The advisory practice part three: The vendors' view

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Richard Sergeant speaks with those that have often perpetuated the decline in the value of compliance and the need to offer advisory services message – the software vendors.

When thinking about this series, it was important to include vendors and consultants, but not above those in practice. This finally gives voice to some of those views and while it puts a different shade on the debate. It certainly doesn’t give the complete picture.

There are many from this group that will disagree with what follows. What does stand out though is that even between vendors nothing is black and white.

The advisory message is not clear

Advisory and its impact mean different things to different accountants, as it also seems to be for those selling services.

Although there is a fear that compliance work will disappear, Practice Ignition’s Trent McLaren takes the view that “the only thing that will really change is that firms will get more accurate data.” He added: “That will help clients make better decisions about what they could be doing better today, in 30 days, 90 days, or what-if scenarios.”

That viewpoint compares quite differently to Foulger Underwood’s Keith Underwood. “General practices will be evolved out of the system to be left with advisory firms,” he said. “Smaller firms don’t have the scale to keep up with the services that need to be offered.”

And there is a world in between.

Exploring Underwood’s thoughts a little more, advisory is based on services which are linked to specialisms from existing services. “Because of the IT cost you need to look at business advisory linked to payroll, accounts and management accounts. This will often mean specialist business streams evolving from general practice,” he said.

In many ways, this seems like the diversification and sophistication that larger practices employ due to the complexities of bigger clients.

Which is a shift away from McLaren’s more general view that “advisory is more about a performance coach-based approach that helps people make better decisions based on what we actually know, what steps are we going to take to get there, and hold them to account.”

So, even with these two examples, we can see that there is a little real consensus.

Do accountants have the right skills?

Driving on from McLaren’s performance coach, FreeAgent’s Kevin McCallum takes a similar view as some of the accountants in the previous article: “Commercial experience can matter a great deal. They are battle hardened, not academic.”

But he also suggested that this is not a route that everyone can make: “By the same token, is it an industry that lends itself to those that want to make a career digression?”

Looking at it slightly differently, Intuit’s Alex Davis started with the tiers of service. “From the perspective of services offered, skillsets need to differ:

  • Compliance - peace of mind
  • Awareness - reporting plus insight
  • Actionable insights - doing something about it.

“The advisory part is at the end and is putting solutions in place and creating accountability. This needs a more developed skillset if it is to be credible”.

Developing the skills

So how easy is it to develop these advisory skills?

“Going back and relearning isn’t an easy thing to do, and so having specialists that can help deliver some of the advice is an obvious thing to do”, said McLaren.

“Those best placed to give advice probably don’t want to be a traditional accountant”, said FreeAgent’s McCallum, suggesting again that only a limited few with the right experience could make the leap.

And for Intuit’s Davis, “Those that are focussing on talking around financial and management reporting are selling dreams of the future, but they haven’t taken the next step to advisory, and perhaps feel they don’t need to or it’s a step too far”. This viewpoint interestingly speaks to both the opportunities around software and low demand.

Is it what clients want?

Those interviewed agreed unsurprisingly that advisory services are things which are higher-value and need to be charged out accordingly, making it a profitable activity. But as Practice Ignition’s McLaren said: “There is the challenge of finding the clients that actually want advisory, and will value it.”

FreeAgent’s McCallum agreed: “Accountants at the end of the day are business people, and need to have a model that makes money.”

However, Davis takes the view that the firms could challenge themselves more than they currently do. “There are some huge assumptions being made about what clients want, but it’s hard to find much evidence about how this has been tested, or even if firms have asked the question. We seem to too easily fall on the line that 'I Know my clients, and it’s not what they want' without pushing it much further.”

Perhaps this is another reason why the messages around advisory keep coming back - it’s because clients can change their mind, and if we aren’t asking or nudging them a little, then when it does come on their radar perhaps it’s something that they may turn to another firm to provide.

On a bigger scale, this could come into sharp relief as we move forward over the next five years or so.

Shifting expectations

Whereas in previous articles we looked at regulatory change, and the availability of technology as key ingredients to how things could evolve, the suppliers brought up the other inevitable force of change - youth.

“In five years, it won’t be tech or regulatory requirements that push through change - but a generational shift,” explained Davis.

“They are subscribers rather than owners, have an attitude and acceptance of technology and what it can deliver, and they will be making a whole new set of demands on accountants as they will know no different.

“They are already showing signs of having completely different standards around value, what is possible, what services need to be. And when they start in business and seek the assistance of firms it will be walking into a world they think is normal, not a world in change”.

