In a recent webinar, Jordan Smith, Operations Director at AG Smith & Co, shared his unique approach to transforming the often-overlooked process of risk assessments and AML (Anti-Money Laundering) compliance into a powerful tool for client management and business growth. He walked through how his firm has developed a system that goes beyond box-ticking, offering value to both his practice and clients by filtering out high-risk individuals early and improving client relationships through consistent, insightful assessments.
Here’s a breakdown of the key takeaways from Jordan’s approach and how you can apply them in your own practice.
Key Takeaway #1: Risk Assessments as More Than Compliance
For many accountants, risk assessments are seen as a necessary evil—something that needs to be done for regulatory reasons, but without much practical value. Jordan admits that his firm used to approach them this way, marking themselves as a “3 out of 10” on how seriously they took it. They relied on templates, checked boxes, and hoped that would suffice during audits by regulatory bodies like HMRC and ACCA.
However, an experience with a long-standing but problematic client made Jordan rethink the entire approach. This client, with whom the firm had worked for 30 years, consistently caused headaches—poor record-keeping, avoidance of meetings, and late tax payments. While technically compliant with AML rules, the client was far from ideal. After parting ways with them, Jordan realised he needed a system to identify and address such clients sooner.
His solution? A more holistic risk assessment process that evaluates both compliance and the broader relationship with the client. This means looking beyond AML requirements to assess how well the client fits the firm’s way of working and whether they’re aligned with the firm’s goals and values.
Key Takeaway #2: Red Flags at the Onboarding Stage
One of the most crucial lessons Jordan has learned is to catch problem clients early—ideally before they even become clients. During initial prospect meetings, his team now looks for “red flags” that suggest a potential client might not be a good fit.
These red flags aren’t necessarily about AML compliance but focus on the client’s overall attitude and approach to running their business. For example, how does a client react to the suggestion of setting up a VAT registration or employee pension? Are they resistant to using technology or paying taxes? These warning signs can be enough for Jordan to decide that the client may not be worth the risk.
Tip: Develop Your Own Red Flag Checklist
Jordan’s approach here is simple but effective. He doesn’t use a formal checklist but relies on his team’s experience to spot potential issues. However, he suggests that practices looking to adopt this approach can start by developing a formal checklist or set of questions for onboarding new clients. This could include:
- How do you handle tax payments?
- Are you comfortable using accounting software?
- How do you manage employee benefits and pensions?
- What are your business goals?
By filtering clients at this early stage, you can avoid onboarding those who are likely to cause issues down the line.
Key Takeaway #3: A Three-Stage Risk Assessment Process
To formalise the risk assessment process, Jordan has implemented a three-stage system at AG Smith & Co:
- Initial Red Flag Stage: As mentioned, this is where potential issues are identified during the prospect meeting.
- Ongoing Risk Assessment: This is the more traditional part of the process, where the firm ensures ongoing compliance with AML regulations. For existing clients, they assess factors like whether taxes are paid on time, if the client has high cash transactions, and if there are any new developments, such as changes in business structure or new directors.
- Business Health Score: This final stage is where Jordan’s approach becomes truly innovative. Every client is given a “Business Health Score,” which measures three key areas:
- How well they manage their business finances (e.g., paying taxes, clean director’s loan accounts)
- Whether they have clear business goals and a roadmap for achieving them
- How effectively they are using their accountant (e.g., whether they are on accounting software, pay monthly, and have proper bookkeeping in place)
This score, out of 100, helps the firm identify high-risk clients, who may require more attention or education. Clients scoring low can be engaged in conversations about improving their business operations or offered additional services, such as management accounts or software setup.
Key Takeaway #4: Turning Risk Assessments Into a Value-Add Service
One of the most striking aspects of Jordan’s approach is how he turns risk assessments into a tool for client engagement and business development. Rather than viewing the process as a burden, he uses it to offer value to clients. For instance, low-scoring clients can be introduced to services that will help improve their business, such as software implementation or cash flow forecasting.
By turning the business health score into a conversation starter, Jordan can upsell services and deepen his relationship with clients, all while reducing risk to his own firm. He’s even considering rolling out this scoring system on his firm’s website as a tool for prospective clients to self-assess before they engage his services.
Key Takeaway #5: Managing High-Risk Clients for Long-Term Success
In his examples, Jordan described two clients who went through the firm’s new risk assessment process and experienced significant positive changes. One client, who was initially high-risk due to poor tax management and messy accounts, became a model client after implementing some of the recommendations from the assessment. This involved setting clear business goals, implementing proper bookkeeping, and using management accounts to monitor performance.
Another client saw their business value nearly double—from £2 million to £4.2 million—after going through a rigorous business health process in preparation for selling the company. By focusing on improving the business’s financial health, AG Smith & Co not only reduced the client’s risk but added immense value to the client’s business.
Final Thoughts: Start Small, Think Big
Jordan’s advice for firms looking to improve their own risk assessment process is to start small. Begin by focusing on the compliance side of things, using tools like GoProposal to streamline AML checks, then slowly introduce a more holistic risk assessment that includes business health and client alignment with your firm’s goals.
By taking a more proactive, value-driven approach to risk assessments, you can transform a compliance task into a business development opportunity that benefits both your practice and your clients.
Transform Your Onboarding Process Today
If you’re looking to overhaul your onboarding and risk assessment process, start by analysing your current approach. Develop a checklist of red flags for new clients and consider implementing a business health scoring system to add value to your relationships and protect your firm from risk.
To see Jordan’s approach in action and explore more practical onboarding tips, check out the full recording from the Elevate Summit!