burnout is driving some increases.
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retirement’s great! long awaited, well deserved.
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but it’s not so great if you’re not the one retiring. at accounting firms, retirement often means trouble.
- there may be no one to replace the retiree.
- there may not be a succession plan in place.
- retirement benefits or processes may not be adequately defined.
- more than one baby boomer may be retiring in the same year.
- the loss of the retiree may mean a loss in clientele.
- there may be second thoughts about mandatory retirement.
- younger professionals may have no interest in becoming partners.
- replacing a professional is difficult. replacing a leader is often impossible.
crucial issues
these are crucial issues in an industry suffering from a shortage of talent just as an unprecedented number of older professionals are bowing out.
the 2024 rosenberg national survey of cpa firm statistics offers hard data on how well accounting practices are prepared for and dealing with retirement. here are some highlights. note that the numbers are for 2023.
- the percentage of firms with mandatory retirement seems to be in decline. among firms that participated in the survey in 2022 and 2023, the percentage with mandatory retirement dropped from 70 percent to 66 percent, a decline of 6 percent. note, however, that those numbers are for partners who began to relinquish their equity and began the capital and goodwill payment process. many of them continue to work at their firms.
- the larger the firm, the more likely it has mandatory retirement provisions. among the smallest firms – those with $2-5 million in net fees – 49 percent have such provisions. at $5-10 million firms, the number is 61 percent. at $10-20 million firms, it’s 73 percent. among the largest, it’s 84 percent. all of these numbers have been declining since at least 2020, though the decline has generally been by low single-digit percentage points each year.
- client retention following a retirement remains strong, changing little since 2020. firms of all sizes retained at least 93 percent of their clientele, with the largest firms leading at 96 percent.
- roughly a quarter to a fifth of most firms reduce partner retirement payments if clients leave after retirement. this is most common at the smallest firms, with 26 percent reining in payments. only 14 percent of the largest firms reduce payments if clients leave. the same is true at 20 percent of $5-10 million firms and 23 percent of firms billing $10-20 million.
- the average age of partners is pretty steady across the years and among firms of all sizes, averaging out to 52 years. an average of 54 percent of partners are older than 50, though at the smallest firms, it’s only 48 percent. an average of 22 percent are over 60, dropping from 24 percent in 2021. the radical deviation is at firms netting under $2 million, where 33 percent are over 60, a big drop from the 43 percent in 2021.
some firms are seeing an increase in retirements because of burnout, according to tamera loerzel, at convergencecoaching.
“partners share that they are burnt [out] … and don’t have the time to work on practice growth or people developing, with some even taking early retirement so they don’t have to continue on the path they are on,” loerzel says. “firms have made strides in solving the capacity challenge by hiring non-cpas or client service coordinators to manage the client workflow and communications as well as other tasks that don’t require an accountant.”
retirement isn’t going away. it’s as inevitable as death and taxes. preparing for it takes years. as an observation to the survey data on managing partners’ client responsibilities says, “as firms navigate the people shortage, changes to the profession, technology and partner retirement, it is critical to have leadership guide the organization.”