This is advisory

While I, too, point the finger to the many consultants and software providers that have repeatedly told accountants to change or ‘die’ (I confess that may have even been me), I return back to the part that rings true the most: that the end result that everyone is after is the right one for the client. To help them to be successful, to accomplish their dreams and ambitions, and keep as much of the money they earn as possible.

Compliance is unlikely to die off anytime soon, and with MTD it will possibly increase. And from the evidence of some of those interviewed it would seem they would agree. However, perhaps it's just that their message has also had to adapt to the realities of the market. Now the availability of compliance-led data provides advantages and insights developed by expertise.

Accountants will always offer this advice to clients, the magic glue that reflects the trust that has been built up from looking after their affairs so well. Whether or not this can extend beyond to a true consultancy role is probably down to opinion, experience, and inclination. 

About Richard Sergeant

Richard Sergeant

Specialist insight and business development support for accountants and their vendors. Cloud advocate with a pragmatist eye.

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11th Jun 2018 12:10

Hi Richard – slightly surprised that no one was trying to ram home the advisory message, but then Intuit and PI know how their bread is buttered.

Maybe needed one of the forecasting/modelling vendors to contribute?

I agree with Alex that a lot of practioners haven’t asked the right questions of their clients to see if they want more services and clients haven’t asked as they don’t know their accountants can offer anything else.

Refreshing to see that Trent also appreciates that compliance work is here to stay.

So where has all this advisory hype come from?

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to Mark Telford
11th Jun 2018 12:27

Not unfair comments.
However, what I suspect is happening is a mixture of:
- Different vendors have different views (so yes, asking a reporting vendor could have brought up different results)- if there is ever a next time I'll push this harder.
- There is a change in tact (especially from sales, if not necessarily marketing), which recognises that the message needs to be more nuanced.
- Not ALL vendors have the view 'advisory good, compliance bad' agenda
- Self conscious of how redundant it is, and are too wily to get caught arguing it out on AW!

If anything though, and as some kind of reflection, it is positive to see.

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to rsergeant
11th Jun 2018 13:51

Definitely positive and a reflection that no matter how good technology get most clients will still an accountant to deal with their accounts and tax.

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11th Jun 2018 13:22

Official statistics tell us there are 5.5 million private businesses in the UK. Of these, 4.2 million (76%) employ nobody other than the owner.

It's a generalisation, but a fair one I think, to say this means that three quarters of the client population are "self-employed" individuals, not "small businesses".

What advisory services would this huge majority of clients look to pay for? Not enough to support a valid business model for existing accountancy practices I would strongly argue.

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to Adrian Pearson
11th Jun 2018 14:39

Hi Adrian,
You're completely right - if you were unfortunate enough to read the other two articles in this series, I think they bare this out.

The distinction we've been exploring is the difference between advice and advisory, really.

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to rsergeant
11th Jun 2018 15:53

Thanks for the reference to the preceding articles: I have now read them also :) Congratulations on putting together a good review and analysis of this subject.

One quote that caught my eye was "Compliance is what clients are willing to pay for, but it’s advice they come to you for and why they stick around" - contributed by one of your readers. This has been true for a long time, but I wonder if this is what will change going forward?

I'm going to stir the pot here a bit and suggest that we should flip this traditional business model on its head: the future should be charging for advice, while giving the compliance (publishing and filing returns) away for free.

Advice is the human element, compliance is done by computers. The new expectation is that what is delivered by technology is free?

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By hollow
to Adrian Pearson
12th Jun 2018 10:46

I agree and do wonder about the price to be determined where practices are being sold.

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By hollow
to Adrian Pearson
12th Jun 2018 10:46

I agree and do wonder about the price to be determined where practices are being sold.

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to hollow
12th Jun 2018 14:34

I don't think a multiple of GRF is an accurate measure, I was going to say "anymore" but I think "ever" is more accurate.

If the buyer does their due diligence correctly they should arrive at the correct valuation for themselves.

A compliance factory will base value on just that.

An 'advisory' firm will vet the prospective client base and identify those businesses where they can sell/offer additional services.

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12th Jun 2018 23:32

A great final piece in your advisory trilogy Richard.

Very balanced and well put together, a sort of lord of the Rings for accountants.

I find myself be agreeing with much of the content.

For your next piece how about value pricing myths busted practitioners v the gurus.

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to Glennzy
13th Jun 2018 10:01

Oooh, now that's got me thinking...

I think we need to park up the "myth buster" image though - I prefer "bleach pourer" or "fire cleanser", as there is usually mistrust and tension from both sides...

I may style myself as the Dennis Rodman to the Kim V Trump debates of the accounting world.

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to rsergeant
13th Jun 2018 10:05

Great Stuff, I see the Rodman comparison in what you do.

Look forward to the next article.

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