Enhancing Client Engagement in Tax Advisory

In this episode David Snider, Founder and CEO — Harness Wealth, discusses the transformative role of technology in tax practices, exploring how tools like practice management software can enhance client relationships and streamline operations. David shares insights on what he sees as three phases of technology adoption in the tax industry and offers practical advice for firms looking to advance their tech capabilities. Tune in to learn how embracing technology can lead to a more efficient, client-focused tax practice.

What you’ll learn from this episode:

• What David thinks are the three phases of a firm’s technology journey.
• How leveraging technology can streamline tax practice management.
• How practice management software can enhance efficiency and client experience.
• Why regularly communicating with clients can strengthen relationships.
• The importance of allocating time and resources to implement new technologies.

AICPA resources

Adding AI into your tax practice — Artificial intelligence (AI) is certainly a hot topic of late. Listen to hear Jason Staats and Ashley Francis talk about the latest information in this area and where you should move forward and where you should proceed cautiously in this Reimagining Your Tax Practice archived session.

Transitioning to a tax-focused CPA financial planner — Tax return compliance is continuing to become more of a commodity. Your clients see you as their trusted adviser and ask about a range of topics that affect their financial well-being. In this Reimagining Your Tax Practice archived session, learn more about practitioners who offer financial planning services and how that has impacted their practices.

Transforming Your Business Model…Technology — The Private Companies Practice Section (PCPS) is developing tools around technology designed to help firms not only identify elements of their current business model that may be holding them back but also offering solutions to help them adapt in this changing environment.

Upcoming event

Tech stack wars in 2024 — With the amount of technology products out in the market, how do they perform in reality? Join our next tech stack wars challenge on Oct. 16, 2024, to hear about the latest in technology for tax practices.

Other resources

Harness Wealth — Learn more about how Harness Wealth strives to provide the next generation of builders confidence in the path to their best financial future.

Transcript

April Walker: On today's podcast,  listen to hear more about leaning into technology for your tax practice. Hi everyone and welcome to the AICPA Tax Section Odyssey podcast, where we offer thought leadership on all things tax facing the profession. I'm April Walker, a lead manager from the Tax Section and I'm here today with a repeat guest. His name is David Snider. He's the Founder and CEO of Harness Tax. Welcome back, David.

David Snider: It's a pleasure to be here. Thank you April.

April Walker: David, I'd love for you to start. Tell us a little bit about yourself and tell us a little bit about Harness Tax and where you see yourself in this world of tax.

David Snider: Thank you for having me. Yes, so Harness has a platform for routine tax advisors that are looking to make their relationship with their clients more seamless and insightful. What that really means is a practice management solution that's tied into a much broader set of offerings. That includes business development to help advisors with leads, a concierge team to help with support, as well as a broader network of resources to help guide advisors and give them the resources of bigger firms.

April Walker: Wonderful. I feel since we talked in Spring of 2022, if it's possible, I feel like the importance of technology is even more important. Maybe that's just me being dramatic, but let's start off just by pretty broad question like, how do you see technology transforming the way tax advisors interact with their clients?

David Snider: Absolutely. I think about it being in the second of three inevitable phases. I think the first was the first stage, which is very typical across industries. My background was spending, now 12 years, building tech enabled services, software solutions, first at Compass, a real estate advisory firm, and now at Harness. Before that in the middle, spent a lot of time at Bain Capital looking at different disruptive technologies. And so that first phase that we went through, very similar to a lot of industries, adoption of email, adoption of technologies that clients can actually submit core documents digitally and not just in paper.

The ability with the early software to actually complete and file electronically. That really is table stakes. If you look at the data, it's 99% of advisors have an Efin, etc. The second phase that we're really still in the early to mid innings of is the software collaboration phase. What that looks like is work-flow automation, ways of interacting with clients to create leverage for advisors and scale. It's not just, hey, I typed an email, send it to one, or I create an engagement letter sent to one. It's using the efficiencies of technology that can, at the vanguard be AI, but really doesn't need to be.

In the vast majority of cases, it's just having good practice management software to create efficiencies for the advisor that end up, ironically, even though you have to spend less time, creating a better client experience and one that's more customized to the individual. It gives them more visibility into what's going on, what's coming next.

