Long Island accounting firms add services in effort to boost revenue

Long Island Business News, Sep 19, 2008 by Claude Solnik

When one of Weiser's clients decided to sell a building, they asked the accounting firm for help finding an appraiser. Weiser didn't simply advise the company whom to hire: The firm did the appraisal itself.

"I said, 'You know we have a real estate valuation division that could help you with that," said Andrew Cohen, partner in charge of the Long Island practice of Weiser in Lake Success.

In an effort to boost revenue and better serve clients, accounting firms are helping clients with more than just numbers.

Although the move into diversified services isn't new, it represents a return to the past following a backlash against growth beyond the profession's fundamental financial mission.

Accounting firms in the 1990s began to spin off and sell consulting operations. Ernst & Young sold its consulting business to Cap Gemini. KPMG spun off its consulting unit as Bearing Point, while Deloitte retained its consulting operations.

But accountants claim they can provide consulting, as long as they're careful about which services to offer audit clients.

They argue that the exit from consulting may have been premature and that it's possible, through proper procedures and safeguards, to provide additional services.

"We'll bring our supply-chain guys in and say these are the best practices we know," said David Kirschner, executive director at Manhattan-based Ernst & Young's Melville office. "In terms of traditional accounting, we're going beyond that. We're saying, 'Let us help your business, not just your financials.'"

Looking beyond numbers

As accounting firms grow, they're launching or expanding specialized subsidiaries in such diverse fields as real estate appraisal, staffing and information technology - hoping to parlay their status as a trusted advisor into other services.

They often operate these other businesses as independent limited liability corporations, separating them from the firms' mainstream accounting practice, which provides greater independence.

"They're separate entities," Cohen said. "LLCs are more flexible than corporations."

Many accounting firms such as Ernst & Young no longer describe additional services as consulting, but as advisory services. More than the word for the work, they say, has changed.

"The stereotype of a consultant typically involves implementation," Kirschner said. "We don't do implementation. We advise on process."

In addition to Weiser Realty Advisors, a wholly owned subsidiary of Weiser that appraises properties, the firm owns Phoenix Resources Group, which places financial professionals.

"We're a full-service operation," Cohen said. "You might call it one-stop shopping. Who else to go to other than the trusted advisor?"

Offering expanded services has a residual benefit: Additional expertise can help accounting firms do their accounting work for clients, making sure they value property accurately, for example. "The client has to value their real estate under fair-value accounting," Cohen said. "They [Weiser's real estate appraisal business] could help us audit the assumptions."

Melville-based Marcum & Kliegman merged with RosenfarbWinters, the largest forsenic accounting firm in the New York metropolitan area, to create M&K Rosenfarb.

After hiring 250 people in 2007, Melville-based Marcum & Kliegman also launched its own staffing operations, M&K Executive Search, to place financial professionals at other firms.

And Ernst & Young has been growing its advisory arm, offering a wide range of business risk advisory services as well as the standard assurance services of an accounting firm. In addition to advising on computer systems used for internal controls, Ernst & Young advises regarding outsourcing, consolidation of systems, security and privacy, and even helps firms grow their staff.

The firm has grown its information technology risk operation to more than 300 people working on computer fraud and security.

But while accounting firms are developing new areas of expertise, these areas are usually tied to their core business.

Weiser primarily places chief financial officers and comptrollers rather than filling in staff at lower ranks. Marcum & Kliegman's executive search operation focuses on financial professionals with salaries of at least $100,000.

Non-accountants wanted

Accounting firms' diversification is prompting them to hire people who don't have traditional accounting backgrounds.

Ernst & Young, for instance, employs former FBI agents and former members of the military in its Advanced Security Centers, which provide security services and instant responses to problems.

"They're focusing on hacking, threats, privacy," Kirschner said. "If we're hired to do work by the company to see how strong security is, we'll try to break into a building. Try to get in from a physical security perspective."

Ernst & Young also examines computer systems to make sure data can't easily be altered. The idea is that in addition to detecting fraud, firms can help prevent it.

Kirschner said his firm hires people with backgrounds in accounting, security and technology. And accounting firms have more than their share of IT professionals as they delve into the electronic entrails of computers to detect fraud and examine financial records. Kirschner, for instance, is not a CPA, but has a background in computer science.