Traditional CPA paths are finding alternative means to meet new market needs and talent requests.
Acknowledgment – This reporter works yearly with Master of Accountancy Students at Vanderbilt’s Owen Graduate School of Management as a guest lecturer. Angles in the article below originated from course preparation and interviews with professionals in the accounting industry.
Higher education programs in accounting have seen a marked shift in the students gravitating to their campuses. A previous and dedicated focus on becoming a Certified Public Accountant (CPA) was the norm. Today, graduate students at business schools nationwide are entering their programs to secure baseline skills to apply to professions outside of traditional career trajectories.
The changing currents of the talent pool have impacted existing accounting professionals that aim to adjust to new client expectations and market shifts.
A survey conducted by Spotlight Reporting asked accounting professionals from all over the world whether or not they plan to offer financial advisory services in the future. Eighty percent of respondents said they plan to, and 70% said they already are.
Just over a decade ago, these results would have looked vastly different. Studies show that more accounting firms are providing advisory services than ever before. According to The Practice of Now 2020: The essential report for accountants, 82% of accountants say clients are looking for more services and more flexibility.
That desire for flexibility creates a domino effect for preparatory education and professional institutions working diligently to provide consistency to the talent pool.
E. Scott Johnson, Ph.D., Associate Professor of the Practice of Accounting and Faculty Director of the Master of Accountancy (MAcc) Program at the Owen Graduate School of Management, Vanderbilt University, sees the potential for expanded services. Yet he cautions against broad-base applicability for today’s schools.
“Designing a comprehensive program for financial planning or wealth management is a big ask for all but especially for the largest business schools because of the diverse set of skills (and specialized classes) required for either career path,” says Johnson. “On top of a strong background in finance, both fields require extensive knowledge of tax law, and those are just the beginning of the hard skills needed to excel. The best financial planners or wealth managers will set themselves apart with outstanding soft skills.”
Johnson continues, “If accounting firms want to venture deeper into the world of financial planning or wealth management, I suspect they would not be able to find enough CPAs with the necessary skill set to easily step into the role. Because most accounting programs are laser-focused on turning out students who can pass the CPA Exam, there is precious little room left to offer such a wide range of electives.”
The opportunity on the professional side to provide additional services can run counter to the practicality of higher education programs. “If only a handful of students choose this niche path, then business schools would be investing time and money into courses that might be lightly attended. If there is one thing business schools understand, it is business, and the law of supply and demand makes it unlikely that many schools would be able to provide this type of ‘Swiss-army-knife’ educational path,” concludes Johnson.
Vanderbilt University's Owen Graduate School of Management students collaborating. Owen was recently ... [+]
The accounting field is not immune to entrepreneurial mindsets. Many entering the field may want “Swiss-army-knife” opportunities even if graduate programs and clients have different ideas based on experience and tenure.
In The Field
Heath Walters, the founder of The Walter Institute, represents the changing tides of financial careers adapting to market needs and opportunities. Walters, looking for additional opportunities to grow the institute, has found fruitful results through actively engaging financial advisors.
Over the last 20 years, Walters has integrated accounting with financial planning to successfully interact with advisors to support the tax planning activities of his clients. “I found that the gap between tax planning and financial advisement was real, especially in the eyes of the client. The opportunity to provide greater client support and services brought me to a professional path of strategy and support that has been good for my business and my clients,” says Walters.
Walters believes that many business owners and do-it-yourself tax filing technology have played a role in the types of services expected and not expected from a given client. “Most business owners already file tax deductions from mileage for business travel to a home office. The chessboard has changed and the pieces are moving by themselves,” he says.
According to Walters, a downstream effect impacts billing practices for those caught between traditional rules of engagement and an evolving industry trying to figure out the classic “who’s on first” conundrum. He finds that students pursuing careers in tax, like most sectors, are looking for growth opportunities in addition to supplying a specific set of skills for a market in need.
Heath Walters represents an expanding subset of tax professionals looking to bridge planning with ... [+]
“I originally followed the path of other tax planners, and I was charging vis-à-vis value-based billing, but the problem is the ceiling on closing rates [revenue] I could generate as I built my firm. I could see the disconnect, and I knew there had to be a middle ground where our services met the needs of clients wanting tax planning but who might not fully understand the complexities of the work provided,” says Walters.
