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Professional services firms the new-age jacks of all trades

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Daniel NewellThe West Australian
Cost-conscious clients are demanding more from Perth’s professional services firms.
Camera IconCost-conscious clients are demanding more from Perth’s professional services firms. Credit: Supplied

There was a time, not so long ago, when a market punter wanting the inside scoop on the next big deal could camp out in the lobby of a top-end accounting or advisory firm and watch to see who was wandering in and out, and who might be ready to start popping champagne corks.

It’s a different story these days.

Any big exec spotted in a Perth professional services firms today may just as likely be there to sign off on their company’s new cloud-based IT system, meet a family lawyer, seek the advice of a marketing guru or find ways to fight the threat of cybersecurity to their business.

Such is the changing face of an industry racing to stay ahead of the curve in an increasingly competitive world full of cost-conscious clients.

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Tax agents don’t just look at the books, advisory and consulting firms are not only there to handle M&A and restructuring, law firms don’t exist simply to handle your estate, write your will or stand for you in court.

Nothing has demonstrated the shifting boundaries of the sector more than the appointment last year of three of the leaders in Australian creative advertising — Adrian Mills, David Phillips and Matt Lawson from the McCann Melbourne agency — to Deloitte Digital to head up its brand creative and media team.

Lavan’s Dean Hely and Deloitte’s Michael McNulty are expanding their services.
Camera IconLavan’s Dean Hely and Deloitte’s Michael McNulty are expanding their services. Credit: Megan Powell

“That was an interesting move and one that fits into the landscapes of where these firms are heading,” says Mike Anghie, who spent 24 years with Perth’s EY team — eight of them as managing partner — before leaving last year to take up a group chief executive role with disability services provider Advanced Personnel Management.

“It’s a natural evolution as the consulting firms continue to grow and expand their offerings and become more specialised and more global. It has meant there’s new competitors coming to the marketplace and you’re able to work more freely across borders.”

Changing client demands along with a digital revolution that has allowed many businesses to bring traditionally outsourced functions in-house has seen many professional service firms expand their remit to keep the money coming in.

And we’re not talking chump change here. This is big business. A recent IBIS World report showed Australian accounting firms brought in $19.2 billion in revenue last year while almost $20 billion was spent on legal services.

Rising revenue across the board is perhaps testament to the fact that in most cases professional service firms are meeting the challenge head-on and managing to make a pretty penny, even in these lean times.

For Dean Hely, managing partner of law firm Lavan, the need for change was not entirely unexpected.

“If you look back 20 years ago you would have said that there was probably more a focus on black-letter law — just the strict legal interpretation,” he says.

“These days there’s an expectation from clients and the community that you utilise your knowledge and skills in a slightly wider sphere.”

Mike Anghie, former Perth partner at EY now consults for the firm.
Camera IconMike Anghie, former Perth partner at EY now consults for the firm. Credit: Michael Wilson

For Lavan and its 170 staff that has meant branching out into property, corporate financial advice, industrial relations and family law to meet client demand and combat increased competition from other service providers.

“Accounting firms are a good example where they have broadened the width of their offering to their clients so they are really, particularly the big four, offering a one-stop shop and I think the expectation from your clients is that we are offering more than just the pure legal advice,” Hely says.

“We’ve got to be careful that we aren’t going outside our remit but within the law practice they may be looking at a transaction but they want you to provide some advice, for example, on tax so you might bring in a tax expert.

“They might want you to advise on corporate structuring so you’d bring in corporate structuring people, and they also may want you to advise on asset protection, so you’d advise them on those aspects as well.”

Lavan opened Quadrant Advisory, a business banking advisory firm, as a standalone business in 2016 and positioned it as an independent adviser between business owners and financial institutions.

Led by former banker Paul O’Farrell, Hely says Quadrant, along with Lavan’s growing family practice, had been a good bolt-on. He expects the need for legal firms to add more ancillary businesses will only continue to grow.

Away from the law, the automation of tasks such as due diligence or discovery has forced the big four accounting and professional services firms to rethink their business model. PwC’s Perth managing partner Michelle Tremain says it has also allowed them to spot gaps in the market.

Tremain, who took on the top job last year after 13 years with the company, says more sophisticated clients want firms like hers to bring something extra to the table.

PwC’s Perth managing partner Michelle Tremain.
Camera IconPwC’s Perth managing partner Michelle Tremain.

“They want specialists and they want the very best,” she says.

“The things we offer now are very different to the standard service we would have offered in the past. The biggest change in the business model has been in the integration service offerings. But it’s not just being integrated, it’s also about bringing real value to clients.”

Bringing that value has also meant bringing in the right people. Tremain says the breadth and depth of what PwC now offers has meant looking far beyond the latest commerce graduate intake.

Its infrastructure services division employs town planners and engineers, former nurses offer advice within the health practice and ex-police officers help take care of cybersecurity.

“We do pride ourselves on building in-house talent but also getting talent from outside, but probably not the traditional areas,” Tremain says. “We would be looking to areas where you would have never have thought to employ someone before.”

