Forging a path to a more strategic advisory practice

In September and October of 2024, Arizent, parent company of Accounting Today, in partnership with Thomson Reuters, surveyed 141 accounting professionals to better understand how firms are adopting and shifting from a compliance-oriented business strategy to a more advisory-oriented one. The results show that although many accounting professionals want to become more engaged in planning, consultation and advisory services, they worry that they don’t have the tools they need to accomplish that goal.

Focusing on advisory services can be harder than it looks

Almost all firms surveyed indicate they have been providing consultation and advisory services since they launched their practices or soon thereafter. More than half (53%) have offered these services since they opened. Another 34% adopted them later but have offered them for at least three years. Often, firms provide these services on an ad hoc basis in response to client questions or requests for advice that arise while performing compliance activities such as tax returns, audits, and reviews. Respondents also report that it’s common for them to respond to one-off questions from clients throughout the year, often at no charge.

Although the practice is widespread, only a quarter of firms (25%) surveyed have made advisory services a key focus of their firms’ activities — 13% say consultative relationships are the centerpiece and foundation of their firm strategy and 12% say they are the majority basis of their firm strategy. These firms proactively engage with clients about the importance of advisory services to drive value for both their clients’ operations and the firm’s bottom line.

By contrast, most of their peers see advisory services as more of a complement to the primary focus of helping clients meet their financial-reporting obligations. These firms tend to focus more heavily on compliance work (28%) or advisory services for 1040 clients (18%), or they pursue compliance and advisory services equally (29%).

Accounting firms understand the benefits of advisory service offerings

Accountants believe advisory-oriented work outperforms compliance work across a number of areas, particularly client satisfaction, profit margins and client engagement (Fig. 1). Respondents see offering clients insights that enhance business performance and advice that saves them money as competitive differentiators.

While compliance work remains essential, advisory services deliver higher strategic value by actively shaping clients' decision making. Through proactive guidance on business and personal finance matters, accounting professionals can transform client relationships into lasting, strategic partnerships.

Advisory work can also provide business benefits for accountants, provided they value that service properly and price them accordingly —see “The value of value-based pricing” below. Because advisory services tend to be higher-value work, firms can charge more for them. These advantages mean accountants see opportunities to leverage advisory services for improved profit margins (58%), revenue growth (55%), and ability to accurately and fully charge for their expertise (55%), compared to compliance services.

Unlike time-sensitive compliance work, advisory services provide flexible scheduling that smooths revenue throughout the year. From tax strategy and budgeting guidance to business goal planning, these value-added services can be delivered when optimal for both parties, eliminating the feast-or-famine cycle typical of compliance-focused practices.

Advisory services also improve employee engagement, as staff feel they are doing work engaging their intellect and creativity. Staff engage more deeply with their clients’ business operations, providing opportunities for different kinds of problem solving beyond data analysis. This can improve attraction and retention efforts, fighting the burnout and turnover common in the industry.

The value of value-based pricing

Data entry and filling out compliance forms should not command the same payment as tax advice that saves a client hundreds of thousands of dollars. That truth is the basis of value-based pricing, which sets fees based on the expertise employed and the benefit provided to a specific client.

The price set can vary between clients and should be tied to what an individual most values. For example, a particular client may be willing to pay more for the opportunity to brainstorm with you on a quarterly basis than for bookkeeping.

This process requires a clear understanding of what is needed, so the project can be scoped correctly, and the lines are drawn clearly about what the service entails. When implemented properly, value-based pricing can produce higher margins and increase client satisfaction.

Many firms lack a comprehensive strategy for moving toward a more advisory-oriented practice

Unsurprisingly, given the many potential benefits, more than half (52%) of accounting firms want to increase the amount of counseling and advisory services they provide in the next three to five years. Larger firms are particularly likely to be moving in this direction, with three quarters of firms with more than five employees indicating a desire to become more advisory-oriented and consultative in the next three to five years.

However, most respondents (86%) experience challenges expanding their advisory practice. Having the right talent on hand to do the work is the top concern (49%), followed by uncertainty around pricing (33%), and a lack of required staff training on how to do the work (31%). 

Several respondents say compliance work takes up so much time they can’t make room for advisory services. A lack of qualified staff exacerbates the issue. Concerns around pricing often revolve around how to do it, since the hourly fees accountants are used to charging for compliance activities are not transferrable to higher-value advisory activities.

Many firms also worry about client buy-in on different pricing plans, since clients who have grown used to the firm’s current billing system may not immediately understand why they are paying more for strategic business advice — or that the fee may be based on the amount of money being saved or generated, rather than an hourly rate. Firms may also wind up undercharging long-term clients who continue to pay the same amount for deeper relationships and expanded services.

Taking a more systematic approach to advisory services could help accountants expand their support of clients in ways that underscore the value of those services — both to accountants and their clients. 

Marshalling the resources to create a strategic plan

Planning and change management are critical as firms establish a game plan for offering advisory services. Unfortunately, most practices lack the resources necessary to develop a clear, detailed roadmap for a transformation from a compliance-oriented organization to an advisory-oriented one (Fig. 2).

Fortunately, accountants don’t necessarily need to create or even locate these tools on their own. Coaching and consulting services can help assess high-priority areas of client need and offer guidance for the best use of existing resources to meet those needs in a mutually beneficial way. Service providers that deal with a variety of accountants addressing similar challenges can keep firms from having to reinvent the wheel — or from encountering common pitfalls.

Further, the ability to network with firms that have successfully transitioned to a more advisory-focused practice can help put the challenges and opportunities firms face in proper context. The best services also offer access to critical resources like templates, tools, and training resources that would be too resource-intensive for most firms to develop on their own.

With help and a proven strategy to follow, accountants can transition away from deadline-driven compliance activities and toward year-round strategic advisory services. For example, Practice Forward provides firms with tools and customized coaching to help achieve advisory-focused client relationships. It offers service proposal templates that set clear expectations about the relationship, pricing calculators to establish firm minimum charges and billings for individual client engagements, tools for creating client sales presentations and deliverables worksheets.

Following a market-proven strategy for developing an advisory-focused practice produces results. Firms can build more meaningful client relationships, provide staff with more engaging work, and increase profitability.

Methodology

This research was conducted online during September and October 2024 among 141 qualified respondents. To qualify, all respondents must work in accounting firms that provide tax services and must be a decision-maker in determining the strategic direction for services offered. This was a blind data collection effort, Thomson Reuters was not identified as a sponsor of the research.

About Thomson Reuters

Thomson Reuters is a leading provider of business information services. Our products include highly specialized information-enabled software and tools for legal, tax, accounting, and compliance professionals combined with the world’s most global news service – Reuters. Learn more about us, and for the latest world news, visit Reuters.

About Thomson Reuters Practice Forward

Thomson Reuters Practice Forward provides firms with tools and customized coaching that helps firms achieve advisory-focused client relations and a healthier bottom line. Practice Forward begins with the belief that our profession’s success from today forward rests with a more pronounced advisory role. Visit us for more information.

About Arizent Research

Arizent delivers actionable insights through full-service research solutions that tap into their first-party data, industry SMEs, and highly engaged communities across banking, payments, mortgage, insurance, municipal finance, accounting, HR and employee benefits, and wealth management. They have leading brands in financial services including American Banker, The Bond Buyer, Financial Planning, and National Mortgage News. Additionally, they have brands in professional services, such as Accounting Today, Employee Benefit News, and Digital Insurance.

For more information, please visit Arizent.