The third phase, which I think only a handful of firms are really investing in, fully tapping into, which is totally fine. I don't think the client expectation is there, is around customized insights. How do you not just deliver an efficient workflow? But how do you, at the outset of a tax season, demonstrate to your client that you already know some stuff about them from prior years, here's why we really need just to tweak that. Showing your work. Here is all the different analysis that we ran in the completion of your return or the discussions that we had and at the end of the process, Yes, here's a completed tax document or analysis that you requested, but also here's what it means.

I think that ability to both give insights to people and leave clients like they actually understand tax, the tax process, the work that you did, is going to create massive benefits in terms of client's willingness to pay, their retention, their happiness, etc. Very few firms are at a Phase 3 in our opinion. You don't need to be concerned if you're not. Because there are a few, if any are. But certainly making sure that you've put in place or have the opportunities to go into next tax season and really nail Phase 2. I think will put advisors in a great place to really capture what is happening on the vanguard in Phase 3.

April Walker: We definitely hear from people and when I'm out talking to firms, people who are definitely still in that Phase 1. Where they transferred to Cloud. That seemed like a huge deal and leaning into some technology, but maybe taking that next step into two, even is difficult. Do you have any advice or thoughts on that? Because everyone is so busy and it's hard to figure out, especially if you're really small, it's hard to figure out how to take that time and really invest in trying to get to that next step. Any ideas or suggestions there?

David Snider: I think the good news is there are a lot of very good practice management software that did not exist or did not have the robustness that they do today, five years ago. One of the things to consider in evaluating the different choices is, ensuring that you price in the value of your time as a practice leader. In that there is a learning curve on anything, no matter how good the technology is. There are some that I think are much cheaper and may have the technologies you want to check the box on. But I think really understanding what is the on-boarding team look like?

What does the client success infrastructure of that solution look like? Who's going to make it as easy as possible to set you and in many cases your team up to use it successfully? And to answer issues that will inevitably arise from any change. I think we have over-invested in those resources, because we know there's a lot of change and fully transitioning the way that you think about practice management, some of the potential third-party software you can plug in, etc. That's important.

I think whatever approach that you take, whether it's working with Harness or a whole host of other solutions that are out there that are very good. I think just making sure that you understand, hey, what are the functionality each have, what's going to be accretive to the way that you want to work and your staff and perhaps your clients. But also what's the process going to be to fully utilize and take advantage of that.

April Walker: Those are some good thoughts. Just maybe if we can talk about a few examples of ways that firms can use practice management tools to really help them. Because this is really what it's about. It's about not having to have an Excel spreadsheet of clients and that's all you have. I'm not saying that's what our firms have. I'm just saying, I was in practice for some time and I remember that. What are some ways you can use tools to really advance your practice?

David Snider: I think there's both external components. How do you enhance the way that your clients perceive their process and there are internal things. How do you ensure that you don't miss a filing? The reason that advisors have Excel is just a mechanism to ensure that they do the work for their clients that the clients expect. I think on the external side, the more frequently you're interacting with clients around the tax process, generally the better, not in an annoying way, but I think tax is something clients generally don't want to think about, but definitely want to get right.

It's no different than a patient coming in to a doctor if they have an issue, but don't really totally understand it. Having a solution that allows you to email me before the season starts, to preview of what's to come and the deadlines and things that are upcoming. What do you need from your clients? What is the engagement going to look like from a pricing standpoint? Being able to send out engagement letters that reflect that. So someone feels like they weren't surprised because they had exactly what's being done for them and the pricing terms, etc, outlined being laid out. Having the client questionnaire customized ideally to what the clients already told you in previous years.

It feels intelligent, not like you're starting at Day 1 every year with the same advisor around your materials, etc. All that stuff is beneficial, being able to update them that "I've received everything I need" or expect to hear from me this time in March for business filing. Aspirationally, late March not April 14th, but whatever that may be for the draft filing, what their advisors recommended, etc. Or at extension deadlines, etc. That stuff all again can be done without moving your practice to Phase 2, but it's going to be dramatically more time consumptive. And it's stuff that you can't bill and price for in the way that you want.

Because there are lots of other tax firms that have already made those investments and therefore they can do those things with very little time invested. Internal stuff is really around collaboration, tracking, knowing what clients have uploaded what? Who has been filed? Who's working on documents? Etc. Where are they in the process? Have they paid? The more visibility you have, the easier it is to spend each day, not driven by who is pinging you over and over in your inbox, but who actually needs something based upon external deadlines or prioritization or the revenue they're going to drive wherever that may be as you think about being the quarterback of your practice rather than playing defense. Just having the scrimmage run towards you over and over again during tax season and hoping you're still standing at the end of it.

