Becoming an Advisory-Led firm: What does this actually mean?
I’ve judged the Practice Excellence Small Firm award every year for the last three years. This year, for the first time, the entries were dominated by firms taking their first (and sometimes subsequent) step into becoming an advisory led practice. Adding advisory services into your mix is not only good future proofing for your firm, but also a way to introduce higher yield services and help clients become ‘stickier’.
In this article, I’m going to be discussing fundamentally what advice does an advisory led firm offer? What do you do if you have clients that don’t want to pay for advisory services and what about if you don’t want to offer them?
What does being an ‘advisory led firm’ mean?
So, we know why we’re considering this, but what is an advisory led firm in the first place? It probably just does more paid advisory work than you do for clients.
- Advice: Being an advisory led firm implies having a significant chunk of your gross recurring fees being based on advice, and not based on compliance. What would that chunk be for you? Could you move to 20% this year, and how would that change your net margin?
- Goal setting: Helping clients to turn information into insights and insights into action. Helping them set goals for their companies, based on their data and (most importantly) their real desires. This is not about telling them what their goals should be, but coaching them to help them understand their world differently.
- Budgeting and planning: Linked to the goal setting process comes helping them set budgets and plans for the future – plans that are linked to their real data. Do you have their data in their cloud accounts and a process for extracting and extrapolating it? How much benefit would some of your clients get from it?
- Cash flow planning: Many accounting firms help here already, do you? Linking to their accounts and then helping track what’s really going on, looking at how could they manage their cash differently, is moving into one of the real roles of a Finance Director. Could you be selling real FD services, is that a good way for you to think about being an advisory led firm (you the FD, and your staff as your client’s finance department)?
- FD services: What is the role of an FD? It isn’t an accountant, but it is a board member (implying a real in-depth understanding of strategy, direction etc) who mainly focuses on the efficiency of the cash conversion part of the business. Many accountants already talk about being a part time FD, but don’t really sell it in terms of client benefits. How would you uncover the benefits, in client language, of them having a Finance Director?
What an advisory led firm isn’t…
Sometimes it helps to also say what something isn’t. Advisory services for accountants are not telling clients what their results say, you’re not telling clients what they must do to get their compliance work done. Your role is supporting their growth. That’s a bigger change than it sounds; supporting clients rather than telling them is a big change in approach and skills. Coaching questions and facilitating clients to develop their understanding and commit to actions generates better results than simply telling them what to do.
It is about being able to work with clients on their own data, on their strategy. It probably involves more data than the set you’ve already got. With the data, you can help create insights that are aligned with their strategy.
Management Accounts or advisory services?
Most of the firms who were taking their first steps into offering advisory led services were offering Management Accounts. Many accountants manage accounts for their clients, monthly, quarterly, or whatever; producing information about how the business is performing. Many firms consider that to be management accounts. In an advisory led firm that is just the start of the management accounts process.
The second stage is then to analyse and interpret those figures.
The third stage is to provide some solutions, working with the client.
It’s only when you go beyond the actual numbers to what it means for the client are you getting into advisory services AND the role of a trusted advisor.
Beware Artificial intelligence
Most modern computer accounting systems can produce a set of reports. In fact, if you are using Futrli or Spotlight Reporting you may have already taken the native reporting functions of Xero and Quickbooks Online to the next level.
If you read any of Xero’s blog at the moment you can’t fail to read about machine learning. It’s machine learning which helps cut down the manual entry time as Xero already seems to know where to put something. Given where we are with machine learning and the pace of technology, it will be no time at all until artificial intelligence systems can add comments to those reports. (Regardless of which software you choose to help you with this) You may have already seen “chat bots” and other AI systems doing just that. There’s no point in setting yourself up to be overtaken by computers again in a year or so!
What computers can’t easily do is take the information, help the clients to align that by starting to unpick what is in the client’s mind. Then you can help the client to see their best way forward in light of their strategy, their goals, and their current status. That’s where coaching skills really come into it, in picking stuff out.
Issues with becoming an advisory led firm.
I spent time asking some firms that have made the change:
- Mindset: There’s a different mindset to working with the clients on an advisory basis than there is on a compliance basis, because you’re not driven by deadlines anymore, you’re driven by providing things to help the client. One of the biggest challenges is getting yourself and your team to think differently to achieve this.
- Cloud accounting. Getting people onto cloud accounting provides you with the tool to do advisory work. If you’ve got clients on traditional PC based or spreadsheet based accounting systems, you can’t see what is going on. If you put them onto cloud accounting then you can see what is going on today in those books and records.
- The team. The roles of the team start to change. It may be they do more compliance, not you. It may be they need to support clients more, and react more to client needs. It may be they need to support you in developing insights. Your team will need to change, and that can be hard.
What about clients who don’t want to change?
You will definitely find clients and prospects who only want basic services. You may be able to increase your sales skills to convert a few of the ‘waverers’ to advisory services, but many clients will not be right for advisory services.
What if you want to stay as a compliance firm?
No problem, do so! It may be that you don’t want to change, you may need to change something else in your firm; but nobody can tell you what you ‘must’ do. My pet hate is advisors and industry experts who tell others what they must do.