The 4 Cs of Advisory Services

Much has been said about the CPA’s role as the most trusted business advisor, yet I believe most CPAs are still playing the role of trusted technical advisor. They are spending their time on compliance related services, which are continually under fee pressure and being commoditized. It is something that happens over a long period of time and, therefore, the tendency is to talk about the need to change, but do little to change.

There is a big difference between needs (compliance) and wants (advisory) services. Most of us are familiar with Maslow’s hierarchy of needs, but you probably have never considered the hierarchy of wants. According to Dan Sullivan, founder of Strategic Coach, “The hierarchy of wants is what drives transformation and entrepreneurship.” Jean-Baptiste Say defined an entrepreneur as someone who takes resources from a lower level of productivity to a higher level of productivity.

Maslow's Needs:

Sullivan's Wants:

These graphics explain why clients are willing to pay higher fees for higher value services, but they don’t explain why it is such a challenge for many in the accounting profession to move from the compliance-based services to the higher valued services. I get asked daily on how to move to the higher valued serves, and generally, before I can respond to the question, they provide their own answers, saying that they either are too busy and don’t have the time, or the client hasn’t asked them to provide the service. The focus then tends to be on capabilities and, often, the firm leader will say that we just don’t have the right people to offer advisory services. Some, none or all of the above may be true ... but, to get to the next level, you must change your thinking and focus on the future, rather than the past.

The four Cs are:

  1. Commitment
  2. Courage
  3. Capability
  4. Confidence

The first question is, do you want to provide advisory services? Some do not and that is fine. However, most firms and many CPAs will answer “Yes.” Upon further discussions, CPAs will often admit that they are including advisory services with compliance services, and often, giving or discounting the advice, due to the fact that they don’t know how to bill, other than by the hour. Clients, on the other hand, often disclose to third parties that CPAs give away their most valuable advice while overcharging for compliance work. In other words, CPAs tend to focus on capability. They don’t focus on packaging, pricing and a delivery model.

CPAs are definitely capable … in fact, they too often try to be the rugged individual and overplay their role, when they should leverage through delegation, or source to others with different unique abilities. Advisory services represent a team sport. Perfection and accuracy have been honorable traits of compliance, but are not as sought after as vision, relevance, real-time information and predictability in advisory services. Hindsight, insight and foresight create innovation, and clients value innovation.

Sullivan states that to make a change, the first C, or step, is commitment. Often, in our profession, this is confused with risk, boldness and even overconfidence. It is often easier to wait on the compliance work to come through the door than to compete for advisory services, but the game has changed, forcing firms to think differently.

The next C is courage. Courage determines your ability to manage and deal with risk. Not everyone is capable of doing so, and demonstrating courage during difficult times. Most firm leaders and entrepreneurs will admit that it is lonely at the top. They must continually demonstrate the face of courage and confidence, even when times are difficult. The old story about the entrepreneur who was asked how he slept last night replied, “Just like a baby, I woke up every two hours and cried,” is true. Therefore, leadership is extremely important in advisory services. There are ways to test and predict who these leaders will be early in their careers.

The final C is confidence. Confidence comes with success, and with confidence comes the ability to learn and grow. Confidence is very important and should be part of your team and firm culture. Confidence is different than arrogance.

A focus on the needs of clients will always create opportunities for firms. However, the changes in services will often require firms to change their thinking, skillsets and processes, in order to remain future ready (relative) and successful. It will also require difficult management decisions, with regard to governance, talent, clients, technology and compensation.

Technology and the Cloud are creating great changes in how business is being conducted in a real-time digital world. Clients are utilizing social media for marketing, online bill payment, banking and accounting, mobile devices, cloud storage for documents, data analytics and more. Your firm is a small business.

  • Are you prepared for these changes internally?
  • Do you have services that are no longer relative or profitable?
  • Are you ready to meet the needs of your clients?
  • Who is responsible?
  • What is your plan?