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The Evolution of Recruitment in Accounting with Allan Fisher
We look back at John Randolph’s sitdown with Allan Fisher, president and founder of Premier Financial Search, on this special CPA Life Rewind Episode 91. Drawing on his own background as an accountant-turned-recruiter, Allan brings a rare “from the other side” perspective to talent acquisition in this wide-ranging conversation. Together they explore how firms that embraced empathetic leadership and stronger benefits in the wake of COVID have seen real gains in retention, and why showing up to candidate interviews with your best people is no longer optional. The conversation also covers how the competitive landscape has shifted from local to national, the edge boutique firms have carved out as a result, and some persistent myths around accounting recruitment. Allan further tackles the complications private equity is introducing to the industry, ongoing talent shortages, offshoring, CPA credentialing challenges, and the strategies firms can use to tell a more compelling story, and one that attracts and keeps the talent they need.
Important Links:
About the Guest:
Allan Fisher is the founder of Premier Financial Search, an accounting talent recruitment firm he established in Southern California in 2001. PFS works with local, Regional and National CPA Firms and Family Office Groups in California, Washington, New York, Florida, Texas and The Midwest. A leader in the placement of public accounting professionals, the mission of PFS is to be the point of connection between exceptional accounting and finance talent and elite organizations. PFS works to understand and identify short-term and long-term objectives, allowing its specialists to provide strategically planned opportunities that maximize outcomes.
Transcript:
Hey everybody. We are back with another episode of the CPA Life Podcast, the podcast that shines a bright light on the public accounting space and some of the leaders and insiders that are aggressively working to create a more people-centric, modern-minded culture versus the century-old “we’ve always done it like that” culture that’s permeated the industry for a long time. Today we are continuing a series that we started a couple of weeks ago, where we’re spending time speaking with other recruiters and talent acquisition professionals who have intimate knowledge of the industry because this is the industry segment that they have built a business around supporting for multiple years.
We are joined today by Allan Fisher, who’s the president and founder of Premier Financial Search, an executive recruiting and staffing firm that, for the last 23 years, has focused on building partnerships and providing solutions to CPA firms across the country. Allan, welcome to the show.
Thanks for having me.
We’re gonna be digging into a lot of different topics that we’ve kind of emailed back and forth about, and I can’t wait to hear your take on some things. Something tells me that we’re probably gonna share some similar mindsets and thought processes as we go through that. But one of the things that we typically like to do before we really dig into a lot of the topics that we’re gonna talk about is to give folks a little bit of the flavor of your background and how you arrived at the point of your career where you are today because if you are like most folks, recruiting in the talent space was not something that you probably set out to do 20 plus years ago, correct?
Absolutely. Fell into it like most of us.
Yep. So tell me kind of where your career started and how you took a left turn and went down this path.
I was an accountant, in-house, for a publicly held company that had no revenue. This was during the dot-com boom, and you could see the writing on the wall in the accounting department that without earnings, without revenues, my job as well as the jobs of a lot of other people, were gonna disappear at some point soon. So I was referred to a recruiter who helped me find my next accounting job. My background—my degree is in marketing—so they said, “You know, with your degree in marketing and a couple of years in accounting, you’d be a great recruiter.” I had no idea what it was. I just knew that it wasn’t accounting, and I was at a point in my life where if I fell completely flat, it would’ve been okay because the year before, I think I made $38,000. So they were offering me a draw of $2,500 a month. Knowing that I could almost replicate my salary plus an opportunity for commission, I was in. Of course, I had no idea what the profession was, and within my first six weeks, the four people in the office, which were another executive recruiter, an outside salesperson, the branch manager, and a staffing person all quit or were fired.
Oh my gosh!
I was there alone, but not gonna give up. I had made a decision that I wasn’t gonna go back to accounting. It was sort of a blessing in disguise that everybody left because it was sink or swim, and I decided I was gonna swim.
