Moving into advisory services is not for everyone. Sometimes it is better to stick to what you know. For other firms, branching out to advisory services could offer huge opportunities. LexisNexis recently spoke to professionals in the industry about the risk of digitisation and offering advisory work. This is what we found.

“If it ain’t broke, don’t fix it”

Some firms already have successful compliance practices and may not want to rock the boat and risk destabilising their businesses by offering advisory services.

“You will find some people that run very efficient compliance services that they make a good return on, and they’ve got no interest in doing anything different,” said Andrew Hubbard, editor in chief of LexisNexis’ Taxation magazine. “They service their clients well, they do the routine advisory as part of that service, and it all works. So why change?”

Small advisory firms specialising in niche areas can fuel growth by partnering with other firms via mutual referrals without expanding into other advisory areas.

Finerva, an accounting firm founded by two PwC London alumni, is an example. It focuses on high-growth start-ups such as tech and science-based innovators seeking specialist advice in areas such as share schemes and research and development (R&D) tax credits. They are referred work by venture capital investors and other accountancy firms with portfolio companies or clients seeking more specialist advice.

Download Tolley’s new report: Advicepower! The tax accountants turning to advisory services

“Finerva doesn’t do any personal tax work or insolvency work or audit, so we refer that to other practices, and they will refer work to us where they need something that is perhaps slightly different to their expertise,” said Adam Brodie, the firm’s co-founder, and CEO.

Careful not to alienate existing clients

Another potential risk of offering increased advisory services is alienating existing clients. Some firms provide basic online compliance work to very small businesses that do not need premium advisory services.

“Many clients just need an audit, or they just need their tax returns done, so there’s always the risk that if you’re moving into much more sophisticated areas of work that you do leave some clients behind,” said Adrian Young, a tax partner at Manchester and Stockport-based accountancy firm HURST. “We mustn’t forget that the core of what we as an industry do is the compliance work.”
Aggressively cross-selling advisory offerings to existing clients—even if they might benefit—is a potential turn-off if those clients feel they are being pressured into buying additional services.

What about the risk of digitisation of compliance work?

A 2019 ONS study found 26% of some or all of the duties and tasks of a chartered and certified accountant are at risk of automation.

While increased digitisation is potentially disruptive for traditional compliance work, many tax professionals in the recent Tolley tax thought leadership report see technology as a way to help them service clients more efficiently rather than fearing that robots will entirely replace accountants.

Brodie says, “Technology is an enabler for people to do what they do best and reduce the amount of time you spend on manual, time-intensive processes and free you up to do the more valuable things such as relationship building with clients.”

Glenn Collins, head of policy, technical and strategic engagement at the Association of Chartered Certified Accountants, agrees that technology can help tax professionals add greater value to client relationships. “For example, having access to compliance data in real-time can help accountants provide advice proactively rather than wait for the annual tax return to dig through the numbers,” says Collins.

So, what should you offer?

Clearly, there are many factors to consider when deciding whether or not to branch into advisory services. Chance the downside, or stick to what you know?

Finerva’s Brodie has some advice, “Our approach is if a prospect comes to us, we will listen to them and see what their needs are, and we will focus the conversation and subsequent proposal on those needs,” said Brodie. “It’s important not to oversell in the initial conversations and identifying and focusing discussions on their most pressing needs.”

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