AI is claiming expertise
In the last year, ChatGPT, Google’s Gemini, Microsoft’s Copilot, and many other AI tools have shown uncanny abilities to answer complex questions and process vast amounts of text information in seconds. These AI chatbots give travel advice, diet advice, and, yes, tax advice, just to name a few, confidently and, often, for free. Armed with specialized tax code knowledge through a process known as “fine tuning,” these large language models can emulate—convincingly!—an expert in almost any field.
AI is software
Let’s take a perspective on the current disruption, to understand what is happening and where it’s all going. We’ll start with a fact: AI is software. And the tax industry has a history of disruptions by software. In recent years, over 62 million households in the US have used tax software to file their income tax returns during a tax season. Virtually every tax practice relies on tax software to deliver its services to clients. Expert tax software had long been central in the industry. And yet, tax professionals’ share of the market has remained fairly stable over the last decade.
We’ve seen this before
AI disruption may be different on some dimensions but it’s similar in many respects to these prior disruptions. When tax software first burst onto the consumer market in the 1980s, it sure felt like as much of a disruption of the industry as the one we are facing now.
The fear was similar—if clever algorithmic programming can replace the decision making of a seasoned tax professional, why would anyone pay for your practice? People were using tax software programs to save on paying the fees to tax professionals. Across the U.S., clients of tax accountants were switching to software-assisted tax preparation by the millions. And yet the industry has survived. Some practices were even able to grow!
Then came the internet-based software disruption. Now it wasn’t even necessary to go to the store and buy the software package, let alone drive to see a tax professional. You could just visit a website whenever and wherever it was convenient for you to do your taxes. Again, many in the tax preparation industry were worried, some were scared to lose their clients and their business. And again, the industry survived! Those who were the pioneers in adopting the internet were able to grow faster than the competition.
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What does it take to thrive in the AI era?
Like during the previous disruptions, businesses that have a chance to thrive now will be pioneers in using the new tools in their work. And pioneering the new approach to running an established business requires a clear strategy, not just in the leader’s mind, but also on paper, as a well-articulated plan.
Such a strategic plan must be:
- Easy for every key decision-maker in the firm to understand
- Have clearly defined milestones and checkpoints for evaluation
- Pre-scheduled reviews, progress assessments, and opportunities to adjust for realities on the ground
A good strategic plan of your practice has to seriously consider the following points:
- How much and in what ways to specialize, by choosing the most promising market niche
- How to invest in understanding your clients and their needs
- How to invest in the human capital in your practice
- What opportunities in the market to pursue and which opportunities to forgo
- Which threats in the market to watch closely
Only after you have a clear strategic plan can you seriously consider which aspects of your operations and services to optimize with the use of AI tools.
What can you do now?
To weather the AI storm, you can start by developing a clear strategy. A prerequisite for developing a sound strategic plan is understanding your position in your local market, recognizing market trends that are affecting your business, and identifying the threats and opportunities around you.
Start by getting precise information on your market position, threats and opportunities by requesting a custom report for your practice from our strategy assessment series.
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