The Path to Advisory: Defining your tax advisory services

Note: Many thanks to the Intuit® Tax Council for their guidance in putting together this article and for their input on “The Path to Advisory.” See editor’s note to download the guide.

Tax advisory services that are adjacent to, and often an integral part of tax preparation, are the easiest place to begin when leading with advisory services. Most tax firms provide traditional tax planning to 20-30% of their clients who are willing to pay for services beyond tax preparation. However, this traditional tax planning is generally just a pro forma exercise to update the tax liability and estimates as a means to avoid surprises at tax prep time. Traditional tax planners don’t align clients’ short and long-term goals with tax strategies to help them reach those goals. And they don’t communicate the tax savings associated with specific tax strategies to reinforce the valued return on investment of fees.

Advisory firms start with client goals, identify specific tax strategies that align with those goals, work with the client over quarters and years to implement those strategies, and most importantly, measure and communicate the tax savings associated with those strategies. John Jordan says, “when we share a tax plan with our clients or a prospective client, we are really focused on trying to communicate the tax savings associated with each strategy area to highlight the value we bring.”

There are numerous ways to serve your clients through advisory solutions, and you don’t need to offer all of them. However, it is best to be clear from the start which services you plan to offer. Your niche will likely provide some guidance as to which services are best suited to your client base.

Advisory services to get you started

Here is a list of example services to get you started. It is also helpful to consider which advisory services you are already doing associated with tax preparation.

Business Tax Advisory

• Entity selection
• HR-related:
  • Insurance and benefits
  • 401K plans
  • Officer compensation
  • Payroll
  • Employee retention credits
  • Education benefits
• Income shifting:
  • State taxation
  • Hiring kids
  • Distributions, dividends, gains
• Asset management:
  • Acquisition/ dispositions
  • Depreciation methods
  • State taxation
• Tax planning:
  • Projecting to EOY
  • Scenarios and strategies
• Financing:
  • Opportunity zones
  • EIDL loans
  • PPP loans
  • Local financing
• Merger and Acquisitions
• Credits:
• R&D credits
• Employment credits

Retirement Tax Advisory

• Traditional v Roth IRA analysis
• SEP contributions
• 401K Strategies
• Social Security analysis
• Qualified charitable distributions

Family Tax Advisory

• Donor-advised funds
• Family partnerships
• Higher education strategies
• Child tax credits
• Hiring kids
• State and local tax

Real Estate Tax Advisory

• Local property renditions
• Residence / vacation homes
• 1031 like-kind exchange
• Cost segregation
• Opportunity zones
• Depreciation
• Separate entity analysis

Estate Tax Advisory

• Legacy planning
• Trust creation and management
• Wealth management

Compliance

• Tax preparation
• Estimated tax calculations

Extracting advisory services from existing services

For some tax pros, tax advisory has been an unidentified service wrapped into tax preparation and was not invoiced separately, or communicated effectively. When this is the case, clients might not recognize the value they are getting from your expertise, and your firm is missing out on an opportunity to capture income based on that value.

The following steps can help you begin to separate advisory services from preparation services.

Start tracking which services are already happening with clients

Review the list provided in the table above, and implement a tracking system to record which services are already occurring with clients. Tracking will help you see where there are natural advisory solutions for you to offer and which clients are best suited to transition. Tracking can also help you identify the value of advisory services when you track the client tax savings resulting from the advice. We will cover this in more detail in the chapter on pricing your services.

Create packaged offerings

Most members of the Tax Council use some form of a tiered approach for their advisory services. You can customize the packages you offer to suit your firm and your clients’ needs, but we recommend that you add clear definitions of which services are included in each tier or service package. When you have defined your service tiers, be sure to use these package definitions in all engagement letters and contracts.

Jamie O’Kane says the easiest way to migrate transactional tax clients and prospects into planning services is to include tax planning in every package offered. Highlight planning and strategy services to communicate the importance of quality planning. Preparation and compliance are included, but become more a byproduct of good planning instead of the primary service.

Following is a menu of three sample packages to get you started.