It’s amazing how those trying moments really kind of are defining for us. People always laugh when I tell ’em my first job outta college. I have a degree in journalism. Kinda like you, I kind of fell into this. My first full year as a writer, I made $14,000. When I moved into recruiting, I thought there’s no way I’m gonna make less than that. I know I’m gonna make more than that, but I didn’t know until the middle part of the first day it was a 100% commission. I just assumed they’re not paying me less than $14,000. When I found out it was straight commission, I sat down with my boss and said, “Hey, I will be back tomorrow, but I gotta go figure out what I’m gonna do in the interim.” It’s amazing how you know the old adage, the story of burning your boats, it’s amazing when that happens. In your case, people quitting, it’s sink or swim, there’s not a whole lot of options. So talk to me about kind of that first year and how you were able to figure things out in an environment where you were pretty much the last man standing.
I was really fortunate that we had—so I worked for a national staffing firm, and we had five offices in my region, which is Southern California—and my area manager at the time said, “If you promise not to quit, I’ll come to your office a day a week. You come to my office a day a week, and then by phone, we’ll assign a couple of other mentors.” She did exactly what she said: She came to the office, she spent time, she mentored me. She could see that I was a willing student. I had two other mentors, and it was the same. It was, “Look, as long as you ask good questions, as long as you don’t give up, as long as you’re willing to take the advice that we give—you can push back if you think that what we’re saying is completely unrealistic,” but these were seasoned veterans. They all had 20 years of experience, and for me, I was in awe. I was 26 at the time. They had unbelievable experience and success. I’m sure you can relate, John—when I started, we had a phone and an industry guide. We didn’t even have a phone book. It was just a big, thick yellow book of companies in certain industries laid out by SIC code.
Yes!
I came in where we had a fax machine. We weren’t even on email yet. The people that I started with, they were telling me stories about how they would send résumés in the mail. They would put a résumé in the mail and then they would call three days later to say, Hey, did you get it? We were thinking of how advanced we were because we had a fax machine and we would get a receipt saying that the fax went through.
I was fortunate—when we started, it was accounting and finance, and it was too early on to even know that there was a difference between accounting and finance. I was in a building where it was almost all CPA firms and we had three mid-size CPA firms in the building. I was the first one in the office, I was the last one to leave, and during tax season, just realized I’m seeing these same people here at 6:30 in the morning and at eight o’clock at night. There must be something to that.
There was somebody who I met in the parking garage, it was just one of those conversations where, you know, “I see you here and you’re working 14 hours a day every day. What is it that you do?” She said, “I’m a tax senior and I work at the firm on the third floor. What do you do?” “I’m a recruiter.” A couple of days later we’re in the elevator together and she hands me her résumé and says, call me. She had three years of experience and she worked at what was considered a top 50 firm in Los Angeles. She said, All I care about is I wanna work at a firm that’s bigger. So I took out the LA Business Journal Book of Lists—she worked for the number, call it 47 firm in LA—I just called firms 1 through 46, which of course included, back then it was the Big Six.
Yeah.
I’m still waiting on a return phone call from the managing partner of Deloitte. But as I made my way down that list, I was getting calls back. So I was leaving a lot of voicemails. And by the time I was done, I had six firms that said, “I’d like to know more about your candidate.” Six out of 46 was a pretty amazing ratio. What I recognized was, partners will respond—the partners, at least in LA, are very much what you see is what you get. My voicemail was pretty much to the point: “I’m representing a candidate with three years of experience working at a top 50 firm, looking for a larger firm, and they’re in touch with the market.” What I said resonated with them. The candidate went on all six interviews, ended up with three offers, and had a 25% salary increase.
Wow.
So not only was I hooked on recruiting, but I think I realized there’s something about partners that, their style just works really well with mine, which is what you see is what you get, and as long as you’re honest about what you’ve got, they’ll respond. That was the beginning. So that happened maybe six months into my recruiting career. I was in a deficit up to that point because of the draw versus commission, and very soon I was back in the black. From that point on, nine months in, I never looked back. I knew—it was at the nine-month mark where I knew I would be a recruiter for the rest of my career.
