Accountants: 6 reasons you’re leaving your clients in the dark
Updated: Feb 16, 2021
When driving home this weekend, along a local single lane road, my five-year-old son, Oscar, excitedly shouted for me to over-take the car in front. When I told him I couldn’t because it was a different type of road to the motorway we had just been on, his response was, “What do you mean? It’s the same, come on Daddy”.
His reaction was completely understandable as (1) he is only five, and (2) no one had explained the different types of roads to him before. So I did. After I finished, to check his understanding, I asked him “which is your favourite road and why?” His response was quick.
“Motorways! They get you where you want to go faster and you can beat ALL the other cars”.
Now this reminded me of something that has been bugging me recently; a client’s understanding of different services and the value they place on each service.
In particular “tax”.
In my experience, a massive misconception is the difference between tax compliance and tax advisory. As professionals in the industry, we all know tax compliance is the process of reporting past transactions, whereas tax advisory largely involves proactively planning for future transactions. But do all your CLIENTS really understand and value the difference between the two? From what I have observed, the answer is no.
Let me tell you why I think this is.
(1) Accountants aren’t particularly good at selling themselves:
Never mind tax, accountants in general don’t talk themselves up enough to clients. I sat in a well-known accountancy conference last week where in one of the sessions, a client, who was part of the session, referred to the audience (accountants) as a bunch of bean counters. It took two 45 minute sessions, and this guy using that derogatory word on 3-4 occasions, before a member of the audience finally challenged him and explained what her expertise was and how she could use that to help him. She explained the skill she uses with her clients, and asked the speaker whether he would find it useful. He asked for her number. Good for her.
I suppose the point I am making here is that, forget what’s on your profile or your website, you need to “talk up” the value of the service to the client in front of you. It’s this same type of client who probably thinks a qualified chartered accountant and a qualified chartered tax advisor (CTA) are the same.
(2) Accountants aren’t tax experts:
In my opinion tax specialists are the brain surgeons of the medical world. Did you know, the UK’s tax code is the longest and most complex in the world? It stands at well over 17,000 pages long. To locate, review, interpret and apply this volume of code you need to be an expert at the very least; maybe a whole tax department with specialists in each discipline.
When it comes to conveying the value and application of tax expertise with clients, this needs to be discussed properly. So on scale of value, tax should be considered very specialist.
(3) Tax experts are gold dust:
There is an extreme shortage of Tax Expertise. Why? Because it’s bloody tough to qualify as a chartered tax adviser! You would be amazed at how low the official number of CTA’s is in the UK. There are just 18,000 trainee and chartered tax advisers in the UK, supporting 30 million income tax payers and approximately 1.2 million corporation tax payers.
So without question, quality tax expertise is a rare and valuable commodity.
(4) The practice of tax advisory by accountants is flawed:
Other issues that can affect a clients value perception of a tax advisory service is what happens in practice. This usually falls into one of the below three scenarios:
Scenario 1: A majority of clients do not receive any form of tax advisory assistance.
Scenario 2: During the process of return preparation/year end accounting, the advisor (on a free consultancy basis) recommends ad-hoc tax advisory work, such as R & D or Capital Allowances.
Scenario 3: A small percentage of firms have a paper based system, like a tax checklist or a tax matrix (see one of my earlier posts). However, this is generally only delivered to the top 5-10% of clients invariably (although intended for more).
(5) No one knows what the hell a “tax review” is:
As you can see from what happens in practice, there is no definition of a “tax review”, which is confusing for clients. This service differs from firm to firm, even from client to client within a firm. But why?
Unless there is a systemised approach, a professional meeting a client, can only apply their own tax knowledge (remember that 17,000 + page code). This means they will invariably just stick to what they know and quite rightly be led by the client.
But what about the areas they don’t know? I’d argue that there are many tax opportunities a client would want to take advantage of, if only they knew those said opportunities existed.
The missed opportunities are there for all to see, even in VERY easy and fundamental advisory areas (Scenario 2 type areas above) – think continued lack of awareness on Research and Development Tax Credits or even HMRC’s record £5.1bn take from IHT.
(6) Accountants are scared of charging more for a service they don’t know enough about:
Accountants will always charge for tax compliance reviews and compliance work. However, in my experience, an initial tax advisory / consultancy review, is often not charged for separately. Yes one does flow from the other, but surely a thorough review constitutes a separate piece of advisory work that should be charged for.
Is this because there is a nervousness to charge for a service that may be slightly limited?
The acid test…
Every client, like my son, would choose the fast lane to get to their desired destination quicker and overtake their competition. So, although they don’t always understand the difference, there is no doubt that tax efficiency, which actually means proactive tax advisory, is probably the most important advisory area to your clients.
If you really want to see how valuable tax advisory is to your clients, ask the following question of the next ten prospective clients you come into contact with, and see what response you get:
“When was the last time your accountant approached you and said, here’s an idea I think will save you money?”
If you have any questions or would like to know more about Diagnostax then pop me an email – email@example.com. Thanks for reading.