultaneous public disclosure.

This regulation fundamentally changed how companies communicate with analysts and, indirectly, increased reliance on expert networks as intermediaries to obtain specialized insights.

The Reg FD itself does not directly regulate expert networks but instead constrains the information-sharing practices of public companies, which in turn affects how expert networks operate.

To help clients to meet these obligations - and to reduce the risk of insider trading issues - leading expert networks have developed a set of best practices. While these are not legally mandated for networks themselves, they demonstrate a commitment to compliance and reduce the risk for all the parties involved.

We strongly recommend considering expert networks that have three foundational standards in place:

1. An in-house professional who is accountable for compliance with the responsibility of overseeing the compliance culture and making sure that internal staff and external specialists are properly informed about their obligations regarding compliance and regulations.
2. Regular (preferably yearly) policy revisions whereby written policies are communicated in a language that is clear and accessible to all clients. These cover information control, restrictions on trading, and identifying potential conflicts of interest.
3. Regular training programs for both staff and experts. These should also be conducted once a year. Their purpose is to, once again, ensure that all parties have a clear understanding of regulatory requirements.

Suggested reading: Cost-Effectiveness Analysis: Expert Networks vs. In-House Research Teams

Basic vetting criteria for expert calls

Putting together a group of reliable experts requires a robust verification process that will eliminate a broad spectrum of potential risks that are associated with irresponsible consultancy.

Below, you will find a brief overview of the vetting that expert networks undertake. These criteria will allow you to eliminate those specialists that simply do not fit your bill and are not likely to provide you with any value or only offer “insights” that could harm your organization in the long run.

1. Firstly, we strongly recommend starting with the essentials that revolve around ensuring that the person looking to sell you their knowledge is who they claim to be.

• Double-check the education and professional credentials of experts with the institutions that issued these. Any degree awarded by a major university should be easily corroborated via official registrar records or background-check services.
• Professional certifications should also be validated with the issuing body.

A rich LinkedIn profile or compelling resume should not constitute sufficient evidence that the person is the expert you are seeking.

It is also important to underline that the number of years in employment is not exactly the best criterion for selecting experts for consultations.

2. We suggest checking for and examining their publication history, conference attendances and presentations, filed patents, positions of operational responsibility, peer recognition, and so forth - whichever applies to the expert’s domain.

Someone with 15 years of tenure and little to no contribution to their field may be less helpful to your goals compared to someone with half the years in the industry but with intensive, specialized experience.

Red flags to watch out for

Aside from the fundamental vetting criteria, there is also a wide array of red flags that any organization should treat as an immediate concern. Not all of these are very subtle.

• A refusal to sign an NDA or an acknowledgement of compliance could be seen to be an issue. To a certain extent, it can be assumed that this expert is not willing to be held accountable.
• Claims of expertise that are far too broad is the other aspect that needs to be mentioned. When somebody is confident that they can advise on multiple industries while also lacking clear and demonstrable specialization, it is most likely that, in this case, you are dealing with a generalist.

It is essential to underline that while generalists do have their place in consulting, this is not frequently in high-stakes consultations when actual depth and a granular understanding of your particular vertical is required.

• The question of conflict of interest is another serious issue that must be taken into account. If your potential expert is currently employed by a competitor, a client organization, or a regulatory body, this can create exposure that pretty much no procedural guardrail is able to fully address.
• Inconsistency and communication - This often exhibits as a degree of reluctance to answer screening questions or hesitation about having conversations recorded, as well as inconsistent or even evasive responses about previous work or indications of transparency issues that every organization should take very seriously.
• Another option that, while not directly related to export networks but might be helpful in the process of vetting consultants, would be a report from the Association of Certified Fraud Examiners published in 2022, which identified a range of red flags that frequently accompany occupational fraud.

Here are some of the important criteria that the report features:

1. Living beyond apparent means
2. Financial difficulties
3. Unusual closeness with specific vendors or clients, and a so-called “wheeler-dealer” attitude.

According to the report, in 85% of fraud cases, the perpetrators demonstrated at least one of these warning signs. So, aside from assessing credentials, it is also important to consider behavioral signals when selecting experts.

Additional controls at your end

As mentioned previously, expert networks do handle the vast majority of compliance and vetting processes, but there are also controls that your organization should maintain simply because this will allow you to layer defenses using the context that is specific to your particular organization that expert networks might not have access to.

We believe that it is beneficial for businesses to have internal processes for blacklisting or flagging experts about whom concerns have previously been raised regarding their engagement.

Because of the context that is exclusively known to you, it would be beneficial to create custom screening questions that are specific to each project’s sensitivity, which will allow you to address the risks that are inherent to your investment thesis or due diligence objective.

One-off vetting isn’t always enough

It is vital to underline that initial vetting should be treated as a baseline, but compliance is not a one-off type of process.

For the expert network, experts have to regularly reconfirm that they understand and accept the terms of compliance established by the network. Quarterly is a reasonable standard, but different networks have varying frequencies.

• A standard recommendation would be to conduct refresher training at least once every six months.
• It is also essential to run periodic re-screening that ensures credentials are still valid and that nothing has changed in the expert's employment situation that could create potential conflicts in the future.

The Society of Corporate Compliance and Ethics requires that certification holders earn 40 continuing education units every two years to maintain their credentials. The same logic can be applied to expert networks.

The expertise of a person becomes stale, circumstances change, and regulations also evolve. So, whenever you evaluate an expert network, it is always important to investigate how they handle ongoing compliance.

Do they require experts to periodically reaffirm their obligations? What is the procedure behind re-screening? The answers you receive should guide you in terms of whether compliance is something they actually care about or just a box they check once and forget.

The bottom line

Of course, after reading all of this, you might assume that rigorous vetting seems overly bureaucratic. But it's essential to underline that it functions as reputational insurance for your organization.

A single consultation that crosses into the territory of material non-public information, or relies on an expert with undisclosed conflicts of interest, can significantly hamper your progress and even undo months of analytical work, along with the resources invested in this.

More importantly, it can expose your organization to regulatory scrutiny, litigation, and, as mentioned previously, reputational damage that could take months or years to recover from.

This is precisely why we highlight the importance of a solid compliance pipeline that protects both you and the expert from inadvertent breaches.

Experts should always have access to clear terms and conditions, written in straightforward language and periodically reaffirmed, which will defend them against allegations of knowingly disclosing restricted information.

For you, as the client, the paper trail demonstrates that your efforts were in good faith and will, as a result, prevent you from acquiring material non-public information.

Organizations that haven't formalized their expert vetting frameworks should treat this matter as urgent. The regulatory environment is not getting any simpler, and nor will it in the foreseeable future.