It is amazing when you have some success in this business. Anytime I interview people, inevitably the question comes up sometimes of, “Hey, what are the highs and what are the lows?” I’ll always tell people, “Here’s the highs: You’re gonna walk out of this office sometimes, and you’re gonna say, I can’t believe I get paid to do this. And then there’s gonna be days that are the lows that you’re gonna walk out and you’re gonna say, they don’t pay me enough to do this.”
Yeah, and both of those things coexist on a daily basis.
Yes, they do. They absolutely do. As a long-term person in this business, I was sitting at the table one night talking to my daughters—they’re older now—but they were little and they were old enough to start to understand what dad did for a living. One of my girls asked me, “Dad, what do you love about your job?” I said, “I absolutely love dealing with people. I absolutely love the fact that you can take somebody and put them in a better position, that gives them more opportunity to create for their family a better life. You also can impact an organization that’s got a hole that needs filling, and this person could answer problems that could take ’em to the next level. I absolutely love the fact that we get to deal with people and do that.” My other daughter said, “Dad, what do you hate about your job?” I said, “We have to deal with people.” There’s a double-edged sword to this that I think anybody that deals with the public sector, even our clients, CPAs, there’s probably a little bit of truth in that in their life as well. Wouldn’t you agree?
Absolutely. Yeah. It’s the best of all things, and it’s the worst of all things. But you nailed it, that there’s something amazingly gratifying about making a good placement because you know that you’re improving somebody’s life, usually in more than one aspect, whether it’s a shorter commute, more money, greater partner track opportunity, different leadership, maybe it’s a niche that they want to get involved in. At the same time, potentially you found the next star, maybe the next partner for the firm that you’re working with.
Years before I went into recruiting, I worked at a car audio store. We sold car stereos and while the buyer may get a lot of love and satisfaction out of his new six-disc changer in his car. That stereo gets nothing out of the relationship with the consumer. Now we’re able to really change the lives of people on both sides.
You’re absolutely right. The ability to impact multiple people in the midst of working together and building those relationships. There are a lot of things that we’ve messaged back and forth that I want to dig into and kinda get your take on in the industry because there’s been a lot of movement over the last five to six years, and definitely in the last two to three years within the space, private equity coming in with a more modern mindset that I think has to be in place today if you want to attract the talent that’s out there today. One of the questions I wanted to ask you is, when you look at what’s going on the desk of not only you but the ten people on your team, what are some things that you’re seeing that your clients are doing, from well to exceptionally well, that are somewhat setting them apart in the acquisition and retention game? Because right now it’s really a two-sided coin—for years, I think that leadership in public accounting just accepted the fact that, Hey, we’re gonna have 18, 20, 25, 30% turnover. The problem with that today is there’s not as many people flowing in the front door as are going out the back door if that’s still what’s going on, so it’s a necessity for firms to work on both sides of that equation and do them both exceptionally well. What are some things that you are seeing that your clients are doing or that you’re advising your clients to do to begin to set them up to succeed? Bringing people in and holding onto what’s there as well as the new people coming in the door.
Yeah, I love that question. We’ll start with retention. You’re right about the 18 to 20% turnover—that has been—it’s been accepted. We could argue why it has just been accepted, but that’s been the status quo. That changed in 2021, definitely in 2022, where I think firms still accepted that was going to be the case. Of course, we had what the world is calling the Great Resignation, which probably peaked late ’21, early ’22. Then what happened in 2022 is firms said it’s becoming way too expensive for us to allow this to continue. During the early days of Covid, a lot of firms found themselves in a position of becoming very empathetic towards their employees; it really pushed firms to become understanding about the human condition, first in terms of what’s going on medically: Are there people at our firm who have had Covid? What about their loved ones? It was really understanding, whether it was mask mandates, vaccinations, but really trying to be beyond the right side of any of those gray areas, but also understanding there were certain people that just couldn’t come back to the office because they were caring for their loved ones, they had their kids doing school via Zoom, and it was really just trying to be the understanding, sympathetic and empathetic employers.
