In our profession, the term “advisory services” is used frequently, but there is little consensus about what it actually means. When we ask multi-service firms which advisory services they offer, the spectrum of responses is incredibly broad and often overlaps with traditional compliance services.
The Importance of Clarity
It’s crucial to differentiate between compliance and advisory services. Compliance services are essential but tend to lack differentiation among practitioners. Whether it’s a tax return or a financial statement, the deliverables often look identical, reinforcing the notion that there’s nothing unique about the compliance report itself.
Conversely, advisory services encompass the expertise, advice, planning, and strategy that precede the creation of compliance reports. This is where firms can truly differentiate themselves and add significant value for their clients.
Defining Advisory Services
According to the AICPA, advisory services involve developing findings, conclusions, and recommendations for client decision-making. This definition, while formal, might feel narrow compared to how practitioners describe advisory services within their firms.
In a recent discussion among firm owners, advisory services were defined as addressing client challenges and leveraging strategies to create growth opportunities. This definition focuses on outcomes and aligns well with the AICPA’s emphasis on client decision-making.
The Interdependence of Compliance and Advisory Services
While compliance and advisory services are distinct, they are interdependent. Advisory services often rely on accurate financial data provided by compliance services. However, while compliance offerings are generally consistent across firms, advisory services are more personalized to each firm’s expertise and approach.
Differentiating Compliance and Advisory Services
To clarify the distinction between compliance and advisory services, it’s helpful to provide a comparative analysis:
- Compliance services involve preparing reports or filings based on existing financial data.
- Advisory services go beyond this, offering strategic insights and recommendations to drive client decision-making and growth.
Crafting Your Advisory Journey
To avoid scope creep and highlight your advisory expertise, it’s essential to define your menu of services clearly. Advisory services are what set your firm apart, so it’s crucial to communicate their value to clients. Consider bundling services to integrate planning and advisory services with compliance offerings, thereby transitioning annual engagements into more frequent advisory engagements.
Conclusion
Clearly defining advisory services is essential for professional firms seeking to differentiate themselves and add value for their clients. By understanding the distinction between compliance and advisory services and articulating their advisory expertise, firms can elevate their offerings and better serve their clients’ needs.
