Tips for tax practitioners wanting to grow their advisory services.
Authored by Nicholas Byrne, Market Developments Director at Tolley
Tolley recently spoke to tax professionals about providing advisory services and what's needed to grow your advisory business.
In theory, any accountancy firm can offer advisory work (indeed, some may already be doing so without realising it). In reality, some may be better placed than others to take advantage of this trend — particularly regarding the size of their business or the type of clients they're working with.
Do you have what it takes?
“You need some level of scale and scope because unless you're a boutique advising specifically on one area, you need to have a rump of compliance clients who want and need advisory work,” said Adrian Young, a tax partner at Manchester and Stockport-based accountancy firm Hurst.
While general tax practices may need scale to support an advisory business, London-based Finerva proves that smaller advisory firms can thrive by offering specialist or niche services that clients can't find elsewhere.
“It doesn't come down to how big you are — we are referred work from one of the big four [accountancy firms], and we regularly win clients from top 10 firms,” said Adam Brodie, Finerva's co-founder and CEO. “Professional services is about personal relationships; that is still king.”
Moving from compliance to advisory services
There are several potential barriers accountancy firms face when increasing advisory services. 10% of recent Global Advisory Trends Report respondents said they would like to offer advisory services but are facing significant roadblocks.
One common problem is that tax and accounting professionals often roll advisory into existing compliance work without having mechanisms in place to charge separately for that work.
“It's knowing when to stop that conversation before moving on to the next area,” said Glenn Collins, head of technical and strategic engagement at the Association of Chartered Certified Accountants. “A lot of the very sophisticated firms have that down to a fine-tuned art. But for many of us who have been involved in compliance and advisory work over the years, we've all fallen into these traps of going that little bit further. That's why it's important to put in place a bit of discipline around moving from compliance to advisory.”
Download Tolley's new report: Advicepower! The tax accountants turning to advisory services
That means accountancy firms expanding into advisory services must seek to break from poor practice and ensure the necessary steps are in place, so it is clear where compliance ends and advisory starts.
Moving into advisory services or rebranding existing advisory work can also mean loading tax professionals with additional responsibilities, potentially risking pushback from staff comfortable with the status quo. However, Collins believes the ever-changing tax backdrop means accountants understand their roles will likely shift over time.
Offering advisory services also helps attract new talent who may otherwise be deterred from entering the profession due to the repetitive nature of specific compliance work.
“I've always felt that if we wanted to develop as a practice, you need to bring in this interesting work because the young, bright things who are coming into the industry, they want this kind of work,” said Young.
How we did it
When asked how Hurst took the plunge into advisory services, Young said, “It wasn't a day-night transition; it happened much more organically. You start with one or two clients who need more complex advice, and then you realise you can do that piece of work through practice. Then you realise you can offer this service to others, and it becomes a virtuous circle where new skills grow from doing it.” He added, “It's never going to be easy. With advisory work, from a financial point of view, you have to go and find the work every day. There's very little annuity or repetitive work.”
Five steps to successfully expand your advisory offering
Tolley spoke to expert tax professionals who came up with these five tips.
- Do your research
- Will clients pay for advice?
- Make sure you have the knowledge—and the liability cover
- Be prepared to graft
- Finding the right people
Research the market and ensure your interests and clients' needs align. “If it is something which really interests me and it's going to impact a lot of my clients, why don't I tackle that — you don't have to tackle absolutely every area,” said Collins. “Equally, if I tackle something that's of interest to me but isn't of interest to any of my clients, I'm going to become very frustrated because I'm going to be trying to sell people something that the market clearly doesn't want. So a bit of research beforehand always works well.”
The service must be relevant to your clients, AND they must be willing to pay for it. “If they're not, then there's no point,” said Andrew Hubbard, editor-in-chief of LexisNexis' Taxation magazine. “If you've got a portfolio, maybe there's only three or four of those clients who would really benefit from some proper advice that will be paid for. And then that's an economic decision about whether or not you invest in the time for your own training or to recruit somebody in order to do that sort of work. You shouldn't look at this as a theoretical possibility. Clients have to be earning enough themselves so that the tax at stake is worth advice for.”
You must have the required expertise and insurance coverage needed to provide advisory services. “Take global mobility issues. Without having the knowledge to properly advise clients, accountants should step away from international tax because it's dangerous and it's very easy to get things wrong,” said Moniza Syeda, global mobility content manager at Tolley. “Even if you have the knowledge, sometimes your professional indemnity insurance may restrict you. So, you need to know as a tax professional what you can do and also what you can't.”
Transitioning to advisory services is not a quick fix. “It's hard work, and you have to invest the time and the money,” said Young. “Once your reputation is there, once you start that ball rolling and you're delivering on time, and you're doing the right work at the right pricing, it becomes self-fulfilling. But it is not an overnight solution. If you're going to pivot the business significantly, it will take time and effort.”
Advisors must have the necessary skills and expertise to advise their clients. “You need to bring the right people on board, people that have some level of experience, or be prepared to invest in the people already there to train them up to provide the advisory services,” said Young.
Lessons from experienced tax professionals
Tolley asked professionals about lessons they learned that could help you to build your advisory practice.'
These are the key lessons.
- Finding the right talent is hard
- Advisory is not a short-cut to riches
- Stop giving advice away for free
- Make sure you really understand what your clients need
- The sky is the limit
“One piece of advice I would have liked to have known early on is it is really difficult to find good people, particularly when it comes to advisors,” said Brodie. “In the tax advisor space, it probably took us about nine months to find our current lead for tax advisory. So the challenge of growth in advisory is finding good people and retaining them as well.”
“It's not a case simply of saying that you make more money if you give advice than if you do compliance,” said Hubbard. “You can make very good money giving advisory work if you're good at it and the client feels the benefit from it, but you can also not make money in advisory work if you don't do it properly and if you don't understand the billing dynamics. So it's horses for courses, you can make money in various parts of the tax system, and you can make a real mess of it in various parts as well.”
Collins says you must ask yourself, “How much advisory work have I given away in the past just because I'd regarded it as, or called it, something different?”
“The key to delivering good advice is to be really inquisitive and to spend more time than you think you should defining what question you are being asked to answer and to really understand what your advice will be used for,” said Sian Steele, head of tax at Evelyn Partners.
The increased complexity of tax issues means that demand for advice—even around compliance matters—will only increase. With the business world becoming ever more complex, the need for support from a company's most trusted advisor—their accountants—means there is an opportunity to provide advisory services beyond tax. Firms are ultimately bound only by their expertise and ambition limits.
For more insights on growing your advisory business, see our Tolley tax thought leadership report.
Discover our core products