That might have been the first time that employees really got a glimpse into their firm’s management philosophy. Prior to that, you didn’t know, and you really didn’t care. This was really the first point—I would say it was a point of inflection in the market. Most firms did a phenomenal job. When people would resign, a lot of firms were caught off guard and they said, “Wait a minute, we didn’t understand some of those things that were on your mind. Give us the opportunity to course correct.” Now, any recruiter prior to Covid could give you a list of reasons, and I think if you were to search “counteroffer and resignation” on Google, you’d probably get a trillion responses. We’re really good at having a comeback for why you should never accept a counteroffer. In ’22 and ’23, I would say our arguments were moot, because there were a lot of firms that prior to this did not really have an understanding of where the shortcomings were, whether it was with salary, with benefits. And firms did a phenomenal job of making things better.
So in ’21 and ’22, that was the first time in my career I ever saw firms give market adjustments. That’s totally separate from salary increases. These were market adjustments. This is a one-time, you are under market, we’re gonna increase you so that the playing field is more level. At the same time, firms increased their benefit offerings to be more competitive. They increased their 401(k) contributions. Firms that were at 0% went to two, they went to three. Firms that were at three went to five. Better medical plans. Firms that never had maternity and paternity leave were creating those plans. And a list of other benefits to just make the firm a really desirable place to work. At the same time, we started to have a little bit of fear about a recession, and of course, inflation and cost of living were raging out of control. So attrition probably hit an all-time low. So we went from the Great Resignation to what people are calling the Great Stay. And firms, for the first time, they felt we are doing all the things necessary to become a destination of choice and people want to stay. So I think if you were to look across the industry, let’s forget about the big four, where they have attrition for other reasons, but if you were to look across the industry, attrition in ’23 and ’24, it might have been about 5%.
So on the retention front, firms did a really good job. That’s starting to change this year. You can’t have a situation where attrition is three to 5% in a profession where historically there is an up-or-out mentality. In serving a lot of my clients and me just being able to do a virtual x-ray over most firms, we have underperformers in the market. And the market I would describe as inefficient. In an efficient market, we have a normal amount of attrition. It creates a little bit of a carousel effect where people leave one firm to go to another, those seats are filled by people that find that firm to be a better option. But when everybody stays put, firms maybe have the right number of people, but not necessarily the right people. What we’re seeing now is a push to return to office—I think firms are trying to figure out how to make sure they have the right people on the bus—and in some cases, they’re gonna allow people to opt out. Attrition has been great. I would actually argue, attrition’s been a little too low. On the talent acquisition side, the biggest selling point that firms have is leadership.
I’d agree.
Culture. Philosophy. HR and talent acquisition usually do a good job of conveying that, but nobody conveys it better than leadership. The firms that still have their partners, even a managing partner, involved in the interviews make a huge difference. So it always puzzled me when a firm goes out to market and there is an attractive piece of business that they want, they’ll send their two most dynamic, engaging, rainmaking partners out to secure that new piece of business. When it comes time to bring somebody in on the market, somebody who could be a future partner, they say, well, their time is too valuable, we’ll have people in HR or talent acquisition, maybe a COO, get involved. And I think they’re leaving too much to chance. I would say, let’s make sure that we’ve got the best people available to interview. So many interviews have gone virtual, which means the firm really has an opportunity to showcase who and what they want the way they want.
Make sure that you’ve got a representative group on the interview. I always want to see that there’s both a male and a female interviewing—particularly if you’re interviewing a female candidate—have a diverse group of people—whether it’s inclusive, whether it’s the age of the people—but it also has to be people that understand the importance of interviewing and understand the importance of securing talent. They have to be cheerleaders. They have to be people that can confidently say why this is a firm of choice because any candidate you’re interviewing has options. They could interview at a different firm every day for the rest of the year and not run out of options. So in about an hour, we’ve got to nail the interview. In that first example of rainmaking partners, they’ve got their pitch down. They know the things to say, they’ve done their research on the company, they are the stars. But when we approach interviews, we don’t. Do they understand the right questions that they should be asking? Do they understand the right way to make sure that the firm is put in the best possible light? Are they taking the time to look at the résumés, to know who it is they’re interacting with? Do they look at the education? Do they look at the other firms? Do they look for commonalities? The amount of effort that we put into getting new business is 10-to-1 the effort that most firms put into attracting new talent.