April Walker: Yes, I love a football analogy. I was just in Minnesota to watch my Tar Heels play. My first trip to Minnesota anyway, it was fun.

David Snider: I went to the Super Bowl when The Patriots played there against The Eagles a number of years ago and it was bone chilling.

April Walker: Yes, we're recording this in early September. It will come out in a couple of weeks and what we're really thinking about, and what I hope our practitioners are thinking about is year-end planning and there's a lot to talk about with impending legislation. There's Tax Cuts and Jobs Act sunsetting. There's a lot going on for you to be in front of your clients and proving your value. Talk a little bit about how technology might assist you with some of those conversations, or pulling data together to be able to help understand who you need to talk to you, and what about?

David Snider: Number 1, I would say, and this is anecdotal, I don't have the data to prove it. The majority of advisors do not proactively email their clients in Q4. Unless they need to collect certain things to do a quarterly estimate, etc. That is a huge missed opportunity. Even if you adopt, no technology, take an hour jot down some thoughts, a few bullets on what could be at stake in the election or the expiration of the Trump tax cuts or of the estate tax exemption, whatever it is, send something that seems thoughtful, and obviously it's going to be thoughtful from any practitioner who cares about what they're doing.

If you do that, you may think, I actually have the time to have something more customized. A, you can use software at least have to be addressed to the person, even if it's a mass email versus just a generic one, but then you could potentially also group your clients and say, hey, I've got 15 law firm partners, and I've got 42 small businesses, and I've got a cohort of people with multi-state issues, etc. I'm going to create three different end of year planning emails.

I'm going to categorize my clients and be able to send out something that's not individual, but that makes you feel like, wow, April is really ahead of the curve in terms of giving the insights that I wouldn't have expected. Although it obviously can be automated, but it takes the adviser having the initiative to create that content and think about what's going to be most useful for. When you do that, feel free to promote the scope of what you can offer. Tax advisors or not, the world's sales-iest profession. In many respects that can be a good thing, but it also does you a disservice where your clients don't know what type of things might be beneficial.

For that end of the year planning to small business owners be like, hey, you're thinking about possibly selling or transferring a chunk of the business to a child or an employee or selling outright, etc. There are a whole bunch of things that you should be thinking about now, potentially some things that may involve tax decisions this year versus next year, etc. I can be helpful with that.

I think highlighting the opportunities around that and giving people the ability to opt in for more complex planning is going to be really accretive. But yes, whether it's Harness practice management solution or others, there are definitely ways to customize the messaging, the cohorts, some of that stuff, but it really starts with the advisers sitting down and saying what is potentially meaningful on the horizon for my clients. And how much time energy do I want to take to customize that? And maybe it's hey, it's one generic one, and there are 10 clients that really move the needle. These are my 10K plus clients, whatever the threshold may be. I actually want to spend some time and really make them feel that I'm paying attention to their holistic needs and how I can be strategic to them.

April Walker: A lot of times we hear people say, I don't want to bother my clients, but I feel like on the other side, they really want to hear from you when you have something to say that's really important and crucial to them. I think it's important. That's a great point you made about reaching out in some way fourth quarter of 2024, because like we said, there's a lot of different things that you could bring up that are specific to their situation.

David Snider: Honestly, my view and it's just a personal view having now been in and around this industry for several years is book-ended communications is extraordinarily rare and extraordinarily valuable. What I mean by that is communication before the season starts, the more customized, the better, but at least something. The same thing at the end, that even after the client has signed a return, you've completed some analysis that post-season follow up.

If it's just previewing when they think about bringing for the next year or some of those planning opportunities goes a really long way, I think in demonstrating value. I'm seeing advisers do the presentation of insights through loom videos and other things that I think is also an element of that. Which is do more than deliver the bare minimum of the compliance requirements, and you will stand out and generate a tremendous amount of goodwill from your clients in whatever form it takes. A Loom video, something semi-customized, something even generic will be helpful to a lot of the people that you work with.

April Walker: Just thinking about some clients you may have worked with with Harness Tax, do you have any success stories that come to mind where technology really improved someone's practice?

