Commoditization, computerization and competition from outside the profession are threatening many of accounting's core compliance services, from tax returns to bookkeeping and even some parts of the audit. The solution, many suggest, is a wholesale shift toward advisory services (see our feature story), but that begs the question: Are accountants going to have to abandon compliance work entirely?
For firm owners who are close to retirement and don't want to have to learn a whole new way of working — and for those who simply like this type of work — experts have some comfort to offer: Compliance isn't going anywhere anytime soon.
"We are going to be a compliance-driven profession for a long time, there's no doubt in my mind about it," said Jim Bourke, a partner and managing director of advisory services at Top 25 Firm Withum. "Those compliance needs still exist — the financial statements, the tax returns."
He offered a warning, however: "I believe there will be a space for firms that want to focus on and be very good at compliance and tax work, but they need to understand it's going to become even more competitive, as technology and artificial intelligence starts to really change that space, so they need to be careful. Will they have the same growth opportunities they had in the past? I don't believe so, so that's where I believe you need to supplement your income with advisory services."
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Carl Peterson, vice president of small firm interests at the AICPA, agrees that there will be space — but that it will be very small.
"I think that'll always be a very small number of firms that all they do is tax prep," he said. "They're not H&R Block, but all they do is tax prep. I think we'll always have a few of those, but I don't think it's going to be widespread. I think most of them are ultimately going to realize or start to position themselves as being advisory first, tax second. I think there's room for small firms that don't do advisory, but I think that'll be a very small amount of firms that choose to."
It's also possible that how firms focus on compliance will change — it may follow the same path of specialization and niching that experts say advisory work should follow.
"I think that there's always going to be some firms who are just focused on compliance and they're filling the need of their ideal client base, so they might be highly specialized," said Peterson's colleague at the AICPA, vice president of firm services Lisa Simpson, noting that there's a Top 100 Firm that already focuses on compliance work like SOC reporting. "That's compliance right? And they've built their ideal client structure around that one compliance service. I think there's always going to be a space for that."
"Is that what I would do, if I were starting my firm?" she asked. "I don't know … but if you can make a good business model out of that, if it fits the vision that you have for your firm, then take that approach. But I think that firms will as a general rule continue to move toward a broader spectrum of advisory services."
The inevitability of advisory
It's worth noting that most experts expect that accounting firms will continue to provide compliance services — but they will offer them as a byproduct of and ancillary to the much more important advisory relationship. And leading practitioners and experts in the profession also expect that there is a degree to which that move is going to happen across the profession no matter what.
"Firms are going to evolve in spite of themselves," predicted Geni Whitehouse, who advises CPA firms as the founder of The Impactful Advisor and is also a winery advisory at a small CPA firm in the Napa Valley.
That doesn't mean every firm and every accountant needs to change, however; in many cases, the shift will simply happen as a result of the natural life cycle of firms, as older partners and staff retire.
"I don't know what the age cutoff might be, whether it's 50, 55 or 60, where [compliance] is all they've done," said Peterson. "They've always been a part of a tax practice and that's what they do, so getting them to shift and change their mind may take a little bit longer, but they're also aging out, where the younger professionals and people taking over your practice are already into this thought process and mindset. … We're going to see the older people who are not really ready to make the change are going to age out, and the younger staff is already making that change."
While demographics may expedite firms' shift from compliance-focused to advisory-focused, economics may actually hold them back, according to Darren Root.
Root, who has run his own practice for decades and helps CPA firms modernize their practices as the chief strategist at Rootworks, says that firms are just too busy — and too profitable — to put the necessary time into moving toward advisory services.
"It just doesn't feel like there's going to be the time available for firms to really work on their businesses, unless they're truly proactive," he said. "So my prediction is that some will [make the shift to advisory], but the majority are going to just try to keep their head above water for the next couple of years or so, anyway."
However much time firms may have to stick with compliance work, in the end they're going to need to make the shift — if only because everyone else is.
"We speak a lot with the managing partners and CEOs at CPA firms, and of course audit and tax are today oftentimes the largest practice groups at these firms," said Jin Chang, the founder and CEO of FieldGuide, which develops engagement software for advisory and audit firms, "but every managing partner and CEO is investing big in advisory, because advisory presents the largest growth opportunity in the immediate future for the CPA firms."