You know, it’s interesting you use that analogy, Allan, because that’s one of the things that I constantly talk to our clients about—the importance of being proactive in the hiring process, regardless of what’s going on inside the four walls of your organization, so you have every job filled that there’s an open seat for. If you’ve got a complete book of business and you’re at capacity, do you completely shut off business development and wait until you lose that account? Or, are you still softly tilling that ground so that if and when something does happen and you increase capacity, whether it’s because we brought in somebody new or we lost a client, we’ve got a pipeline of stuff that we’re dealing with? We don’t approach it the same way on the talent acquisition side: we wait until either we win a big account—now our people are overworked—or we lose an account. Since we’ve lost that account, now we’re stressing because it made up 22% of our overall revenue. Oh my gosh, what are we gonna do? We lose a top player, same type mindset happens. If you’re always approaching it, like you’re talking about, from a BD perspective, from the standpoint of this is something we’re always doing and we’re putting our best foot forward when we do it every time, it’s amazing, I think, what would happen if that just little switch flipped in the mindset of most leaders of firms today.
That’s where philosophy is so important. We describe that, the word we use is “progressive.” Progressive firms, they’re always gonna hire and add capacity because they know that if they have another A player, it just gives them the freedom to bring in a couple of extra clients that next $250,000 of revenue. They know it makes sense for them to be upgrading current talent that they have—progressive. So we noticed that progressive firms were open-minded to hiring people remotely, which was a game changer in the first couple of years during and post-Covid. Firms said geography no longer matters, we want the best talent irrespective of where they live. We have more business coming in than we know what to do with. Capacity is the issue. If you’re only gonna look at who exists within five miles of your office, you’re gonna be disappointed. It’s gonna stunt your growth. When you say geography no longer matters, then it’s okay, how many people do you need, and how quickly?
Yeah, it absolutely is a game changer. I have a client here in the Dallas area that retired recently but started a firm 47 years ago and was one of the top five local firms here in the marketplace. His mindset—anytime I would call him with a candidate, regardless of whether or not they had an opening—was that it’s amazing how when I hire A players, even when I’m not looking, work just always shows up. It always does. I think you’ve probably lived that, and I’ve lived that as well from a recruiting perspective because there’s arguments that could be made. At what point do you add somebody else to your team? Well, my mindset has always been if there’s an A player out there, I’m gonna bring that person in because it’s amazing how the work always shows up whenever we bring that person in the door. So I think you’re right, that progressive mindset tends to set firms apart when it comes to talent acquisition and when it comes to retention, there are firms that just look for more creative ways to do those things and do them well.
You mentioned a minute ago, you know, just the simple act of knowing who it is that you’re talking to and having studied that person’s résumé and looked through that résumé. I mentioned my daughters a minute ago, and when my daughters were starting to get into the professional world and start the interviews and I would prepare them for interviews, I would always tell them, “Look, if anybody ever asks you right out of the door when you sit down, ‘So tell me a little bit about yourself,’ that is code for either one, I hate interviewing, I don’t like doing it, so why don’t you start this process for me? Or, the second thing they’re probably saying is, ‘Hey, I haven’t taken a chance to read your résumé yet, so if you could fill in two minutes of space by telling me about yourself, I’ll glance through your résumé for the first time.’ ”
Yeah.
I think it’s still that way in the world that we live in today in our space in accounting.
There’s something lazy about that statement. You get one chance now. In the old days—to me, pre-Covid—you might have been going up against one other firm, and that firm was a mile away. Now you’re going up potentially against unlimited firms. As an example, if you’re in Dallas, you’re not just going up against firms in Dallas, which philosophically may be exactly the same as you. Well now you’re going up against firms in California and New York and Atlanta and Chicago that philosophically are very different in terms of the ways they treat people. So lazy sticks out, and with that one opportunity to make a first impression, it’s unlikely the candidate’s gonna want that second interview.
