Welcome to the second edition of this video series where we talk you through the 10 Big Advisory Questions.
Join Micheal as he answers Question: 2 – What Are Advisory Services?
The below is a transcript of Question 3 of the 10 Big Advisory Questions Video Series – What Are Advisory Services?
It seems the profession has changed more in the past 18 months than in the previous five to 10 years, and that the rate of change is unlikely to slow at any stage in the future.
The role of the accountant is evolving rapidly. What clients demand today is radically different than it was 10 years ago.
Many accountants I talk to feel like they’re sprinting to stand still, struggling to keep up-to-date with all the technological and regulatory changes.
Amongst all this, possibly one of the most important and fundamental changes is continuing to build rapidly in the background.
That’s the changing nature of a relationship between accountants and our clients as they move from number cruncher to business advisor, from compiler of financial statements to strategic coach, from box ticker to business growth guide.
Now, this certainly isn’t something that’s going to happen all of a sudden, however, the trend is clear.
One way or another the profession now widely acknowledges the need to get started with advisory services for clients and prospects.
Of course, that’s in parallel with hyper-efficient, digitally-based compliant services. But many questions remain unanswered and in some cases, not even asked.
My name is Michael O’Neill, and I’m delighted to welcome you to this video series where I answer the 10 big questions about advisory services.
These are the questions that I get asked by my clients in Ireland, on a regular basis, and also, the questions that my colleagues in the UK, U.S., Canada and Africa get asked.
So let’s get started with today’s question. So, here’s question two. What are advisory services anyway?
Now, working with accountants day in day out, this is probably the most common question that we get asked – What is advisory?
There seems to be so much confusion, and there seems to be so much misconception about what advisory is, and how to provide it in the market. And the fact is that advisory is nearly becoming a cliche now.
It’s been talked about for so long without having a very, very clear definition of what it is.
It’s nearly in danger of becoming this buzz word that doesn’t really, that nobody really understands what it is, but it’s thrown around so much, that people feel afraid to ask what it is.
So, what is advisory at its core?
Advisory services are all about the client and being truly client-centric. It’s about helping them achieve their goals and aspirations.
The thing is, when you connect with your clients on their level, you begin to see what is most important to them about being in business.
Where do they want to be in three years, five years or ten years? What are their goals? What are their aspirations? What do they want their business to get to?
When you start connecting with your client on that level, it brings a whole new dynamic into play. You are no longer the “Pain in the arse” accountant who’s hassling them for this, hassling them for that.
You now step into this business advisor role and let me tell you, business owners across the world are crying out for help and assistance.
They’re crying out to be understood. They’re crying out to have somebody listen to them, help them achieve what it is that’s in their mind.
Because being in business can be a very lonely place. In relation to advisory, it is an ongoing process.
That is one of the most important things.
You know, very often we talk to accountants and say – “Oh well, this advisory thing. You know, I provide my clients with loads of advice. You know, kinda the phone will ring, I’ll pick it up and I’ll give them an answer.”
But, that’s not very useful because you’re giving them some information, but there’s no follow-up where you help to implement them.
It’s all about planning. It’s all about planning out where they want to go? What they want their business? How they want their business to grow and develop? And then we look at once you have a plan in place.
Once you’ve charted the actual path for them to take, then it comes down to implementation.
Now implementation can be seen in two ways. First of all, we can look at implementation, helping them implement the plan.
The most important thing here is we’re not telling clients what to do. We are asking clients where they want to go, helping them set their goals and then we’re helping them create the plan to get there.
From an implementation perspective, then obviously, we have a role to play in making sure that they’re keeping on track and they’re moving along with their plans.
However, there’s also the other real side, which is solving problems that occur with our technical expertise.
So this is where another whole level of opportunity comes into advisory.
Because when you start working with a client about where they want to go, they’re gonna identify for themselves, some of the issues and some of the problems that they’re having in their business.
Now that is a wonderful opportunity and it turns the whole sales dynamic on its head.
Because what they’re doing is they’re identifying all the problems they have in their business, and then you’re the one sitting across the table from them, and you can pick and choose –
“Okay, would you like assistance with that problem?”
“Can you solve that problem on your own, yes/no?”
“Would you like me to help you solve that problem?”
And that generates a new level of consulting and compliance work.
If it’s not a problem that you want to solve yourself, well now you can sit back in the role of, okay well –
if it’s an IT problem, “Okay, maybe I can put you in contact with an IT company.”
If it’s a legal problem, “Okay, I can put you touch with a legal firm.”
So it gives you the opportunity to sit back and really you become a signpost for your client which you help them identify, create, set the goals, create their plan and then you figure out, cherry-pick what elements you want to work with, and point them in the right direction to help them solve the rest of their problems.
Then obviously, once we have that, there’s an ongoing review process, which is possibly one of the most important aspects.
When you set goals, you create your plan.
It’s then checking in to see the progress you’ve made, have you gone off plan, do you need to come back on plan?
From the point of view of conceptually seeing this, the diagram on the screen will just give you a kind of a really good idea of where advisory sits in relation to your current offerings and your current structurings within your firm.
So, at the top level, we have Audit, Accounting & Tax Compliance. Now, in here from your firm owner’s perspective, well your risk is very high, this is all compliance based, your risk is high, and let’s be honest, the reward is low.
This is the sort of work where the clients don’t really appreciate it. It’s something they feel they’re being forced to do. It’s something that probably if a vast majority of clients were given the choice, they probably wouldn’t do.
So from their regard, the value perception is low and the trust and loyalty as in the bond, the relationship between you and the client is low.
