The big debate: Advisory vs complianceby
Do accountants have to offer advisory services in order to thrive? Is compliance dead? Four leading experts in accountancy debate advisory's place in the profession.
Many firms have spent the last 18 months spinning as many plates as possible in their practice to support struggling clients through the pandemic.
As a profession, and certainly throughout the last year, it's tricky to know what to include within your practice - do you offer up advisory services to your clients? And with increasing relience on software and tech, what place does compliance have in your firm? Are the rumours true - is this the end of compliance?
We spoke to four leading experts in accountancy to debate the question: do accountants have to offer advisory services in order to thrive? What side are you rooting for?
The argument for offering advisory services in order to thrive
Accountant-in-residence for Capitalise.com and founder of the Corporate Finance Network
I’ve spent my career encouraging more firms to consider offering corporate finance and capital advice to their clients.
Our clients need us to share our skills with them to grow their companies, ensure resilience, and ultimately exit with a capital sum – otherwise what’s the point in running a business with all the stress that can bring? If you want to retain your clients for the lifecycle of their whole business, you need to be able to advise them with all their commercial needs along the way.
Plus, as a profession, we need to! As highly skilled advisers we are more than capable, and if we don’t someone else will fill that gap. Plenty of others in your business community will say that they are able to give business advice and will promote themselves well so that they appear highly credible.
As a profession I think we have been really weak in recent years in promoting our full value to the business community. If we don’t bring back that trust so we are the first point of contact for entrepreneurs, what will become of our industry?
We cannot rely only on offering compliance work, reviewing historical accounts and preparing tax returns. The business world is changing. Digital natives will turn to online advice - even YouTube - first. They will prepare their own accounts and tax returns and seek out business and systems advice elsewhere - unless we can really stand out as the experts of choice in our local economies.
I’d finish with this: advisory work is far more profitable because it’s more highly valued than compliance work. So if you only intend to offer compliance services, you have to ensure you are efficient, your systems and processes ar super effective, and your firm is completely streamlined. How many firms can say that they truly operate like that?
Advisory gives you the opportunities to diversify your income streams and make your firm stand out.
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CEO and founder of Clarity
It all depends on what your definition of ‘thrive’ is. If you mean to thrive financially and make more of an impact, then in short the answer is resounding ‘yes’.
From all the conversations I had with fellow accountants (when I was in practice) and from all the data that we now have from accounting firms around the world, revenue per employee, average fee per client, and gross and net profit margins are all significantly higher in those firms that offer advisory services.
It is worth pointing out, however, that many firms who already offer advisory services are doing so to their top 10/20% of clients. This is mainly due to the fact that their advisory services are bespoke and are delivered by the partners/senior managers within the firm. The fees associated are necessarily high and, as a result, only the top clients are able to afford the services.
In recent years, we are seeing a drive to introduce repeatable and scalable advisory services. These leverage technology and engage more of the team with appropriate structures and processes to offer this service line to a greater number of clients. It’s more affordable too and therefore accessible to even the smaller business clients.
Interestingly, in a recent survey by Xero, firms that offered repeatable advisory services (as opposed to bespoke niche and high level advisory), not only generated higher average fees per clients, they also generated higher profits too.
But it’s not just the firms offering advisory services that are thriving, it’s the clients too! And often holistically, from a personal, business and tax perspective.
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The argument against: 'Compliance is not dead'
Managing Director of Steele Financial
I think many in the industry seem to be missing a very large point and making incorrect arguments.
It shouldn’t be advisory against compliance – it should be advisory alongside compliance. Both are important and have their place.
My issue with firms like mine being told that compliance is dead and advisory is the “new way” is nonsense and could end up causing much more harm than good. The danger here is that if the accounting industry starts to push the idea of compliance services becoming redundant, clients and business owners will pick up on this. It creates an issue that doesn’t need to and shouldn't be there.
Think about bookkeeping. Due to cloud software and other tech, many more business owners believe they can 'do it themselves'. However, how many accountants have picked up a Xero account done by the business owner and found it to be a mess? We all have, I'm sure!
Compliance is very much still alive and will continue to be. Look at MTD ITSA, for example. This is increased compliance, not less!
MTD for VAT didn’t mean clients could suddenly do it themselves. Why not? Because the complexity of VAT still existed! It is just the format and filing that changed.
This is the same with compliance. Statutory accounts and tax returns are just as complex as they ever were. This hasn’t changed.
I understand (more than many accountants) the joys of cloud accounting and apps/integrations. However, this is to systemise and improve finance functions, not to replace us.
AI is WAY off with regards to making decisions on clients' figures in terms of tax savings and applying FRS treatments in the correct way etc.
Compliance might not be as useful or 'sexy' like advisory – but many stakeholders still rely on this info, including banks, mortgage providers, funding providers, and even HMRC!
So then why keep pushing this thought? Who knows…but it will just create more reasons for clients to “try it themselves” – and then who wins?
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Director of product compliance at TaxCalc
Depending whose data you choose to subscribe to, there are around 40,000 providers of tax and accounting services in the UK, spanning from the smallest of sole practitioners, whom make up the vast majority, right through the ranks of the top 100 and the big four.
It is true that the largest firms in the country would not be able to survive, let alone thrive, if they only provided compliance services. This is why they have evolved to become global providers of business services spanning sectors as diverse as technology, consulting, law and research.
However, for the smaller practice, not only can they thrive without offering advisory services, but hundreds, perhaps thousands, already do - secure in the knowledge that there is an abundance of potential clients out there that really do value the support of a professional adviser in keeping the wolves from the door.
It is also important to be clear on what we mean by advisory services, because the giving of advice is an intrinsic part of any accountant’s compliance offering and cannot be treated in isolation. What I am talking about is the provision of services distinct from the tax, accounts, bookkeeping and payroll. Marketed, sold, delivered and charged for independently of the core compliance offering.
As much as I, like many others, hunted for the mythical ‘advisory’ goose that lays the golden egg, my clients at least were prepared to reward me generously for my reliable, reputable and trusted services that were largely bereft of anything that could be considered advisory by today’s standards.
The big debate: Is this the end of compliance? Should accountants go all in on advisory?
— AccountingWEB.co.uk (@AccountingWEBuk) September 30, 2021
Now that you've heard both arguments, it's time to decide which side of the debate you're on. Are you for or against? You decide! Let us know in the comments below.
Want to keep up with the debate around advisory? There are over 60 panels, workshops, seminars and lectures at AccountingWEB Live Expo this December, covering advisory services, MTD, Autumn Budget and much more - many with CPD attached.
AccountingWEB Live Expo takes place on 1-2 December 2021 at Coventry Building Society Arena, Coventry. Registration is now open. A full content programme will be announced in early October enabling you to register for specific sessions. Please visit the AccountingWEB Live Expo website for full details and to sign up to our newsletter.