Let's be honest: Clients don't care about tax prep. Sure, they care about it getting done. They want to be able to sleep at night, knowing that it's off their plate, but beyond that, the prep itself isn't valuable to them.
What clients do care about is reducing their taxes. That's where advisory services come in. To do tax advisory right, CPAs need to have a holistic view of their clients. This involves understanding their business, the relationships with their family and what their goals are when it comes to leaving a legacy.
"Tax advisory is a very comprehensive service that helps clients build wealth by having more money to build wealth with because they're reducing tax," said Tom Wheelwright, founder of the WealthAbility Network, who has more than 40 years of tax advisory experience.
Making tax advisory services the focus of your firm can build a lot of value for your clients. However, too many CPAs think about how to charge for advisory services after they've already given them, instead of creating a model based on advisory from the beginning. Breaking that habit can be hard, especially if you view the work you do for clients as a commodity.
"We have decided that tax returns are a commodity," said Wheelwright. Rather than race to the bottom on price, he chooses to compete with other firms on value instead. This requires a focus on what you uniquely provide that isn't offered by anyone else. That's where you go the extra mile to offer true advisory services.
Build advisory relationships
When transforming the relationship with your client into an advisory one, you need to start by understanding what the client is trying to accomplish in the first place. Don't wait for the client to start asking questions. Instead, diagnose, ask questions and focus your energy on them, instead of the transactional work.
You're going to want to ask about long-term goals that address the life of their business and the legacy they want to leave. For some clients, this may look like breaking even, where they don't want to leave any money or debt behind. Others might want to leave a successful business to their children and grandchildren.
The planning and work that go into these two scenarios look very different. The answers and guidance CPAs provide these people will also look different. But you won't know what your client wants to do until you ask probing questions that help you find out "what's the why behind the why" of their business, as Wheelwright puts it.
Once you start asking these probing questions, you'll find that the answers start becoming distinct quickly. If you ask two different clients what they want and why they want it, both might say they want to reduce their taxes, but their "why" for this could be significantly different. For example, one might not want to pay taxes because they're just against them. Another might be looking to grow. Or, one may want to give money to charitable foundations, while another may want to leave money for their children. Knowing their desires is imperative to providing the advice that brings their wishes into reach.
Tax advisory is a lifetime service
Doing this kind of work requires a multiyear plan, which moves your relationship from a transaction to something that is much more meaningful. Tax planning is not tax advisory, nor should it be. "If you want lifetime clients, focus on their lifetime," said Wheelwright. "If you want a client for three months, focus on three months."
Planning for the long term is more beneficial for your clients and your relationship with them. Projecting out a tax strategy that takes into account the shifts in incentives and changes in tax law will be more advantageous for your clients and reflect well on you as a result.
If you're telling yourself that you're already doing this and your clients are happy because they come back every year, know that clients can be slow to move away even if they aren't raving fans of what you do.
"Just because a client comes back every year, that doesn't mean that you've been really a strong advisor for them every year," said Wheelwright.
Being so entrenched in your client's business can feel like a strength, but Wheelwright says it's a weakness because it makes CPAs complacent. Even though they aren't leaving right now, you need to ask yourself what you're doing for your clients. It can be hard to shift into this kind of work, but you'll find that once you start focusing on your clients, your work will become more interesting and your clients will be happier.
Deepen your knowledge
Should tax advisors have a specialty or should they take a generalist approach? That might depend on who's on your team. If you have people on your team who are specialists in particular areas — say, real estate — it makes it easier to build a specialty practice. Your specialties also need to extend to the team outside your office. Financial planners, life insurance experts and bankers all play a role in establishing your expertise and specialty to attract and retain clients.
It boils down to this: "Do what you're really good at and let other people do what they're really good at," said Wheelwright. You do need to be a generalist when it comes to knowing a little of everything. But to be a strong advisor, you need to know a lot about a few things.
How you choose whom to work with is also heavily relationship-focused, making the criteria look different from what you might be used to. For example, Wheelwright likes working with mission-driven entrepreneurs, but he has one other important qualification: "I have to like hanging out with them." Why spend your time with clients you don't enjoy? Identify your target buyer and focus on them.
Quantify your tax advisory
Once you've worked on shifting your mindset, changing what's valued in your firm, and getting clear on your ideal client, you need to work on quantifying your advisory services. This comes down to deciding what deliverables go with each step and how they can be valued.
"We need to remember that every minute we spend with them is a minute of their time that they're giving to us," said Wheelwright. "We need to value their time."
From that perspective, you have to consider what your plan looks like to ensure you can work on it every time you meet with them while adding value.
Creating a tax advisory-based firm is a plus for you and your clients. You get to focus on client relationships instead of pure transactions, and your client feels more valued in return. While it can feel like a large ship to turn around to change the course of your business, don't forget that you can make the shift in stages. Find what works for you, and add value to what your clients really care about over time and every time you meet. This is how you become the trusted advisor you aim to be.