Because in nine times out of 10, you’re chasing them for stuff that they don’t want to do and they don’t appreciate it.
But, let’s face it, this is the world that we live in. And I’m never gonna come down, I’m never gonna speak bad about compliance, because it’s the bedrock and the foundation to every single accountancy firm in the world, is built on and will continue to be built on.
But what we need to do is we need to identify what it is? How it operates? And how it sits in terms of the internal structure of the firm? From there, we look at Consulting. So next level up is Consulting.
Now, this may be something like. You may be looking at monthly management accounting, implementing financial control systems, cash flow projections or doing work so you can have financing for the business.
In here the risk is still fairly high.
The reward is medium to low.
So now you can start charging a little bit more, you can start bringing the value into it.
This isn’t just about putting figures into a software package and printing out kinda something at the end of the year. From the client’s perspective, the value proposition is medium to low as well.
So they’re starting to, “Yeah, this is more valuable, “this is more into the realm of what we actually want.” And then the trust and loyalty is medium/low because in here you were getting closer to the client, you’re asking questions.
You’re getting to understand their business better. The next step up we have is elements like Tax Planning.
Now why Tax Planning is really a step up from the Project Specific Consulting, in terms of this model is, well tax planning cannot be done without there being some sort of future strategy.
So you have to understand what it is the client wants from their business into the future. And then you put the tax structures, and you put the tax kinda constructs into actual place.
So here for you as the accountant, your risk is still high, your reward is medium. Because here’s the thing, clients appreciate this sort of work. They’re willing to pay for it.
And so that’s what we see on the opposite side here, the value proposition is medium, and the trust and loyalty as well is medium. Because think about it, this is possibly a lot of times the first time an accountant will talk to their client about what kind of the ultimate goal is. So is this the succession planning?
Are they thinking about getting out of the business in five, 10 years down along the line? It’s the first chance that you have to actually identify what kind of the client’s future goals are.
Sitting above all that is Advisory. And in the Advisory sphere, we have things like Discovery, the Annual Strategic Review, Performance Planning, Implementation Support.
So that sits on top of it. And that’s where you are purely asking the client what is the most important thing to them of being in business? It’s looking at all the elements of their business and creating a plan for them to grow and develop their business. In here the risk is low.
There’s actually there’s pretty much, there’s zero risk in true facilitation, and true because you’re not actually telling the client what it is they should do.
They’re identifying their own goals and their own objectives. The reward is high. Now sometimes we have conversations with accountants and they argue on this point.
They say, “Well Michael, no my clients won’t pay for this. “No, my clients don’t want this sort of service.” And that’s fine, right? I’m not gonna say there are some clients within your client base who this is not for.
Actually, you know what? It’s probably the majority of clients.
That’s fine in terms of the high-end advisory packages where you have people you’re meeting people on a regular basis.
I do believe that there is an opportunity and I do believe that for the majority of your clients are suited to an advisory led approach.
But if we’re talking here about true sitting down and creating an overall annual, strategic review, and doing performance planning, well a lot of accountants say no, they won’t pay for this.
Well, the thing is, I’m in groups with large numbers of other business owners, in terms of my own development, and of my own business.
And when I talk about accountants and what they can do, the business owners out there go, “Oh my God, that will be amazing if my accountant would do that. But they don’t do that sort of service.”
So we have a problem here because you’ve never articulated it and never offered it to your clients.
They don’t know that you do it and therefore they’re not demonstrating the actual desire for it.
But what we have found amongst the accountants who have started providing advisory is it is largely welcomed in their client base.
And your ultimate goal in this model is to get to the Most Trusted Advisors status. The Most Trusted Advisors status is one that has been held by accountants for many years, but it’s starting to slip.
And in fairness, it was never in terms of I would challenge that accountants did not necessarily deserve the status of Most Trusted Advisor because yes, they were trusted confidant, but they were not acting in an advisory role.
Well, what is the Most Trusted Advisor?
This is where you have a major influence on your client’s business decisions.
The way I like to look at it is you are in the room when the client is making business decisions, rather than you be implementing decisions that have been made.
So if you’re actually there in the room, influencing the business decisions, rather than the client coming to you and saying, “We want this done, we want this done.”
You become indispensable to the future success of your client’s businesses.
So where do we stand in the advisory process?
Well, really it’s your role to be transparent, chair the advisory process. And you bring your financial and commercial acumen to play, helping and guiding the client, kind of traversing across what they do. So yes, you are bringing your knowledge, your experience, your talents, your skills to play, but it’s not led with that.
Far too often as a profession, we are too quick to jump in with answers off the bat. This is a little bit about taking a slight back step.
Taking a back step, asking the client what they want, getting them to put their words on it, and then guiding them along in the process.
So the ability to deliver key financial and technical input when needed as part of the process. And we had earlier in there, solving problems is a part of advisory, but it’s not where it starts.
So solving problems is a key part but it’s not where it starts. And once you are a trusted advisor, that’s when you become indispensable. And when you become indispensable, as a Most Trusted Advisor, that’s when clients will stick with you for the long-haul.
I think it’s fair to say, that in general, we have seen a reduction in client loyalty in terms of we’re not holding onto clients for as long as we were previously.
As a strategic advisor, you will unquestionably hang on to clients for longer. Okay, so that is question two. We’re now, question two, what are advisory services?
And in this series, I’m answering the 10 big advisory questions. So if you haven’t actually seen the first series of this, please do go find the link, go back to it, and take that one in.
And make sure and keep an eye out in the coming weeks for the rest of the series.