Against a backdrop of commodisation of transactional services and a race to the bottom on price, the onus is on accountants to forge deeper relationships with clients with advisory services that address their biggest pain points and keep them coming back for more.
For Eric Clapton, the chair of ICAEW’s personal financial planning advisory group, the combination of accountancy compliance work and value add advisory services – provided both internally and in collaboration with external experts across professional services – is a killer proposition.
Having qualified with Peat Marwick Mitchell in the early 1980s and following a career in business across organisations including Dun & Bradstreet and Coca Cola, Clapton’s foray into personal finance advisory came about when a small investment business in the family found itself in urgent need of a finance director.
“I joined in March 1987. And in September that year, there was the crash of all crashes. It was a baptism of fire,” Clapton recalls. It soon became apparent that weathering the storm would require the firm to broaden the range of services it offered to clients.
An acquisition of a small local accountancy firm ensued, allowing for the provision of accountancy services alongside financial planning. A merger with a larger accountancy practice in 1998 cemented the provision of compliance work and advisory services with financial planning and investment management. The larger practice had already established a dedicated private client department, which offered the opportunity for close collaboration between financial and tax planning.
Having dedicated experts with a narrow and deep focus will stand you in good stead, Clapton says. “With clients who wanted audit and accounting or tax planning advice, I'd offer to introduce them to our inhouse experts. We didn't try to be a Jack of all trades.
“We were a big enough practice that we could afford to run experts, and clients who came to us valued the fact that we were a one-stop-shop. But it meant we had the time to look forward, and we didn't get the additional pressures of the compliance work. That makes quite a big difference. It allows you to move into that forward-looking advisory mindset.”
Advisory work can soon make you indispensable to a client and offer real value add, Clapton says. “It means you have a lot of touch points with the client. If you're simply preparing their accounts or private client tax returns, you might only talk to them once or twice a year and they see you as little more than the person who cranks the machine.”
However, it also requires a shift from a retrospective focus to more of a forward-facing view. “You're not finding a solution to a problem that's happened, you're trying to avoid issues happening in the future. It means you have to think in a different way.”
General practitioners keen to develop a financial planning advisory strand need to be realistic about the time commitment it will require, Clapton warns. “You've got to let go of something to have the time to do it. As a partner, you have to separate yourself from doing compliance work because your value is acting as a trusted adviser who can bring that additional value into the business.
“Whoever's doing the compliance work can supply you with the basic information that you need for your client meetings, but more importantly, it gives your brain some space to think about that advisory side, rather than worry about whether or not the debits equal the credits.”
Clapton’s investment business was sold in 2015 and today he focuses on offering clients forward-looking tax planning advice. But his firsthand experience has more than highlighted the value of personal finance advisory services as part of your offering.
There is nothing to stop accountants providing more general strategic advice on all matters financial planning. And although a segue into advisory work might feel like a big step, accountants need to have confidence in the experience they develop over the course of their many and varied interactions with clients.
Employing a team of dedicated financial planning experts might be a step too far for many firms. Instead, collaboration with financial planning experts – if approached correctly – is an excellent alternative. Clapton’s involvement in financial planning firms offers his clients access to regulated financial planning advice and allows him to take his remuneration as a profit share. “I’m not necessarily the first point of call for financial planning, but I am the trusted advisor working with the regulated planners,” he explains.
Despite the growing commoditisation of compliance work, having a compliance capability gives you the foundation and understanding of a client’s situation and can open the door to financial planning opportunities. But this can’t simply be about providing an introductory service to expert financial planners, Clapton warns. “You need to understand something about how the planning works if you are going to be retained as a trusted advisor and remunerated for this on a professional basis. Otherwise, clients are unlikely to value your involvement.”
In practical terms, advice may hinge around use of pensions and ISAs to construct a wealth plan. “A client knows that they can discuss a general financial strategy with me that they've spoken and I can add value, because I understand what they're trying to achieve.”
Similarly, conversations about the numbers - cashflow and tax in particular – can prove a useful introduction to the benefits of financial planning advisory services. “My own preference is more on the tax side; I don’t mean whether something's a taxable deduction. But knowing more about the taxation of investment wrappers such as pensions, bonds and ISAs, and how that aligns with the taxation of income capital and wealth. You're not talking about specific products, you're talking about the tax legislation and its application to the plan to improve the client’s net income and overall wealth.”
* Please note that a DPB (Investment Business) licence may be required to give investment advice.
