Delivering advisory services – the digital firm way

Will Farnell explains why it is crucial to get the blend right between technology, people and process if you want to unlock new capacity and capability in your firm

In the last article, we recapped the first half of the digital firm series of articles and went on to conclude the topic of process. Getting the blend right between technology, people and process will unlock new capacity and capability in your firm. Once we can do this in our firms, we have to look at ways to fill that spare capacity. We can go after new clients and deliver more of the same to those or we can look to new services to deliver to our existing clients.

Compliance is dead, long live compliance!

I am very sure you have heard the rhetoric that compliance is no longer enough to keep accountants in business and that we have to ‘shift to advisory’. Ask 100 people ‘what is advisory?’ and you will get 100 different answers. Despite the doom and gloom of this rhetoric you will be pleased to hear compliance is going nowhere anytime soon. However, it is changing, and we have to rethink how we do it and how we lever the value of compliance to find new ways to support our clients.

When I speak on stage around the concept of the digital firm I present a case for change which goes something like this…

True or false?

  1. The market is seeing downward pressure on compliance fees
  2. Technology is contributing to automation of compliance work
  3. The pace of technology developments is getting quicker
  4. Making tax digital is driving adoption of technology across the industry
  5. If we accept the four statements above, we need to find ways to supplement compliance income.

Do you agree? What I see is commoditisation of compliance work driven by technology and automation, so we have to find ways to deliver efficient and effective compliance and use data to deliver new value. This is where advisory or non-core compliance work comes in.

So what is advisory?

We have already said that 100 people would give you 100 different definitions of advisory. Mine, as with most of my views, is pretty simple! My firm will be doing ‘advisory’ when every client we have picks up the phone and asks every question they have got. Now that’s probably more a mission than a definition but it is the steps we take to arrive at that destination that is really the heart of advisory. More on these steps shortly.

What advisory isn’t is selling another software solution and looking to disseminate the benefits of understanding your cashflow or whatever else it is the software advisory solution might offer. Advisory comes from knowing your client: the person and the business. It comes from understanding their objectives, goals, aspirations, challenges and helping the client achieve or solve these. 

Is advisory new?

Of course it isn’t, so why all the fanfare about it now, why are we being told to stop being accountants and become ‘trusted advisers’? The cynic in me would say because it sells software.

Accountants have delivered advisory services for years. As long as I can remember firms have positioned themselves as chartered accountants and business advisers. Most firms do advisory now. The problem is that it is often reactive and in lots of cases not charged for. Much of this comes down to poor management of scope so an easy problem to solve. Simply by working out what’s included in the compliance fee and what isn’t and building a process to ensure non-compliance work is identified and quoted will make a significant difference for firms.

If we go back 25 years accountants had great relationships with their clients. They got invites to birthdays, wedding and funerals. Clients would pick up the phone for every question they had because of the relationship. What’s changed this, why have those relationships drifted? Something got in the way and diverted our attention. That something is called compliance.

Compliance got so complicated. Self-assessment, RTI, AE, GDPR, FRS102, MTD - the list of acronyms goes on. The focus of the accountant become one of keeping clients out of jail at the cost of the good old-fashioned relationships we used to have. All is not lost, though. Technology can help and is helping us deliver compliance more efficiently and provides us the opportunity to once again rebuild those relationships and hopefully the invites to birthdays, weddings and funerals will come again.

What are the steps to delivering advisory?

It starts with the relationship. If you recall the digital firm wheel I shared in the first article and the recap last month, client experience sits at the heart of the wheel. Great client experience is about great relationships with clients. Advisory is simply having great relationships and a system of ensuring you charge for the value you deliver.

In my own firm, the start of the advisory relationship comes from increasing the number of touchpoints we have with our clients. The primary way we achieve this is by delivering daily/weekly bookkeeping for a significant proportion of our client base. By doing so we create weekly touchpoints with the client. We have a discussion of some form with them every single week. This provides us an opportunity to understand their pain points. If you don’t know what these are for your clients, you cannot support them in the way you should be.

I can trace this approach back to the very beginning of my firm in 2007. The first recruitment I made was someone to manage payroll for clients. Many of the clients were director payrolls. We could have just filed an annual return. However, the payroll team member would email every director their payslip every month. It created a client touchpoint. Clients would often email back and thank Vicky for the payslip and follow up with a “by the way, can you help me with….?”

OK, this was and is reactive but it’s a start. The bookkeeping approach we have now is far more deliberate in the conversations we have with clients and leads us to the second point. If you want to deliver any kind of advice to clients, you have to have good quality data to base that advice on. Ensuring we deliver live up to date information to our clients enables them to make the business decisions they need to and allows us to understand what is going on in a client’s business. This is where software tools can be useful in helping us pinpoint and understand the things we should be discussing with clients based on the data we have.

The final element is we have to carry on this approach of deliberate advisory in the conversations we have with clients. At the point you take on a new client we need to build in the process to ask the important questions, so we understand the goals and objectives of both the business owner and the business itself. Build this process into your client's onboarding and also use this as an opportunity to set expectations around what is in scope and the things you can do to support the client beyond the routine scope.

Practical steps to advisory services in your firm

What do you need to do to build the process of delivering new revenue from your existing client base, whilst growing the value in the relationships at the same time? These six steps should help you on your way.

  1. Build great relationships
  2. Have deliberate advisory conversations
  3. Build processes to get to KYC (know your client) as part of your onboarding
  4. Use daily/weekly bookkeeping to build in regular touchpoints and useable data
  5. Charge for the additional value you deliver
  6. Stop selling what you think the client wants to buy and sell what THEY want to buy, you might be surprised.

In next month’s article we will look at the topic of marketing. I am regularly asked how firms should go about winning new work. We will discuss the importance of vision and values, brand, getting out the right message and why it is easy to grow a firm and much harder to scale one.

Will Farnell, founder and director, Farnell Clarke