8 ways to determine if a client is ready for advisory services

The term “advisory” in our profession can feel like a dark ocean that is difficult to navigate. Our challenge, as practitioners and firms, is to take the vast sea of advisory services and develop a fishbowl of services that can be profitably managed. If you ask 100 tax professionals what advisory means, you will most likely get 100 different answers.

My definition of advisory is any service that meets two specific criteria:

1. You and/or the firm are exchanging knowledge for money and NOT for time.
2. Compliance is NOT the driving force of the service provided, such as tax return preparation, payroll processing and financial statement audit.

In essence, service provided that is not required or mandated by a third party, including government entities and lenders, and generates revenue based on your skill and professional relationships is advisory.

Many colleagues ask me how I will know if a client needs advisory services. The answer to that is easy: They are telling you! Your clients ask for advisory services every day, and if you are listening, you will clearly hear the requests. That is why at times, half of your job is spent acting as a psychologist!

Here is my list of client actions that indicate they are ready for advisory services:

1. Asks financially-related questions: Various inquiries provide an opportunity to assist your client, enhance the relationship and increase revenue. These include vehicle purchase vs. loan decisions, mortgage refinancing, family member loans, investment portfolio allocation, life insurance coverage, college planning, and estate planning.
2. Divulges several non-tax personal challenges: The client discusses marital divorce or separation, family members with substance abuse issues, special needs children, aging parents, or employment changes.
3. Implements your advice: At some point, the client has followed your direction and implemented a decision based on your recommendation.
4. Displays financially stability: Chances are you have financially responsible clients who can afford your services and realize your value; however, avoid focusing only on high income or net worth clients unless that is one of your niches.
5. Doesn’t change their own oil or mow their own lawn: Okay, maybe not literally, but beware of “do-it-yourselfers” or extremely analytical clients.
6. Promptly attends meetings: People who don’t respect your time will not respect your opinion.
7. Currently refers other clients to you: Our firm has a saying: “Let your best client pick your next client.” The best compliment a client can give is a referral. The referral is a testament to the belief in your work.
8. Embraces price certainty: Transparency in fee is the foundation of a strong relationship and trust.

How do we go from indicators to implementation? I am happy to tell you what has worked for us. Our firm works exclusively in a subscription-based, flat-fee, bundled service environment. As tax professionals, we face the inherent challenge of heavy work compression during tax season. Providing subscription-based services provides us the flexibility and freedom to shift face-to-face client meetings and calls from the timeframe of May 1 to Nov. 1. We bundle our advisory services with tax compliance/preparation, payroll processing and bookkeeping. Our firm has developed four programs that are separately named.

We require all potential clients to participate in an initial complimentary consultation and to provide their prior year tax returns. The consultation provides us with the platform needed to perform a needs analysis and determine if the prospect is a good fit for our firm.

You may be thinking, “This sounds great, but how do I get started?” My advice is to start small; the smaller your practice, the easier bundled services are to implement. It is much easier to turn a motorcycle around than an 18-wheeler!

Here are some practical tips for determining implementing bundled services:

• Create a menu of programs and provide a recommendation.
• Name your bundles and make sure you can scale.
• Require an initial consultation and review prior year return with the prospective client.
• Charge a client set up fee and require ACH payment.
• Remember, you can change the engagement letter if the situation materially changes.
• Start implementing with prospective clients before rolling out to current clients.
• Carefully consider the regulatory environment for each professional license you hold.
• Build out your network of professionals you can collaborate with or utilize as a strategic revenue partner.
• Your first sale will be with yourself and your team – make sure there is a buy-in.

Advisory services are the key to evening out work compression, de-seasonalizing revenue streams, deepening client relationships and providing a better work-life balance for your firm.

Good luck!

Editor’s note: Access more resources on advisory services on the Intuit® ProConnect™ Tax Pro Center.