I like how you put that, Allan—lazy absolutely does stick out. That doesn’t mean that you have to put forth exceptional, over-the-top effort. If you probably just do the effort, that’s going to stand out versus a lot of other people in the marketplace. And you bring up a really good point—I want to kind of steer down that path a little bit, you know—the fact that you’re now competing as a firm owner. As a firm leader, you’re competing against firms literally all over the country. And again, pre-Covid, you were probably dealing with stereotypical, traditional firms that were going to provide a little bit of all the services to a little bit of all the industries.
Today, there is an opportunity that this guy who’s sitting at a Top 100 firm, where 50% of his book that he may be working on in the tax space or audit space is in real estate, and man, he really loves the real estate piece of the business. There’s a chance that he’s interviewing with a couple of Top 100 firms in his marketplace, but he’s probably also interviewing with three or four firms that are spread out throughout the country, who are 100% real estate, boutique, niche firms. They’re granular in what they do and they can sell something different to that guy. Tell me what you’ve seen from the difference in boutique firms versus, let’s just say, a Top 100 firm. Why would someone pick that versus the other?
There are a lot of stereotypes out there, and we hear it all the time from candidates: “If I go to a smaller firm, I’m going to be giving something up.” Maybe it’s technical complexity. Maybe it’s access to resources. Maybe they can’t pay the same. And maybe that’s true of some small firms, but if we’re really talking about boutique firms, most of the ones I work with compete with the nationals and in some cases with the Big Four in terms of the sophistication of things that they come up with.
If we were to look at some of the industry-wide metrics and we were to say, the average firm is $250,000 of revenue per employee, there are boutique firms that we work with where it’s double that. They’re unbelievably profitable. And within their space, which could be real estate, it could be high net worth and ultra-high net worth individuals, they’ve got a dream list of clients that they work with. And the work that they do, it’s interesting. The clients are interesting. The types of transactions that you’re going to see, you’re not going to see anywhere else, and they’re very successful.
So I really think what we’re dealing with, or what we’re up against, is just the preconceived notions candidates have. With a lot of the firms we work with, we’ve been working with them for two decades, and so we really have the ability to become, for them, the storyteller. If you’re a boutique firm of 30 employees, you can tell your story to your clients, but the world doesn’t know who you are. And that’s where the recruiter comes in, is we advocate for you, we tell the story, we know you’ve got something special to offer. We know how you rank versus all the other firms we work with, and those who don’t. We can shout it from the rooftops and get a candidate to understand it. You know, the amount of placements that we’ve made of clients that have no website—they are leaders in what they do, and they don’t care about who in the world knows who they are. You’re up against firms that have no website, they don’t give you a job description, but you know that they’re doing something spectacular. So that’s where, in my opinion, the boutique firms, they’ve got something extraordinary to offer and many want to stay independent. In a market where consolidation is happening at a breathtaking pace, knowing who you are is also really important.
I think that’s a great point. It’s one of the things we talk to our clients about all the time: The more you can put that stake in the ground and know who you are and who you’re not, the easier it is to tell that story and paint that picture for that person that we’re talking to. And I think that you’re completely on point there, Allan—a decade ago there was probably some validity to the complexity of the work, the compensation, the challenge of what I’m going to be doing, the opportunity for growth—there was probably a decade ago where some of that, I won’t say all of it, I won’t say all the time, but there was a large part that probably had a lot of truth to it. But in this post-Covid world in 2025, we’re dealing with, like you, we’re seeing less issues between, like you said, the complexity of the work, the compensation that you’re dealing with. There’s a lot of parity in that space now in Top 100 firms, national firms, and that local firm. And I think it is because when those people niche down so far and granular, like I’m talking about, there’s a price point that their customers are willing to pay for the value they bring to the table, and they can afford to pay people what somebody’s going to be making at a Top 100 firm doing work that maybe isn’t as complex.
One of the things I want to ask you about as it pertains to compensation and what you’re seeing in the marketplace, and again, just seeing what you’re getting from your clients, there’s still the perception in the marketplace, I think to a certain degree that if we offer an amazing culture, if we offer a better work-life balance, people are willing to take less money than what is competitive in the marketplace. What are you seeing around that type of a mindset with some firms, and the candidates they’re looking at?
