“If you don’t pay for the product, you are the product”.
This famous phrase was aimed at Google/Facebook et al. They provide useful tools, often for free…but not out of the goodness of their heart! They make money out of you in other ways, often without your knowledge.
Don’t make the mistake of thinking they’re the only ones. Many businesses do the same, even where you do pay them directly as well.
A small business’s most trusted adviser
Accountants provide a key service to small/micro businesses like yours, and their owners like you. You give your accountant information on your income/expenditure. They’ll know the ins and outs of your finances. They’ll have lots of similar clients, who have similar questions/need similar services to you.
They’ll inevitably know associated service/product providers:
– banking
– software
– pensions
– insurance
– mortgages
– legal advice
Any/all of these, plus more. Whatever you need, your accountant can often recommend someone who can help.
Brilliant, right?
Be careful!
For decades, accountants have been a small business’s most trusted adviser. 3rd party providers know this. They understand a recommendation from your accountant adds a lot of credibility. They therefore offer accountants commissions to be recommended to you.
Over time these have grown. Historically they were modest thank you gestures. Increasingly they’re a hefty chunk of the 3rd party’s fee. How can the providers afford to pay such big commissions to the accountant? By charging you well over the odds for the service.
There’s increasingly a financial temptation for accountants to exploit your trust in them to make big additional profits on the side, via commissions, without you even knowing.
“But accountants are ethical professionals, they would never do this!”
The accounting profession has changed. It’s modernised.
Accounting firms used to be archaic old boys clubs. Large fees, but hard-won/easily lost reputations. They’d use jargon and act superior at times, but ethics and pride was central to how they operated.
Now they’re more like businesses. This has pros and cons for the customer.
On the plus side, with “new breed” accountants:
– use of jargon has reduced.
– they focus more on value than time.
– it’s much rarer you get nasty surprise invoices.
– technology adoption has helped streamline their service.
Some of the evolution’s been less good for customers. Downward pressure on fees has meant:
– it’s harder to speak to knowledgeable staff.
– integrity has taken a backseat in the hunt for income.
– accountants look to profit from you in sneaky ways, that still cost you.
Why should you care?
So what if the accountant makes a bit of cash on the side, it doesn’t hurt you, does it.
Yes, it does.
Those 3rd party providers can only afford to pay accountants big commissions by charging you over the odds for the service.
The worst part is when you’re in that situation, you can get a falsely improving impression of your accountant. Relatively speaking, the accountant seems good and great value, compared to the expensive poor associated services you use based on their recommendation.
THERE’S A REASON! Those other overpriced services you’re paying for are paying your accountant, who’s now making huge profits at your expense without you knowing!
What should you do?
You have a few options:
1) carry on as you are. It’s not the end of the world. You’ll likely just be paying over the odds for some things recommended by your accountant.
2) ask your accountant for their policy on commissions. Assuming it gives them permission to receive kickbacks, have your wits about you when asking their advice. Do your own research.
3) stop asking your accountant for advice at all, instead relying on Google/friends. If you’re going to do this, begs the question why have the accountant at all!
4) switch to an accountant that has your best interests at heart, not their own.
“Surely only a tiny handful of unscrupulous accountants profit in this underhand way?”
You’d like to think so…but we’ve had a dig into Ts&Cs of some of the big name accountants in our industry. Every one we’ve seen makes clear in small print they can receive and keep commissions.
Maslins are different
We haven’t received a penny in commission since 2014. Back then, we liked the insurance QDOS offered, well suited to contractors/freelancers. So we started recommending them. They paid us a cut of the premiums from our clients.
Being uncomfortable with this, we spoke to QDOS about it. Apparently no other accountant had queried it(!) but they agreed to giving the client a discount in lieu of commission to us. So our clients get 10% off QDOS rates, we get nothing. You as client are better off, and our conscience is clear.
Since then, whenever we see a good service our clients might benefit from, and they offer us a commission, we negotiate a discount for you instead.
That’s what your accountant’s service should be about. Advising on accounts/tax stuff, but also helping you get the best value on ancillary services.
We want to be your most trusted adviser. To achieve that, our recommendations must be impartial. If for any reason they’re not, we’ll make that abundantly clear to you. We’ve operated this way since 2015, and intend to forever. We’ve made this clear in our Ts&Cs (see third page, 3.1).
It disappoints us that this is a differentiator between us and our competitors, rather than standard for all accountants. But this is the world we live in. We have a comparison of us vs our main competitors here.
