The role of relationships in advisory services

In a recent article, I discussed the vital role that data analytics can play in improving the advisory services firms provide to their clients. While the ability to process and interpret large amounts of information is a pillar of next-level advisory services, it's not the only required component. Well-rounded and informed guidance will always take multiple factors into account rather than privileging one approach over all others. On the other side of the coin from data, you find the human qualities of a business that can’t be quantified in a simple metric or equation. We can call this facet of advisory "relational accounting," and it’s crucial that you don’t overlook it.

Relational accounting is the part of accounting that results from knowing your clients in a way that goes beyond dollars and cents. One of the reasons a relational approach is so valuable to firms is that it is future-proof in a way simple compliance accounting isn’t. AI and machine learning improve all the time, rendering computational power and accuracy less of a differentiating factor for firms. If you have the same number-crunching power as other firms in your space, what’s there to set you apart? It’s the relationships you develop with your clients and your ability to use those relationships to provide better service.

Advisory on a personal level

Understanding a client intimately isn’t just a matter of knowing their financials. Every business wants to make money and be successful, but that's far from their only motivation. People start particular companies for particular reasons, ranging from a desire to serve their community to environmental concerns and beyond. In addition to these core components of who companies are, owners possess a collection of values and principles that they hold near and dear to their hearts. As an accountant, especially one who seeks to become a trusted advisor, it’s on you to learn about these values.

Here’s an example of how it works on a practical level. Let’s say you have a client who is going through a budget crunch and needs to make spending cuts, as many businesses are doing right now. If you know this client strongly believes in diversity, equity and inclusion (DEI) as a foundational aspect of their company, you aren’t going to advise them to cut DEI programs to save a few bucks. Instead, you’re going to look to other creative places where spending can be limited. In doing so, you demonstrate to your client that you not only know their business on a financial level, you know who they are as people. Bonds like these — based on more than simple business-to-business transactions — last longer than superficial ones.

Find balance in your advisory

Of course, you cannot let personal understanding cloud your judgement when it comes to offering consultation services to your clients. Done right, relational accounting will provide more clarity to your analytical work, not less. Advisory services are about using your intimate knowledge of a business in order to offer guidance that provides them a framework for greater success. To achieve this goal, you’d be wise to use all of the sources of information at your disposal.

The trick comes in allocating the right level of importance to each piece of the puzzle. If a company’s narrative, the story it wants to tell about itself to customers and team members, is out of whack with its data, then the client is probably in need of a serious redirect. A business shouldn’t make decisions based on its values alone, but it shouldn’t compromise its values for the sake of dollars and cents, either. As an advisor attuned to relational accounting, you’ll be able to find better harmony between all aspects of a business.

The best advisory firms are those that are willing to turn over every stone in order to uncover the fullest, most detailed picture of their clients. Sometimes, in the effort to do this, we can lose the forest for the trees. I’m not saying you should ignore minute data points, because you definitely shouldn’t, but you also need to keep those data points in the context of the big picture.