AI and the Future of Advisory

Under the direction of Accounting Today, the 3.5 Version of ChatGPT sat the CPA Exam and failed, rather badly it turns out! However, as Rick Richardson notes in a recent (Sept 28, 2023) article in CPA Trendlines “The most recent Version 4.0 [of ChatGPT] averaged 85.1 out of 100 and successfully completed all four sections of the exam, in contrast to the prior Version 3.5’s average score of 53.1. The chatbot received an 87.5 in the part that rated highest, auditing and attestation (AUD).”

This is a very interesting development for several reasons.

First, it’s amazing how quickly ChatGPT has improved. I seriously doubt a human, even a smart one, would achieve a 32 percentage point improvement in an examination score in just a few months. This performance improvement begs the question: are we looking at the likelihood of close to 100% in the near future?

A second point to note from this exam success is whether an AI Bot, or whatever it might be called, is capable of performing most of the technical functions expected of a low/medium level professionally qualified accountant and do so 24 hours a day, 365 days a year. This represents a potential 673% productivity improvement over a human system with a very low error rate, no bathroom brakes, no idle chatter in the corridor, no requests for vacations, no arguments with bosses or colleagues, and total loyalty – at least until the Bot becomes sentient.  

Tools that demonstrably improve productivity tend to be adopted quickly because of competitive forces but the apparent cost saving inevitably results in price-driven margin erosion as firms scamper to grab market share using price as a lever. This is the inevitable result because productivity improvements increase industry capacity and with it potential idle capacity costs – this would need another essay to explain in more detail.

Another way to look at that is, and related to the above comment, the AI Bot would seamlessly do the work of nearly 7 people. I’m not suggesting that the jobs of 7 people would be at risk but you would be foolhardy to believe that no human jobs will be on the line which has led some people to suggest that AI will not take your job but a person who knows how to use AI will. I agree but I seriously doubt it will be a 1:1 transition.

In my opinion, the people who would most likely be candidates for retrenchment are the least productive ones in the current operating model but ironically (and for reasons I might discuss at another time) they are probably the people you should seriously consider retaining. The real world works in mysterious ways and one of the mysteries is why people (including partners) who operate at a high level in one operating model tend to sabotage an alternative (but future better) operating model that does not align with their view of the world and the source of success.

And this gives rise to a third point. AI is good at what most humans are not good at (or don’t like); namely, endlessly engaging in a non-stimulating task while performing it at a high level of accuracy and speed. With that in mind, some people have suggested the use of AI Bots will go a long way to dealing with the talent shortage in the profession and/or will free up talent for more valuable tasks.

I agree that this may help with the talent shortage challenge but as for the second aspect of the proposition, my feeling is the talent AI is likely to free up is not generally talent that has a use value much beyond the way it is currently utilized. I therefore wonder what value other than cost saving is expected to be created from the deployment of AI Bots? At least one answer to that question can be surmised by understanding that an AI Bot is a tool which, when put in the right hands, will yield enormous untapped value that goes beyond mere productivity gains. A past example of this is the value spreadsheets have delivered in analytical and modelling domains. AI will unquestionably take this to another level. However, my gut feeling that is informed by the past use of spreadsheets as a guide, AI will not make average or even good people great but it will enable great people to perform at an exceptionally high level.

I also wonder whether the current talent shortage reflects an astute awareness by young people that a future in accounting is not a good career choice because of the role AI is expected to play in the profession. In other words, far from it being an answer to the talent shortage, perhaps it’s actually a contributing reason for it!

A fourth point that comes to mind is the question of professional integrity and the possibility of advisory disintermediation. Let me explain.

I have prompted ChatGPT to analyse a 5 year set of financial statements for a business then prepare a report recommending what management could do to improve the profitability and value of the business. It did a credible job in under a minute even on the first pass. I then did a deep dive into some elements of its conclusions (e.g. based on this analysis, what initiatives could management pursue to improve its gross margin) and it was even more impressive. I had invested about 20 minutes in the analysis and report preparation by this stage and realised that I could standardize the prompts and repeat this for many clients.

Three thoughts immediately came to mind from this simple exercise.

First, if I were to give the report to a client what would I charge? My judgement is it would be worth way more than any time-based billing system would mandate but given it was not my experience or insights that was the source of the value can I, with integrity, charge $X,000 and if so should I advise my client that I used ChatGPT to do the analysis and write the report so my value was to draw on my skills to approve and complement its work. In this scenario am I being an imposter? And if I did tell the client that the analysis and report was an AI Bot’s output would the client value it, or me, less? Given that AI is headline news at the moment coupled with the possibility that I have never created a review like this for the client in the past is my client likely to suspect it is not my work and call me out?

Secondly, assuming full disclosure, how would I respond if the client said “give me the prompts and I’ll work with ChatGPT myself.” Do I charge for the prompts? If so what are they worth? Oops, there’s an idea, what if I put together a booklet specifically aimed at SME managers with prompts they could use to extract insights into their business from an AI tool like ChatGPT. If this hasn’t already been done I suspect it will be soon. Frankly, I can’t see AI giving a firm a sustainable competitive advantage because it is not a proprietary source of competence and its low cost will result in rapid deployment. 

But permit me to offer a word of warning (or advice) here. I have had the opportunity and privilege to work closely with hundreds of SME managers (and a couple very large companies) in the past 50 years. Although I may have started my analysis of an organization through the lens of financial reports it became evident very quickly that the challenges and opportunities are not financial but involve the interplay of complex relationships between people and process, both formal and informal, within the organization and between it and its various stakeholders. The insights needed to deal with these issues for a given business, at a given point in time, is not something AI is likely to do well at least in its present configuration simply because this is not an algorithmic issue, it is a systemic issue.

