Xero foresees consolidation across different advisor channels of accounting, bookkeeping and financial advisors to continue in 2014.
Managing director of the accounting software vendor, Chris Ridd, is already seeing many accountants offering financial advisory services to high net worth clients.
"A number of them are setting up bookkeeping arms as a feeder for higher fee accountancy services," he said.
At the same time, Ridd said that financial advisory firms are picking up accounting practices and are moving to more full service providers to SMB and high net worth clients.
"There is a real mix of cooperation between advisors as well as competition, so that creates a tricky environment to work across all three advisory channels of accounting, bookkeeping and financial advisor," he said.
To help advisors move to full service offerings, Ridd said that Cloud platforms will become even more important in delivering "real time and value-added advice" to businesses.
These advisors are also expected also move to value-packaging and fixed fee offerings, with Ridd adding that it includes diversifying to other service portfolios, such as IT and advice on Cloud offerings, to improve business workflow.
"We will also see the continued trend of advisors branching into other business advice services such as targeted business process outsourcing, occupational health and safety, and HR management," he said.
The changing face of financial advice
Xero comes into 2014 after spending the last year moving into the financial advisor space with Xero Cashbook, its platform for income and expense classification for financially advised clients.
"Whilst we had seen a growing trend of accountants with financial planning divisions using our Cashbook product to manage their clients, we had not really considered the rapid pace of change with the financial advisor channel and the suitability of our Cashbook product for addressing this market," Ridd said.
Xero's traditional channel to small business has been via accountants and bookkeepers, though Ridd admits that the software vendor was questioning whether it wanted to stay in the personal finance manager market with Xero Personal.
"This was a popular product but lacked substantial take-up and was not well suited as a platform for the advisor, with no reporting, no Chart of Accounts, and no API," he said.
After running some workshops with financial advisors, Ridd said Cashbook experienced a "huge uptake" during a pilot, with over 300 financial advisors signing up as partners by November 2013 and promoting the product to their clients.
Ridd attributed this demand to the new Future of Financial Advice (FOFA) legislation coming into effect, as well as the need for financial advisors to increasingly track the spending and earning habits of their clients.
Xero expects further momentum with financial advisors in 2014 following the announcement of a partnership with Midwinter, a provider of Cloud-based tools for advisors.
Sign up for Computerworld eNewsletters.