In recent months the Big Four accounting firms have been making known their plans to edge more and more into the legal market. And with the latest news of a potential forced breakup of the Big Four following the Carillion debacle, many commentators are saying this move into legal is only going to happen faster.
The promise is of an increasingly ‘holistic approach’ – the latest buzzword amongst accountancy firms – to the professional advice they offer their big business clients. But why should it only be the global clients of the Big Four who benefit from this?
Arguably it is SME businesses that stand to gain more from joined-up advice, ie from professionals who see their commercial, financial, tax, employment, property, IP issues etc in the round, understanding how they all interrelate and being able to lead the client quickly through the maze to the right solution. We all know it is the smaller and medium businesses that need to be the most fleet of foot, and speed of advice can be critical to them achieving first mover advantage, or not.
Sadly, advisers to SMEs often prefer to tackle the different elements of the same problem as completely separate, dealing with each in a silo, not worrying how their specialist ‘solution’ impacts the other aspects of the business until after it has been presented to the client. Then when questions are raised whether, for example, this perfect tax solution has knock-on effects on the company’s property issues, with a dismissive wave of the hand the adviser tells the client to ‘check with the lawyers’.
Downsides of silo thinking
The downsides to SMEs of this silo thinking by their advisers are significant and real: loss of time and money, both highly precious commodities in this part of the market. In contrast, the upsides of a joined-up approach are cost efficiencies and speed, which in the SME world is so often of the essence. It is something that SMEs should be bolder in demanding from the advisory marketplace. Here’s why…
Business issues don’t present themselves in neatly separated silos, so why should your professional advice be delivered this way? The vast majority of business challenges involve a mix of legal, tax, accounting and other issues such as property considerations. A simple example is the company that wants to relocate from London to Cambridge, to lower its operating costs.
In assessing the cost benefit of such a move, its need to consider all the impacts, and these will be a tangled mix of legal as well as accounting and tax issues: aside from needing to find a new property to move in to, at the right price and with the transaction structured to minimise tax impacts, the company will have to get out of its existing property obligation, with multifarious legal issues to navigate, each with potential costs impacts too. There are also issues around moving staff and whether the company is free under employment law to decide unilaterally to relocate them; also how long can the business subsidise their travel, eg as part of incentivising staff to move, without incurring additional tax liabilities for the business and for the employees?
Accounting and legal: natural bedfellows
You can see how the issues flip flop between accounting and legal. They are so interlinked, it is positively unhelpful to deal with them by referring to specialists on the individual points in isolation. Experts won’t see the issues outside of their own specialism. You would forever be going back and forth as one tax solution raises an employment law issue, and the legal solution to that raises another accounting issue, and the accounting solution to that raises a new property law issue. I could go on…
You might think the answer is to put all the experts together in one room to sort the issues out among themselves. But unless there is one individual taking the lead, this can be a disastrous waste of expensive advisers’ time. Advisers working in different disciplines don’t understand where the man traps are in each other’s fields. Moreover, they rarely speak the same language as each other, so they find it hard to communicate.
I once witnessed a senior partner from a magic circle law firm attempting to find a solution for a client in the oil & gas industry for whom a new tax regime in the sector meant 25 per cent was being wiped off their balance sheet. The partner gathered 14 specialists in a room but he wasn’t able to control them, simply because he himself had lost sight of what the client’s problem was. The meeting dragged interminably and expensively on, with no solution in sight.
It would have been far better if the partner had sat down in a room on his own with the client until he understood the issue himself, worked out a solution in his own head, and only then asked the experts to get involved, to check his thinking. It underlined to me the importance of one adviser taking charge of the whole issue, getting his or her head around the broader commercial challenge, thinking creatively, sometimes laterally, about the best way to approach the matter given all the issues involved, regardless of how they are labelled, then project managing the different experts required to check detailed points and finally drawing on their various different contributions to finesse his/her own solution and perfect it.
Advisers need to take more responsibility for client problems
In a sense, it is about professional advisers taking responsibility for finding solutions to their clients’ business problems. It is interesting to think about why the professions, both law and accounting, have chosen to focus so much on ‘specialty’ as a way of selling professional services, when there is such a big danger that the silo thinking this promotes actually worsens advice to clients. This may be controversial, but to my mind the truth is that it makes life easier for the advisers, because specialising minimises their risk. And in the worst cases, it avoids the need for advisers to give any real advice – even better from their point of view of minimising risk!
It’s a sad truth, but both the legal and accounting professions have become increasingly shy of getting off the fence and actually advising clients! This benefits the professions, not their clientele. It is high time the advisory community was challenged on this. SME clients should demand that their professional advisers take a holistic view of their business challenges and opportunities as routine, and be prepared to actually give them advice!
Richard Oury is a senior partner at law and accounting firm Oury Clark.