So there’s always going to be a disconnect between what firms feel is fair and what employees feel is fair. So let’s accept that—there’s always going to be a little bit of disappointment. But I think what you’re asking is, is there a certain contingent of candidates who will leave money on the table in exchange for other things: quality of life, the right opportunities, sophistication, shorter commute, all the other things? Yes. There is going to be a certain contingent. It’s not a big contingent. Salary is the scorecard for employees. I imagine a conversation around the Thanksgiving table where somebody says, “I just got a new job.” “Oh, how much do you make? How much more money did you make for accepting the job?” “I actually took less, but hear me out! I’ve got a shorter commute.” Everyone stopped listening at that point.
But we’re also in a market where there is a free agent premium. We’re in the type of market where accepting a pure lateral is just not the market condition. There’s always a free agent premium to make a move. The only time that free agent premium is zero is in a recession, where there’s stability, so staying put is the risk—they’re moving for stability. In any other market, there’s always going to be an amount that somebody should get just for making a move. It’s the risk premium: “I’m going somewhere new. It’s a new relationship. I’ve gotta make a little bit more.” So, you know, for firms to think that there shouldn’t be that implied risk premium, that definitely is not the case.
On the subject of salary, we do something really valuable as a service to the industry here in California, and we do this in conjunction with the Cal Society of CPAs—so we produce an annual salary survey. And it started about a dozen years ago when the finished product was a page. Last year, the finished product was 84 pages. To me, I consider it the bible of every metric for CPA firms in California, and we had 50-plus firms participate. And so, you know, when it comes to what should somebody make? How many billable hours should, on average, are people working? How many overtime hours? What are the billing rates? We have the data and so we understand. And when I say “we,” I mean recruiters in general. Because we’re asking what are your expectations, and we know what the market is. But having your finger on the pulse of what is going on with salaries, but also all the other things. “Yeah, you’re making x, but in exchange for how many chargeable hours and how many overtime hours and what would it be like at another firm?” So it’s really become the industry standard for salary reviews and increases, and we put the finished product together in June, and we have a lot of firms that say, “We’re not going to go through our reviews until July because we want to see what the data is. We want to get a sense of what the market’s saying.”
And when you have that data, you can make much better-informed decisions for your customers, allowing them to make better decisions for their employees, that kind of thing. One of the things that I think is moving the needle a little bit with compensation as well as hiring and retention in general—which we’re talking about globally here—is the elephant in the room kind of thing right now in public accounting, that is the insertion of private equity. From your lens, from your perspective on the west coast looking back this way, what are you seeing the impact of private equity impacting hiring, retention, in the marketplace?
It’s more of a negative than a positive. Full disclosure: I have two clients that are directly owned by private equity, and I’ve got another two clients that there’s what we call a platform between them and the actual private equity firm. So I do work with firms that have received PE money. There’s some resentment in the market. The feeling that the selling shareholders did very well at what cost to everybody else who’s here? Does partnership still look the same as it did pre-private equity? And it’s not just private equity—BDO is now an ESOP. Grossi in New York is now an ESOP. There are other firms that I know are considering going this way. Markham was acquired or merged with CBIZ. CBIZ is publicly held. So we have brand new ownership structures. And I think the question from the employee’s mind is, “How does this benefit me?” And without the firm being able to clearly articulate how it benefits them, people are going to develop their own stories. And most of those stories don’t compute well for the firm. We’ve placed a considerable number of people out of firms that have recently, in the last couple of years, taken private equity money. There’s discontent. Grant Thornton, Baker Tilly. Again, the list of firms that are going this direction continues to increase. It’ll be interesting what develops over the next couple of years.
So I started recruiting in the earlier iteration of this, which was American Express, which came into the market in a big way by acquiring firms that were primarily tax practices, or in Los Angeles, entertainment practices, and the hope was they would be able to sell financial services to their clients. It ended up being great for the firms that sold, because after those agreements expired, they were able to just go on business as usual, plus they got their payment. It’ll be interesting to see the evolution of this. But I would say the number of people that we’ve placed out of private equity dwarfs the number of people we placed into firms that are owned by private equity.
