The professional services sector is in "fine fettle" as it enters a challenging period of increasing competition, changing customer expectations and automation.
Accountants are among those covered by Westpac's report into the professional services sector. Photo: 123RF
Westpac bank's report into the industry, which includes law, accounting, advertising and consultancy firms, said the sector generates about $26 billion in annual revenues and is made up of about 43,000 firms.
About half of these firms have sole owners, while another 40 percent are small firms.
Westpac industry economist Paul Clark said while the sector had easily outperformed the economy in recent years, despite a brief period of hardship when Covid-19 first emerged, he expected some firms will struggle as the industry enters a period of disruption.
"Looking forward, increasing customer expectations, rising competitive pressures and the ever-quickening pace of technology are likely to accelerate change in the sector."
He said the sector as a whole was in "fine fettle" and was well prepared to handle the changes, however, there were some smaller firms, who were resistant to technology and relied on personal relationships, that would struggle.
The report concluded that customers were paying greater attention to environmental, social, and governance issues, and it was incumbent on firms to not only ensure their views on these matters aligned with their clients, but also to demonstrate they were taking practical steps to play their part.
"So, the professional services sector has to adjust accordingly and the one way they do that is by moving up what I call the value curve."
By this, Clark meant firms should look to automate time-consuming tasks so staff could focus on higher value work.
He said this would eventually result in a change in how professional services charged clients for their time.
Typically, firms would add up their time and materials and add a margin, and deliver a service, he said.
But he envisaged that pricing would become more results driven, whereby services firms would be paid for their ability to deliver clients the outcomes they were seeking.
"If the professional service provider delivers on the outcomes that the customer seeks it will be compensated well above what it ordinarily would have been under the input-based pricing model."
