Changing times
We all know that the professional services industry in Australia is changing. And fast.
Take a moment to reflect on the macro factors: a fluid regulatory environment, ever-increasing client sophistication, the trends of globalisation and outsourcing to low-cost jurisdictions, huge technological advances, pressures on traditional pricing models, the influence of social media, and the expectations of our Generation Y staff. What a melting pot!
And make no mistake; the pace of change is accelerating, with commensurate risks and opportunities for all of our businesses.
The great Jack Welch said it perfectly: “If change is happening on the outside faster than on the inside, the end is in sight”.
And for us in the professional services industry, are we really rising to the challenge?
Many professional services firms stuck in a rut
From what I see, while there are a small number of innovators out there doing novel and exciting things, many professional advisers remain firmly stuck in a rut.
In the face of seismic change they just put their heads down and churn out of the work as they have always done, scurrying back to their comfort zone of solving technical problems.
Instead of innovating, they blame the economy or other macro factors for yet another mediocre year, implement cost cutting measures, equity management programs, or arrogantly hike up fees.
Or some firms make modest, uninspired, and incremental changes to their business, and then trumpet these “me too” strategies as meaningful points of difference. Here are some examples that I have heard in the last month alone:
“Client service is important in the new environment, and we recognise we need to do things differently. So, we have resolved to introduce a new protocol whereby we answer all calls within 2 rings.”
“Our competitive advantage is that we turn things around quicker than our competitors.”
“As a business, we do not cross-pollinate our clients well. So, our new commitment is for all professional staff to have a coffee with our key clients and introduce a colleague.”
Increased operational efficiency is not a strategy
Having a true competitive advantage means so much more than operating with greater efficiently than your competitors.
And again, in the words of the inimitable Mr Welch: “If you don’t have a competitive advantage, don’t compete”.
Differentiation via the multi-disciplinary approach
In the new landscape, my view is that the Australian professional services firms which will survive and thrive will be those which are able to adapt by breaking down the barriers of functional expertise and moving up the value chain.
For some time now, I have strongly held the view that our clients get the best results when we transcend our functional areas of speciality and work together as a multi-disciplinary team. After all, our clients’ issues are complex and multi-faceted. Unfortunately for them, their problems rarely fall squarely within the silo of one professional adviser’s area of expertise.
Playing it safe in the silo
One (in my view) undesirable trend in professional services over the last two decades has been the movement toward ever deeper, narrower areas of speciality and sub-speciality.
Sure, we are becoming increasingly brilliant in our respective niches, but we risk losing sight of the big picture. And this is particularly because, for many of us as detail-focussed technicians, the big picture was never our strong suit to start with.
Without the multi-disciplinary approach, the old adage “give a child a hammer and every problem is a nail” is how many professional services firms deliver their advice. In other words, they only see the world through the prism of their particular area of expertise. And that’s dangerous. The problem is then further compounded by our insecurity about highlighting a broader range of issues with our clients in case, heaven forbid; they feel that we are “selling” to them!
So, we constantly play it safe by delivering efficiently and competently on the client’s stated need within our narrow silo of expertise.
In contrast, to some extent the multi-disciplinary approach allows us (and our clients) to have our cake and eat it too. The client receives the benefit of all the depth of expertise that they need in the relevant functional areas of speciality, but also a broad overview and/or alternative perspective which ensures that nothing slips between the cracks.
An example of the siloed approach gone wrong
John Smith’s stated need is for a will. He has a blended family and wants to look after the children from his first marriage but also his new wife and step child. His major assets are the equity in his business and the family home.
Send Mr Smith to an estate planning lawyer and he will get a well drafted will, which addresses his stated need. But that lawyer might not appreciate that there is risk in Mr Smith’s corporate structure, and fails to spot a major restructuring opportunity that would protect his assets and provide incidental tax benefits.
Send Mr Smith to a tax specialist, and he will end up with a tax-effective structure, but will he be set up right for when he sells or floats the business in three years’ time?
Send Mr Smith to a corporate finance accountant, and he will be given a wonderful exit strategy to maximise the value of his business upon sale. But what if he dies or has health issues in the meantime?
Send Mr Smith to a financial planner, and his key man risk will be comprehensively underwritten by insurance. But what about other systemic risks in his business such as OH&S concerns, poor governance, and the like?
The optimal way to address John Smith’s risks and opportunities is, of course, to get all of these professionals together as a multi-disciplinary team.
So what’s the best way to do this? That is, of course, another question entirely…
What next?
In future articles I will continue to explore the topic of the multi-disciplinary approach to professional services. I will investigate some of the hot areas where professional advisers are using these techniques right now to achieve fantastic outcomes for their clients.
I will also consider the structural, mechanical, and regulatory aspects of those relationships (formal versus informal, incorporated joint ventures between financial planners and accountants, and the like) and overview some of the trends and innovations that I am seeing in the market. I will also consider new client engagement models, and how techniques such as insight selling can assist with the multi-disciplinary approach.
In the meantime, I would welcome any feedback on the thoughts contained in this article. I look forward to continuing the discussion!
Martin Checketts leads the Private Advisory team at Mills Oakley Lawyers. He also sits on Mills Oakley’s management board.
Martin is an expert in private and family business, co-ownership, corporate structures, corporate law, business succession planning, and business exits.
Martin is the author of The Strategic Exit, a user-friendly guide on how to maximise value on the sale or transition of private businesses.
