How Can We Rethink Tax Advisory?
It's time to think about tax advisory differently
Many accountants are afraid of tax advisory since it’s different than what they’ve been doing. You need to think about tax advisory differently. It requires the right mindset and a structure around it. but the good news is that you are very capable of pulling it off. And there is a roadmap to get there!
As you build a tax advisory practice, you need to remember the importance of putting the human in tax advisory. Automation is coming faster than accountants have time to put it into practice. As technology continues to change and evolve, being human and proving those things humans do best is what’s going to keep us relevant.
Here are highlights from a whole season of my Radical Ideas show on Rethinking Tax Advisory to help you build your tax advisory practice.
How do you build an advisory mindset?
As tax professionals, we want to relieve pain and pressure for our clients. Working and filing their tax returns can feel like an aspirin to them. However, forming a tax advisory mindset is more like providing a vitamin - a proactive supplement with a mind toward their overall business health, not just alleviating something that pains them.
It’s important to look at the client holistically. Not everything is a checklist. You have to think about the past but ask questions regarding the future. What does the client want to accomplish in the short term? The long term? Both personally and professionally? This is a different way to approach the conversations and how you move to that advisory mindset. You have to build it into your day-to-day process or you won’t make the time for it either. This is imperative when it comes to client retention, too.
“If you don’t get creative and figure out how to make your top clients a priority, somebody else will.” - Angie Grissom of The Rainmaker Companies
The journey to tax advisory may look different depending on the firm, but it all starts with thinking about how you can make your clients a priority in a more holistic way. That requires you to build an advisory mindset and Angie has a lot to share on the topic.
What sets a tax advisory specialty apart?
When it comes to tax advisory, it really comes down to what the client cares about and what they don’t. They don’t care about tax preparation. They just want it done and done correctly. They do care about reducing their overall tax liability. So, you have to focus on the client and what the client’s needs are over the long term.
“If you want lifetime clients, focus on their lifetime. If you want a client for three months, focus on three months.” - Tom Wheelwright of the WealthAbility Network
Now that you’re in the mindset of tax advisory, it’s time to pass new expectations on to your clients. One of the biggest mistakes CPAs make is believing that it’s the client’s job to ask the questions. Instead, if you are doing advisory work, you should see your role as similar to a physician. You can diagnose and ask questions that help your clients get to where they want to be.
When you focus on the client and not the transaction, you are looking at where the client wants to end up and walking them through to get them to their desired destination.
While year-over-year deliverables will include predictable pieces, such as tax returns, you also need to think about what the advisory pieces look like. Tom believes you can’t build a specialty tax advisory practice successfully until you start shifting client expectations around what you’re able to do for them. This serves as a powerful counterpart to changing your own mindset.
How do you build capacity for advisory?
Most accountants bill by time. If you put five hours into something, bill for five hours. That is not the same as pricing. And, frankly, clients don’t care how much time it takes you do to anything. They care about the value received.
“Value means that it's worth more to the client than you're charging, but it's also got to be worth more to you than the time it's taking.” - Tom Wheelwright of the WealthAbilty Network
Moving from pricing to billing will help you gain capacity. When you know what you are offering and you can deliver it over and over again in a very intentional way, you can do capacity planning.
Think about it. How much of what you do for one client, do you do for all of them? Maybe 80%. You can systematize this work. Find a pattern and then put together a formula. Then you develop your system. The real plus comes from increased efficiency when you share this system with everyone in your firm and have them follow it.
Capacity problems may also result from pricing too low. As does charging for things clients don’t value. You need to improve your pricing structures in a way that both aligns with what clients truly value and gives them a choice in what they do and don’t want from you.
This focus helps drive profitability as Tom has seen firms double profits without adding new clients this way. He also has a lot more ideas on how you build more capacity with better pricing.
What does a tax advisory engagement look like?
What if I told you that you had a secret superpower inside you? A skillset that all CPAs have but may not realize they possess?
As an accountant, you get to spend your time in your client’s financial underwear drawer where you see the good, the bad, and the ugly of businesses — from the inside out. Because of what you’ve seen, you are highly beneficial to your clients who can take that knowledge and use it to improve their business. This knowledge becomes the foundation of a tax advisory service that clients will value and pay for.
A roadmap is what will move you from “random acts of advisory” to being able to offer advisory on a recurring basis. You have to start with knowing where the client wants to go, but you must also show them a path to get there. That is the ticket to truly helping them. For most accountants, this forward-looking view is a complete 180 in the other direction from what they typically do.
“The difference between becoming a tax advisor [and not just a tax preparer] is to be proactive.” - Rob Deinis, consultant to the WealthAbility Network
And everything you learn from one client better equips you to serve the next, which gives you a real advantage in helping them. Advisory is scary though since you never know what they might ask next, but it’s okay to not have an answer. Rob’s look inside a tax advisory engagement can help you build sustainable engagements that serve your clients best and make the most of your time.
What does success look like for a tax advisory practice?
Tax advisory is the star and compliance is the stagehand. The two aren’t separated, but taxation is approached from an advisory perspective in tax advisory firms. Things like strategy, estimates, projections, and returns all blur together when you approach a relationship holistically and work with clients seamlessly.
“When we start working with a client, it's actually required that they work with us on a strategy.” – Karen Manahan, Wheelwright & Manahan
Karen’s firm develops a roadmap for each new client and then meets with them at least quarterly to check in and get updates. Meetings are documented with notes to help ensure they always have a solid picture of the client. The frequency of meetings has led to clients telling them more than they ever did before, and her finding new ways to help them – all this for one set price. Clients look forward to the calls because that’s where the value is delivered!
Younger team members are involved in all the calls. It’s part of her firm's leadership development. It also improves staff morale as they get to see how what they do makes a difference for clients, as well.
Both staff and client retention are low for Karen as she aims to be someone they don’t want to part with. Her tax advisory firm has a unique and profitable approach for those who want to take a look inside a successful practice.
Now, go rethink your tax advisory
Moving from your current practice to a tax advisory practice won’t happen overnight, but you can start making changes now that will lead to a radically different firm years down the line.
There is a lot to learn from the five episodes that make up Season 1 of Radical Ideas, sponsored by the WealthAbility Network. After watching, you will walk away feeling confident that you can build a better tax advisory practice.
Start by recognizing what you are giving away today under the umbrella of tax preparation that clients value and will pay for. Stop doing that. Place more emphasis on pricing for your advice and less on compliance. You’re worth it!