Tax preparation and financial report generation are the backbone of accounting practices’ work. They’re the purpose for accounting firms’ existence. However, increasingly accounting firms are making a big business move: expanding into additional, related services like financial planning.
Financial Planning Services (and Beyond)
Nearly half of accounting firms surveyed said they provided personal financial planning services as well as accounting services, reported the Journal of Accountancy, a publication of the American Institute of CPAs. The firms that are already venturing beyond accounting by offering personal financial services are overwhelmingly pushing the envelope even further, with 91 percent of them offering still more services to their clients.
These additional services can take many forms. Some firms are branching out into insurance sales or investment management. Others help clients with estate or retirement planning. Businesses and organizations may seek advice about cash flow planning and risk management, while individuals are increasingly turning to their accountants for guidance in planning for personal financial goals.
Why Expand Beyond the Traditional Accounting Role?
If accounting is already a thriving industry (with some firms operating short-staffed as it is), you might wonder why accountings professionals are getting into financial services in the first place. For many firms, it’s a smart business move. By offering new services, accounting firms increase the amount of value they bring to clients. This helps them retain existing clients, attract new clients, and bring in more revenue, the Journal of Accountancy reported. Also, with more taxpayers using accounting software programs to do their taxes, accounting firms must give clients and prospective clients a significant reason to choose them over computer software that can generate reports, but can’t act as an expert advisor or consultant.
For many accounting firms, this strategy is working. About 65 percent of the firms now engaged in personal financial planning as well as accounting reported expanded services and engagement among their clients, according to the Journal of Accountancy. Further, more than half of those firms stated that clients appreciated their services more. There’s hard data to back up these claims. About 79 percent of these firms found that profits improved within the first year of expanding their services.
While many accounting firms are finding success providing financial services, the move isn’t exactly a no-brainer. There are several potential obstacles accounting firms must overcome when they expand their work into financial services, and overcoming those obstacles requires a great deal of planning and work.
For today’s accounting students, the shift in focus can have significant implications on their future employment prospects. As more firms expand into the financial services industry, candidates who have a strong background in finance as well as accounting may gain a competitive edge in the job market – which means this trend is one students should follow closely. Changes in the accounting industry can inform their decisions about what subjects to study and how to use electives to maximize their marketability in their later careers.