The warning I offer here is AI may give you and your client some comfort from an appearance of credibility (after all it is supposed to have scoured all the available knowledge on the internet) but the solution to a client’s declining GM% challenge for example may not be, say a sales mix, COGS, or pricing issue, but may simply be the result of the behavior of a toxic manager who the owner of the business thinks is fantastic. But also note, this is not just a warning, it’s an opportunity because firms that are able to add their own intellectual and experiential insights to the grunt work AI is capable of performing will be the winners. In other words, competitive advantage will go to those firms or individuals who not only know how to use AI but also know how to do what AI is not able to do.

Third, any organization or person who has access to the financial statements of an economic entity could use AI in the way I have outlined above. Let me put that more bluntly. Cloud-based organizations that currently offer accounting packages could very easily and seamlessly offer a low cost (maybe zero) option for an analysis and profit improvement report. This could go close to disintermediating a large chunk of the accounting profession’s advisory aspirations.

My tentative conclusion on the impact AI could have on the accounting profession is tempered by several deep concerns outlined above. It’s shaping up to be an incredibly powerful tool and the clear trend in it having even more power is scary. People are excited to see how it can improve productivity by dealing with such matters as creating marketing content, answering emails or setting up a chart of accounts but these are trivial things. In relation to its potential in advisory, it is the thin edge of a wedge into the real value creation function of the profession and that is where the battle is going to take place.

In my opinion, AI will have a far more significant impact than the introduction of computers, traditional productivity software, and communication tech has had on the profession. These things empowered people to more efficiently and effectively create customer value. However, AI can actually create that value largely without much input from a human – this is somewhat of an exaggeration but I believe it’s not far from the truth.

I suspect it will fundamentally change the structure of the industry, its competitive forces and the design of its dominant business model. The profession’s belief that it is the unassailable Trusted Advisor will be challenged. As happens when any disruption occurs there will be winners and losers. To be amongst the winners, firms should immediately look beyond the trivial productivity improvement potential of the tool. This is a given and will soon enough fall into the table stake arena.

You need to be asking yourself the following questions:

What might our firm look like if we totally embraced AI as a corner-stone of our advisory business? 

That is, let’s set out to win in this space by setting an ambitious goal to be the dominant player within 5 years in our chosen geography. I strongly recommend you use a strategic thinking framework and to help you here you need go no further than study Roger Martin’s methodology described in his book with A.G. Laffley called Playing to Win: How Strategy Really Works. They describe a 5 level cascade of designing and implementing a strategic initiative and is by far the best framework I have seen and used.                  

What resources am I willing to commit to this opportunity?

This is an investment in the future of your firm. Don’t expect to get a quick return. Remember, your less sophisticated competitors will look for the quick productivity gains and will be drawn into the vortex of intense price competition. They will not be your competitors for long. Let them play in that space while you focus on the long game. They will not attract the type of clients who will see the value in working with a professional who understands the technology and the role it plays in the wider systemic environment of a business entity. This is the first thing you need to get your head around. Where do I want to play and what value do I intend to create – in Martin & Laffely’s words “how can I win?” and “what has to be true for that to happen?” Be totally transparent, tell your prospects you’re going to use AI to do the grunt work and you are going to help them fashion that into a winning strategy, one that’s designed to increase the odds (but not a guarantee) of success, and then you’ll help them execute that strategy. This is an incredible opportunity to jump out of the box while everyone else is mucking around trying to save 30 minutes setting up a chart of accounts .

What business structure and management support system do I need to have in place?

The strategy I’m talking about will not work if you attempt to incorporate it into your existing business model. It is a fundamentally different business and needs to be treated as though it is a startup. You will have resistance from some (maybe all) of your team and shareholders so be prepared. This is unfortunate but some of them will feel threatened and may even sabotage your attempts to create the business despite saying they’re committed to help.

If this sounds hard, it is! But therein lies your opportunity for securing competitive advantage and quite possibly even sustainable competitive advantage. Because what’s hard for you will be impossible for a challenger who is comfortable travelling the path of least resistance; believe me, I’m right about that after spending 50 years in the trenches.

I would love to hear from anyone who can challenge my logic and the conclusions I have reached.


Just for fun I asked ChatGPT to read this post and suggest some headings. In less than 2 seconds these are the 10 it cam up with. My working title and preferred final choice is a slightly modified version #6 but decided to share them because each one raises a question that I believe needs to be discussed.

1. From Failure to Success: The Rapid Evolution of AI in Accounting Tests

2. Beyond Numbers: AI’s Monumental Leap in CPA Exams

3. The 24/7 Accountant: AI’s Promise and Threat to Human Jobs in the Profession

4. Bridging Talent Gaps: Can AI Truly Fill the Void in Accounting?

5. AI and Professional Integrity: Navigating the New Frontier

6. The Future of Advisory: AI’s Potential to Disrupt Traditional Practices

7. Pricing AI’s Expertise: The Ethical Dilemma of Value Attribution

8. DIY Analytics: The Emergence of AI-Powered Client Self-Service

9. Advisory at Risk: The Impending Threat of AI to the Accounting Profession

10. The Real Battlefield: AI’s Inroads into Value Creation within Accounting

One thought on “AI and the Future of Advisory”

  1. Fascinating insight into Ai and it’s place in the armoury of business advisors and accountants who embrace this area. I am arranging a debriefing of this article with my partners to come up with our freshest thinking and action plans.

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