Accounting grads and mid-career CPAs should be very concerned about the continuing consolidation in the accounting industry, says Joe Tarasco, CPA and president of Accountants Advisory Group, a strategic consulting firm catering to accounting organizations.
In an interview with eFinancialCareers, Tarasco says that industry consolidation is putting a real strain on quality and seasoned staff. While the Big Four and second tier firms, such as the likes of McGladrey, Grant Thornton, Crowe Horwath, and BDO USA, aren’t going anywhere, the remaining smaller firms are feeling the pressure to combine forces, especially as the economy lags and senior partners age and look to cash out.
Uncertain Times Ahead
For accounting grads entering the profession, a shrinking pool of employers, aging senior management, and uncertain times are never a good thing. Midcareer CPAs have even more to fear, says Tarasco. A merger might leave an experienced CPA with less independence at the newly formed firm, or it could mean there are many more CPAs on the corporate ladder ahead of them. And, as surprising as it may sound, Tarasco points out that the bulk of accounting firms simply don’t fund retirement for their partners. So, if the recession takes a chunk out of the profits and subsequently the bonus pool, partners have a real reason to worry.
Show Me the Money
Younger accounting professionals and seasoned CPAs are also fretting partner compensation models. Tarsaco notes, “There needs to be accountability and pay for performance.” Partners at smaller firms weren’t always held accountable, he says, and many of them really became complacent. But that’s not good enough anymore. Now firms are giving a harder look at results, moving partners out of their comfort zone. Tarasco adds, “There were a lot of firms —those below $100 million— they used to simply divide profits.” But he notes that the lagging economy and disgruntled CPAs are forcing firms out of a sense of complacency. “They’re tying comp to performance again.” That may be good news, especially for hard working younger CPAs.
Keeping Gen Y Engaged
But the millennial generation is also anxious about the demands of working at a high pressure CPA firm, says Tarasco. The ever-increasing stress of the job is a reality for the accounting world. However, the hectic pace simply may not jive with what Gen Y is looking for from an employer, he says. And, many younger employees are simply unhappy with the time it takes to make partner. That’s only exacerbated with fewer firms out there. “This is a generation that needs to be focused and challenged,” says Tarasco. “They want to know what the short-term opportunities are.” In the accounting profession, the big payoff of making partner might come a decade or so down the road. “That sounds like a lifetime to many, and firms are trying to deal with it.” As firms scramble to capture good talent, many are overpaying for the newbies coming in. But the policy can impact the bonus pool. Some firms have even started to offer the title of partner with no equity stake, and that’s left many a CPA in a strange place, he says.
Best Opportunities for Newbies
For the best and brightest, the Big Four, and then the second tier firms, are still the best bet for pay, security and benefits. But for those who don’t find a spot there, Tarasco says there is great value in working at a smaller and more entrepreneurial accounting firm. He just admits that finding the right one can take some homework. “They simply don’t recruit on campus,” he adds. The growing wealth management sector has created more opportunities for CPAs. Private equity firms and hedge funds also recognize the importance of CPAs, and despite the economic downturn, they’ve continued to hire accounting personnel, Tarasco says.
For accounting grads looking to avoid the overwhelming pressures of an accounting and consulting firm, a private industry spot is increasingly becoming more attractive, he notes, especially for millennials who are looking for a bit more work-life balance. Typically, accounting grads find initial opportunities as staff accountants in a company’s internal audit, tax, or financial reporting divisions. They might eventually rise up the ranks to a senior manager role, and then, possibly, on to a spot as controller or CFO. Unfortunately, there are fewer accounting positions in tax departments and many other departments with the tech improvements in the field, says Tarasco. He also notes that there are fewer CFOs spots available in private industry, as a result of the recession and the inevitable slowdown in business growth.