That same level of diversity also exists at EY, says Perth managing partner Fiona Drummond. Different perspectives from different professions are delivering better outcomes for clients wanting advice and insights on how to better manage risk, where to seek growth and how to weave digital into their strategy and operations, she says.

The firm is one of the nation’s biggest graduate employers and this year it took in 540. Drummond says a growing number of staff are not accountants or they have dual qualifications.

“Through all of the change, our priority is to ensure our people are equipped to meet the changing skills demanded by the market and that we have a culture that encourages inclusivity, innovation, collaboration and teaming,” Drummond says.

“We know that a diverse workforce and an inclusive workplace is critical to thriving in a disrupted world.”

For EY, the pace of change is evident in the numbers. In 1999-2000 across Australia it had about 200 partners and generated revenue of about $600 million. Today it takes in $1.6 billion through more than 500 partners and 7000 staff.

Fiona Drummond, managing partner at EY WA.
Camera IconFiona Drummond, managing partner at EY WA. Credit: The West Australian

Drummond says the focus on digital technology, human capital and strategy solutions has seen consulting and advisory services become the fastest-growing areas of EY’s business.

“The way we generate revenue is changing. The billable hour is still alive and well, but managed services and revenue-sharing on jointly developed solutions is playing a bigger part in EY’s future.”

Drummond says there has also been a focus on investment in new technology within EY to cut the costs of internal functions and to enhance or create new client offerings.

“You’ve got to understand your client base and what services that client base will require in the future. Then you design your structure off that — through either investment or alliances.

“The ongoing political and economic uncertainty over the last few years has shown us that opportunity presents itself in volatile times. Our clients increasingly expect us to help them find those opportunities, and execute against them.”

Professional services don’t exist in a bubble. Those same disruptive technologies that threaten traditional service offerings are also revenue opportunities as more organisations seek out professional services for advice on how to shake up outdated business models to keep up with the disruptors.

But the advice is only sought if a company recognises its own need to change.

“What people would think of as our traditional services — the audit, tax — some of the technical innovations and automation makes how we delivery those unrecognisable to what they used to be,” says Mike McNulty, Deloitte’s Perth managing partner.

“All the things we go into, it’s because we see there’s a demand that’s not being met. In that technology-enabled business transformation space what we saw was a gap where a lot of the more technology-orientated companies were doing quite vanilla-type projects and were managing these projects in a fairly old-fashioned style of implementation.

“What we saw was the opportunity to come and deliver those services in a very different way, in a more agile fashion, delivering a far quicker business benefit to an organisation.”

The ongoing political and economic uncertainty over the last few years has shown us that opportunity presents itself in volatile times. Our clients increasingly expect us to help them find those opportunities, and execute against them.

Fiona Drummond

McNulty says Deloitte’s evolution — which has included adding property and cyber intelligence among myriad offerings — has been focused on giving clients an end-to-end service. In some cases, that has meant looking outside the business for small boutiques perhaps hamstrung by further capital investment to bring them into the fold.

“We’ve certainly achieved growth in some of these areas by working with those types of organisations and bringing them into Deloitte,” he says.

“If it’s a new-ish capability, what you want to do is bring in like the kernel of an idea — that 10 to 20 people. That gives you a real kickstart versus trying to build something up from scratch.”

McNulty estimates consulting work still makes up about 35 per cent of Deloitte’s work but there has been “significant” growth within the private wealth business serving high-net-worth and private companies.

“It’s a really interesting time for the profession and we’ve certainly faced disruption, to use that term, over the last few years,” he says.

“But I think what the profession, and I would say Deloitte specifically, has shown is we do believe we have a real ability to be quite agile in how we respond to those changes in the marketplace.”

RSM tax director and managing partner Con Paoliello says the rapid pace of change has also demanded faster results, with expectations around turnaround times increasing as technology and society has evolved and communication becomes 24/7.

RSM managing partner Con Paoliello.
Camera IconRSM managing partner Con Paoliello. Credit: The West Australian

“Clients are looking for more holistic solutions to their business needs, not just tax services,” he says.

“There has been no clear trigger or disruption that prompted change, it has evolved over time. That said, technological disruption has impacted on the way we communicate and the speed at which we are expected to deliver

“Technological disruption has impacted on the way we communicate and the speed at which we are expected to deliver.

“Competition is now top down and bottom up so the boundaries have diminished. Clients expect speed — the same quality just faster. They also expect us to have a broad business acumen, extensive networks and act as expert advisers.”

Paoliello says RSM is yet to feel the full effects of the gig economy but warned the sector should be prepared. “The future will inevitably bring more competition, employees with a different mindset and expectation and advancements in technology which will dictate the HR practices and policies adapt accordingly.”

As the profession continues to meet these challenges while expanding to meet demand and inevitably encroach further into more boutique areas of advice and service, can the big and small end of town find a happy medium to coexist?

Those at the top of the big Perth outfits think so.

“It’s a very broad ecosystem that we work within and clients require different things of different people,” McNulty says.

“It’s a relationship business at the end of the day and I think you’ll find that there will always be those type of boutiques that will be out there on the market.”

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