There’s a ringing alarm clock for the accounting profession as baby-boomer partners reach retirement age. At least two Sussex County accounting firms have already merged because of it, and, when one C.P.A. there died suddenly, another local firm purchased his practice.
Michael A. Trulio, a partner at Gunnip & Co. in Wilmington, said succession planning is something C.P.A.s have long advised their clients to do, but now they’re facing the issue themselves. “We’ve seen them go through it and struggle with it, and, now, we’re faced with it for our own firms,” he said.
Do the math: About 82,000 graduates earn accounting degrees each year nationally, but only about 40,000 take the exam and about 26,000 pass it.
“While accounting professionals are graduating at a higher level than they ever have, the number of people sitting for the C.P.A. exam is sort of constant, so the pipeline isn’t as full as we’d like it,” said Jonathan D. Moll, chairman of the Delaware Society of Certified Public Accountants and a partner at Belfint, Lyons & Shuman in Wilmington.
The accounting profession has traditionally been a pyramid where there were always more people coming in behind you to fill your spot,’’ said David C. Doane, a director at Jefferson, Urian, Doane and Sterner in Georgetown. “Now, there is more competition for that talent. There is demand for them in other work situations. Graduates might go into financial services. If they take accounting, they can really go into any field of business they want because an accountant has to know so many facets of the business world.”
Doane said he knows of a handful of firms that were sold or merged when the shareholders reached retirement age, had health issues, or, in one instance, died.
“There have been some, and I think they will probably continue. There have been several firms who have sold upstream to larger firms,” Doane said. “The demographics speak for themselves. A large number of the current C.P.A. profession is north of 50, and, for a period of time, there is a concern among a lot of C.P.A. firms about succession. Where will they turn to have people take over their practices — whether it’s through an internal transition or whether they will be selling to an outside party.”
Trulio said more Delaware firms are competing for young C.P.A.s: “Wilmington is seeing the same demographics and issues that are hitting firms elsewhere. It’s become more competitive from a recruiting standpoint. There are more firms that seem to be competing for the same students, and they’re competing earlier on. Now, the students who are seniors have jobs planned. Our firm recruits interns for the junior year.”
Large firms like Gunnip and Belfint and Jefferson, Urian start planning for succession years ahead, and the Delaware Society of Certified Public Accountants conducts succession-planning seminars for sole practitioners and small firms.
Moll said Belfint starts grooming C.P.A.s as soon as they walk in the door out of college. “We sort of cringe at the word ‘succession,’ because we think of it as more of an evolution. In our firm nobody has to learn anything new when someone retires. We feel confident that we prepare people who are willing to take the reins long before it’s actually needed,” he said. “We’ve been very lucky in creating this culture a long time ago because we’ve had succession take place, and it’s been very successful. When people retire, it’s just a checklist we go through.”
Moll said it’s essential to get the retiring partner’s buy-in to assure a seamless succession for clients. “An important element to be successful in succession is to make sure the retiring partner is taken care of. You have to have the retiring partner buy into that transition plan to make sure it’s successful.”
Belfint asks partners to inform the firm three years before they plan to retire, if they know. “The final year here is really like the swan song,” he said. “It’s like the congratulatory parade. We don’t have to worry about any quick transitions during that year. The client has already established a relationship with the new C.P.A., who is going to take over that account. By the time that retirement happens, the new C.P.A. would be serving that account for more than a year.”
Trolio said local C.P.A. firms often plan five to seven years ahead because they are aware their current leadership groups could be winnowed in the next few years due to retirements. “I think it’s a challenge to most of the firms to maintain and provide that level of leadership as far as supervisors, managers and younger partners to enable that transition properly. It’s something a firm has to look at,” he said. “Theoretically, when you think about it, I think it is a reason why firms merge. Some smaller firms might not have the depth of leadership.”
Jefferson Urian has already successfully retired two founding partners, Doane said, and they try to identify C.P.A.s who could fill partners’ shoes and get them in front of clients. “We have to pay them, but we also have to give them opportunities and support them,” he said. “We actively try to get our staff in front of clients. We think that helps the individuals get more ownership into the process and get to know people. We think that makes them more desirous to stay and eventually move into ownership positions.”
Doane said technology has really helped the industry attract new professionals with family-friendly workarounds — laptops and cloud environments allow C.P.A.s to work some hours from home.
Companies are more flexible too, he said. “A lot of firms are learning to adapt and say, if your family circumstances don’t allow you to work umpteen hours but you can put in good-quality hours and you’re doing quality work, there’s going to be opportunities to grow. You’re not going to be held back,” Doane said.
“We try to keep our people in 40- to 45-hour work weeks,” he said, except during the February-March-April tax season when it could range from 55 to last year’s 70 hours due to the Affordable Care Act, tangible property regulations and the IRS’s slow unrolling of new regulations.
Even as enrollment in college accounting courses is at record, a 2015 survey by the American Institute of Certified Public Accountants said finding staff was a top concern of C.P.A. firms nationwide. (Other top concerns were compressed hours during tax season and declining service by the Internal Revenue Service.)
“Firms are finding it difficult to find and retain staff who are equipped to take on leadership roles. This is further complicated with the different perspectives and expectations of the next generation, who may not want to work the lengthy hours that current leaders put it,” said Natasha Schamberger, the AICPA’s associate director for firm services. “This could possibly mean that it might take two new partners to replace a retiring partner.”
Accounting firms are not the only ones going through transitions. Their clients are transitioning, too. Several Delaware C.P.A.s said their clients who once did business only locally are growing across state lines and even globally. “A client that once did business only in Delaware, may be doing business nationally or globally, and their needs, from an accounting standpoint, are changing,” Trolio said.