On the other hand, the investment space has created a different financial algorithm, Walters stipulates. “The economics of the financial planning world is very different, and so too are the levels of investment into professionals and firms providing said offerings,” he says. “At the end of the day, real long-term money is not having me doing a tax plan, but in wealth management.”
So what happens if accountants begin to support financial planners to better assist their clients? And how can accountants come in and provide the same level of support to the client and charge the same rates as a financial advisor?
As he ventured down the path to answering these questions, Walters saw how quickly an advisor could take CPA language and make it very simple to explain to clients.
“We're in a great position in that we made the transition to stop the value-based billing and convert it to more of a retainer-based model,” Walters says. “Up until this point, the economics of the advisor’s role and the CPA’s role did not align with client needs. And what happens with that relationship when you look at it over two or three years is that the dollar amounts of those bills get in the way of client acquisition. The minute I understood that, I figured out how to get the economics of the advisor and the CPA on the same page so that we both have the same incentive,” says Walters.
The question for many in the field is, if the incentive is to help the client, and they hire the advisor, can they [current professionals] get the economics to work correctly. A win-win proposition that solves the problem of the disconnect in billing, strategic and professional tax planning advice appears to be the end goal.
Like Walters, Michael Carter, CPA and president of Carter Financial Consulting, understands the challenges of the service provider and the programs working to develop the next generation of tax professionals.
“Universities are doing what is expected of them. In the accounting world, the result of formal education usually means a Fortune 500 or a Big 4 accounting firm [placement].”
The path of least resistance to these jobs is through one of the primary gateways of the profession, tax or audit. The greatest emphasis of the educational component is designed to educate students on those two endpoints,” Carter contends. “By nature, we become absolute experts in those two areas, and the lens is formed through which to view businesses, consulting engagements, and clients. The greater problem is that these are starting points, not endpoints.”
According to Walters, clients often look for wealth-building, cash flow, and tax savings in any given tax year, assuming a typical, healthy market. These activities require strategic conversations beyond the tactical elements of tax or audit to be productive.
“This is where a great CPA can champion the conversation for clients. Unfortunately, universities teach the theory of the thing, which ends in a specialization of either tax or audit,” adds Carter.
“There are two main issues preventing the bridge between tax planning and wealth management. The first is the fear of error. Traditional CPAs are usually comfortable operating in the known landscape in which they are first introduced. Keep score, tell the client the score, and provide minimal insight or passing comments on how a client ended up in their position. You know, the usual subjects. ‘You just need to buy an asset,’ or ‘You made too much money.’ This is a safe place to be because it requires very little interaction from the CPA. After all, plenty of clients want this level of service.
Carter finds the second issue is based on the needs of the industry. “The demands related to tax or audit season require a new graduate to focus on one or two tasks during the season with a proper understanding of the theory. Traditionally students are required to keep up in a conversation but not add to it. The problem is that we have fewer and fewer people entering these programs each year. The answer to this so far has been to adjust the CPA exam and perhaps lessen the 150-hour requirement to attain a CPA license. Neither of which raises the baseline of the profession,” says Carter.
A general consensus among graduates is that there is a right or wrong end answer for a tax return, and the reality is there are only complete and incomplete answers. As Carter surmises, “Doing it correctly depends on the goal but I will always side with what is ethical and legal to advise.”
While educational programs set the foundation in undergraduate courses, most graduate programs are understandably focused on students passing the CPA exam. The practitioners believe more focus should be placed on advisement skills to produce well-rounded professionals.
“For these programs to prepare capable students that remain agile enough for the changing landscape, schools must find a way to have blended programs. A hybrid course of study that bridges students in accounting with those in finance to bring both sides to the table for a holistic view,” says Carter.
It appears students and current professionals are looking for similar outputs to richen the industry's viability and the market's updated needs. Walters signals a new era of tax professionals is on the horizon. “As we wait for graduate programs, client needs, and the overall talent pool to align, there are opportunities for leaders in the space to create new business models where everyone wins,” he says.
Time will tell if new professional pathways can create enough viability to warrant a systemic shift from universities tasked with producing the next generation of tax professionals. Consistent integration of theory into applicable and real-world scenarios remains a key driver to advance the sector beyond current guardrails.
The market is in high demand for CPA talent. Will the current crop of professionals desiring an expanded offering move the needle of opportunity, or will higher education generate innovative structures to drive the industry?
The cost is rising, and the clock is ticking.
Interviews have been edited and condensed for clarity.