Communicate the change to clients

Traditional tax firms often churn about making changes to their service offering and communicating those changes to clients. Every business has been forced to make changes in the past decade and tax firms are no different. As long as you communicate why you are making changes, and the benefit to clients, the overwhelming majority of clients, who already value your services and pay you, will agree and move forward.

Here is a sample communication incorporating planning into every tax preparation engagement:

We appreciate you as a client and our goal is always to provide you peace of mind about your taxes.

Successfully navigating the complexities of tax regulation and the increasing changes in tax laws requires more than annual tax preparation, which is why we’re updating our service offering to include tax planning with every engagement. A consistent, long-term focus on tax planning strategies will help minimize your taxes and help you achieve your financial goals.

Our new packages are outlined below and we can discuss them further during your first planning appointment. Please use the link below to select a time between now and September 30 for a video planning meeting.

To effectively provide advisory services to business owners, your firm needs access to real-time financial information. Too often, transactional tax clients have incomplete bookkeeping that is cleaned up during the tax preparation process. That is a terrible experience for the client who isn’t benefiting from the value of quality financials to support decision making, and for the firm who is already overworked during the busy season to play janitor and clean up the mess. Firms that lead with advisory services rely on cloud accounting solutions that automate most of the transactional work for the business so that both the firm and the client have access to real-time data for planning and decision making. Advisory firms need to become experts using cloud accounting software — not so they can do bookkeeping, but so they can deliver valued tax advisory services. Your clients already trust your recommendations, so communicating the change to clients to embrace cloud accounting is usually a simple process.

Here is a sample communication regarding a shift to the cloud:

With advances in technology, we are moving our services to a cloud platform where we can easily engage and collaborate with you throughout the year, which saves you time collecting and organizing tax documents. 98% of users agree that QuickBooks Online increases their confidence about managing business finances¹, which is why we use it as our advisory platform.

The cloud enables us to be more engaged advisors with our business clients. 89% of business owners say they are more successful when working with an accounting professional². Our goal is to minimize your tax liability and help you reach your financial goals. Using QuickBooks Online, we can provide the right level of advisory services for your business.

Let the calendar drive your cadence and engagement

How often you and your client meet should be defined by the type of client and package of services engaged.

Transactional clients may feel most comfortable transitioning into a single planning meeting each year, which, when combined with their tax prep appointment makes them a semi-annual planning client. Provide a window for these clients to self-schedule their planning meeting using a tool like Calendly.

High income, high net worth and investor clients will have more tax strategies that require ongoing project management and they should meet 2-4 times annually to successfully implement the strategies that align with their long-term goals. These meetings are generally longer than the transactional clients meeting semi-annually.

Finally, business owners have more complex needs, including staffing, employee benefits, asset management, retirement planning, tax stimulus credits and many more advisory-related issues. These clients will often need monthly meetings, and some very large clients will be even more frequent. Instead of asking business clients to schedule meetings, it usually works best to calendar recurring meetings on both of your calendars.

If a client can’t make a meeting, some advisors like Renee Daggett will record the highlights of the agenda and send the video meeting to the client to review on their own time. That keeps both client and firm productive and avoids the administrative scheduling time.

All these models have the added benefit of eliminating the need for time tracking and help employees manage outcomes, not inputs. This helps cultivate a great work environment for advisors who are making a difference in clients’ lives, instead of less desirable compliance tasks.

Update client agreements annually

When you track the tasks and services completed and requested by clients, it creates a clear path for your annual agreement review. You will identify if the client is in the correct tier or is better suited to a different package.

Timothy Wingate Jr. uses his CRM system to collect information throughout the year. Each quarter he checks to see if anything has changed, using forms to route the client to the next action. This process provides the opportunity to upsell clients to the next package or service.

¹ Based on survey of small businesses using QuickBooks Online conducted September 2018

² Intuit Helps Small Businesses Find Their Perfect Match With New QuickBooks Accounting Professionals Marketplace

Editor’s note: This article is a small part of a whitepaper, “The Path to Advisory,” that can be downloaded and used extensively in your firm. The PDF includes checklists, charts, and many other activities that could not be included in this article. Download it today. There is also an Executive Summary available for download.