The transformation to advisory services: A few observations from the road

Prior to this unprecedented time for our community, I had been traveling the country for nearly 10 months, meeting with large accounting firms for one-on-one deep dives into their advisory workflows and client experience. For firms of all sizes interested in advisory transformation, here are a few observations I have made as to what is working, along with a few pitfalls that may be lurking.

To set the table, I feel like most would agree that client demand, data automation, and globalization are fueling the industry shift from the compliance-driven outputs to higher-value, greater revenue-generating advisory services. The adoption of cloud platforms is helping to create the capacity and the real-time data required to make that shift possible.

With that said, the profession has changed drastically for many reasons in the last few weeks, including the extension of the tax deadline, which may cause firms to temporarily pause any transformation. However, once our profession comes out on the other side of this uncertainty, I’m hopeful the advice I’m sharing will be useful for firms looking to expand their advisory services in the future.

Identify as a consultant

My first observation, and likely one of the more eye-opening transformation accelerators I have discovered, is when firms no longer identify as tax preparers or accountants. The more successful pros in this space have shifted their focus, mindset, deliverables, and even (frequently) the name of their business to consultant/advisor. Even in their base pricing, the consultation is front and center. Items like tax preparation are listed lower in the bundle and presented as byproducts of their regular engagement. It is a subtle nuance that drives massive change.

Be open to change and encourage active participation

The second item to note is the speed of transformation. For firms without total buy-in from the partners down to the front-line staff accountants, bookkeepers, and tax preparers, change is a lot like running through mud. In other words, it is painfully slow, and it will wear you down quickly. Unfortunately, it is a drain on your clients, too. Leaders can have the best intentions, be visionaries, and all the rest, but without staff buy-in and active participation, it is slow going.

The opposite is also true. I meet with super talented, forward-thinking managers, staff accountants, bookkeepers, and tax professionals who report to partners and leaders who claim to be open to change, but their actions show they want to keep the status quo. Despite the staff’s best efforts, the business model stays reactionary and growth is stale. The best advice I have received about this concern came from the director of client accounting services (CAS) at a large firm in Houston. She said to “lead from the middle.” I like that.

The silver lining? There is a tipping point.

Once an entire firm has gotten behind a shared vision and aligned on a plan, nothing can stop them — and I mean nothing. Limitations are recognized as only perceived, and they go fast. Let me reiterate that. Limitations are recognized as perceived. I meet with traditional firms that tell me with a great deal of enthusiasm that features, processes, or things they do in a legacy desktop world “can’t be done online!” And, they are right. I meet with other leading firms that say, “Not only can it be done online, let me show you. My clients, my staff, my family have never been happier, and we are not going back!” And they are right, too. The question is, which firm are you going to be?

And now for the pitfalls

A CAS-related pitfall to be exact — and this is a good one. (A quick caveat: This observation might be for firms in the mid-to-large category, but as you grow, it’s definitely something to watch.)

First, let’s start with the good by recognizing that the original creation of a CAS team removed from tax preparation was genius — a quick way to build capacity is to eliminate tax preparation. Advisory service models demand time, and lots of it. CAS without tax prep, on paper, makes sense.

Unfortunately, there are several issues hidden inside the CAS segmentation strategy. The first pitfall lurking in the shadows is that those newly created CAS teams are usually and often immediately occupied with traditional compliance work — especially during tax season. The result? The majority of CAS teams operate at max capacity, preventing them from scaling their advisory services. It is unfortunate and very real.

Now, let’s assume the CAS team has not been buried with compliance, and is engaging in monthly or quarterly advisory services — budgets to actuals, KPIs, benchmarking, cashflow forecasting, the works.

The second issue with CAS segmentation might be even more deceptive than the first, and it lies in the segmentation itself.

Let me explain. When done well, the transformation to advisory services is a firm-wide strategy — meaning all staff, every interaction, deliverable, pricing, marketing, and so on supports the advisory model.

What I am finding is that firms leave the bulk of the advisory services to the CAS team. Segmentation has somehow absolved the excellent folks over in the tax division from joining the fun. The data shows that tax pros in this scenario still only “advise” their top three to 10 percent of high-net-worth or high-revenue-generating clients. Furthermore, their current definitions of tax advisory are typically reactive advice generated by quarterly or annual compliance-related interactions, or client-initiated fire drills. Segmentation, with all its good intentions, in many cases actually creates missed opportunities to expand services.

And there you have it — a few observations from the road. If you would like to connect on these items or have a few of your own to share, feel free to join me on social media on Twitter or LinkedIn @smbizpro.

Editor’s note: This article first appeared on the Intuit® Tax Pro Center.