David Snider: Yeah. I think we have two different types of advisors that we principally help. The one is a practice with 1-25 employees under 10 million of revenue, that's really making an investment. [They say] we've got a good business. We're going to do just fine regardless, but we also recognize to make it A, sustainable, B, to enable growth,

We've got to be more efficient and we want to not just be good enough that clients don't leave, we want to be better. For a number of those practices, I think the combination of a workflow, practice management technology that can save a couple hours per client with some of these automations of the client engagement letter or the intelligent client questionnaire, the status updates, also supplemented by our client's success team that can help field those level 1 questions that may come into the advisor. They're not necessarily required to answer. They don't require tax expertise, etc. All that stuff gets unburdened. Those firms have then been able to take advantage of new referrals that they generate and a whole bunch of Harness generated clients.

One of the earliest practices that came on to the platform has grown, I think 80, 90% across two seasons because the practice leader is getting a lot more leverage in the amount of time that she spends with each client. She's gotten more resources to talk about in the conversation. The clients, they don't use the network of tax attorneys that we have or some of the other software and database that they have access through our platform.

The other group are people that have been at top 50 firms and for a variety of reasons feel like now is the time to be more entrepreneurial to create their own practice. There's tremendous demand for people that have specialization, nimbleness, a willingness to create a great experience. And one  that joined that had been at a top 50 firm to create his own practice and his first year was able to generate over a quarter million dollars of revenue. That really came from Day 1, adoption of Harness' technology, a few other components to that workflow and the ability to really highlight some areas of specialization and to take a lot of clients that came through our consumer-facing side that brings in clients and distributes those to the right advisors to serve them.

It's really a powerful combination that no matter how good your practice seems, if you free up hours and you position yourself well, you're going to grow. I think giving yourself that time, especially in Q4, to really think through what are ways that you can generate more value, maybe capture a fraction of that incremental value for existing clients and create the space for you to take on new ones that would be incrementally valuable is wonderful. We've certainly seen that just in the top-line value and in really high net promoter scores of the clients that are being served by advisors using our technology.

April Walker: We'll go live before the end of September. Hopefully this will be valuable information for people and we talk about growing. Sometimes firms don't want to grow because they feel like they have too much going on at the time. But what we have talked about and heard and I'm sure you'll echo this is sometimes you need to grow in a different way, like you need to cull some clients and really focus on growing your experience with those really good clients.

David Snider: Grow your free time. Grow your client value and or grow the amount of money that you pocket at the end of the year.

April Walker: All three, I'm going to say, check, check, check for me. David, it has been lovely chatting with you today. Any final thoughts as we're wrapping up?

David Snider: I think we're turning back to that initial theme. If you are an advisor in Phase 1 where you adopted some technology probably 7-10 plus years ago, it's really important, to get ahead of clients expectations. Which I think will rise as more advisers are using technologies to create a better experience. But don't also get anxious. Oh, if I don't have a fully outsourced AI practice then I'm behind the curve or my job's going away. There is secular growth in demand for tax services.

The more that you can devote time to areas that you are advising, building relationships, strengthen relationships you will thrive in this profession. But don't sit in the same as last year mentality. Take Q4, look at what is going well, look at what's going to create the most value for you and your clients and make those investments of time and in some cases, expenditure.

April Walker: Great thoughts. You've been with us before, so you know that in closing on these podcasts — we're Tax Section Odyssey — we're taking a journey together toward a better profession. But I also like to think about other journeys outside of tax. David, share a page from your travel journal, a trip coming up or something you've just recently done. You already had a spoiler with the Super Bowl trip, so that was cool.

David Snider: That's way in the rearview, I don't think the Patriots are making a run this year unless something dramatic changes. But the trip I'm excited about I'm heading actually tomorrow night to Barcelona and watch the America's Cup race as a father sons trip. [He has] always been a big sailor before my time. He spends a lot of the summer and now year-round in Rhode Island. That used to be where the America's Cup always was held and for the last almost 40 years, I think it's been elsewhere. We decided rather than just wait, we will take the trip. We're hoping that Team USA, American Magic, can at least win the Louis Vuitton cup to be the challenger against New Zealand.

April Walker: Worst-case scenario, enjoy some time in Spain which doesn't sound like a bad plan for me.

David Snider: Exactly.

April Walker: Thanks again so much, David. Again, this is April Walker from the AICPA Tax Section. This community is your go-to source for technical guidance and resources designed especially for CPA tax practitioners like you in mind. This is a podcast from AICPA and CIMA together as the Association of International Certified Professional Accountants. You can find us wherever you listen to your podcasts and please feel free to follow us so don't miss an episode. If you already follow us, thank you so much and please feel free to share with a like-minded friend. You can also find us at aicpa-cima.com/tax and find our other episodes as well as resources mentioned today. Thank you so much for listening and happy fall.

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