I would have to concur with that. And I will tell you, there’s a couple of firms that we work with that have taken on private equity infusions over the last year; there’s a couple that we don’t work with, but we know the leadership there. Tell me if you’re seeing the same thing: Where we see it working, and I’m like you—I lived through the days of private equity moving into the staffing space, which is very similar to the public accounting space, it’s a knowledge-based industry. When you start cutting, which is one of the things they do, you don’t have plants, you don’t have equipment, you don’t have raw materials, you’ve got people. That’s it. I make no bones about it: I’m not a big fan of private equity. But there’s a handful of firms that I’ve seen that are doing something really well, and it touches on what you said, and that is amazing transparency, and very open communication with line staff. The firms that are doing well are doing that exceptionally well.
There aren’t a lot of them, but you’re right. It’s where there’s transparency, where it’s very clear what everybody gained through the transaction, what some of the pain points might be. Interestingly, I’ve had a couple of clients that have gone down the road. They’ve explored it, and maybe they’ve been turned off and they’ve said, “We’re going to double down on the fact that we’re independent,” and I think having gone down that road, explored it, flirting with the idea and saying no, makes them even a stronger employer of choice than somebody who isn’t quite sure or somebody that may be susceptible to FOMO—and there’s a lot of that right now. There’s, you know, I think most private equity firms want to have a CPA firm in their portfolio, and most owners have good friends, former partners, people that they golf with that have gone down that road, and it’s easy to be seduced.
Yep. We’ve got a client here in the marketplace and probably over the last five years, six years? You know, even before private equity came in where there was just a consolidation of Top 100 firms moving into markets where they didn’t have a footprint, Baker Tilly, Moss Adams, Carr Riggs, buying up local firms, these guys doubled down and made the decision “We’re not going to sell. We like who we are. We know who we are. We don’t feel like we need to be anybody different.” Private equity started coming in. They explored it, they decided that’s not the path we want to go on. “We know who we are. We like who we are. We’re going to stay on this path.”
And they’ve built an entire business model around going after potential clients that have been serviced by local firms that were acquired by a Top 100, or firms that were being serviced by a firm that was acquired through PE or had PE money come in and now staff has started to leave. Their sales proposal to, you know, Bill, who’s a CEO of a $25 million manufacturing firm is, “How do you feel now being a little fish in a really big pond? How do you feel that the partner you worked with for the last 18 years retired? And since then, you’ve had three partners and two managers on your job?” And they just continue to grow and grow from 18 people four years ago to 47 people this year, projected to be 60 by the end of the year.
Yeah, and solidly independent, and they can tell the story with conviction to prospective clients and employees: “We know who we are and that’s going to be who we are as your career progresses.”
Yep. I want to talk to you about the perceived—and again, get your opinion on it; I just had a conversation today with a candidate about this—the talent shortage in public accounting. You know, obviously the pipeline, the 150-hour, all of that has been a big discussion through the last two to three years. Give me your thoughts on what you’re seeing, again, from your perspective at PFS.
We could probably have a separate podcast just on this subject, so I’ll try and make it concise. There is a shortage, so we’ll start with that. There is a shortage. However, there are a lot of interesting and maybe even conflicting things going on. So we’ll go back to, a lot of firms are right-sized, but is it the right people? So this year, for the first time since pre-Covid, we’re going to see layoffs. Now, we’ve seen layoffs in the last couple of years from the Big Four and a couple of the nationals. This year we’re going to see it in greater frequency, and we’re going to see it from firms that are smaller, that they finally say, if somebody truly is a low performer, it’s time for us to open up that spot and let’s upgrade. But if we look at demographics, just the number of people that are going into accounting—although there was a recent data point, the number going up—it may be going up, but not enough to replace the baby boomers who are retiring, and then the next group of people, which are going to be the older Gen Xs. There is not a one-to-one ratio of people going into the profession to retire them.
One thing that no one’s talking about is the threat to the industry of people in their 40s and 50s who decide to either retire or take time off because they receive significant checks as part of a private equity buyout. So what’s going to happen to the industry when people say, “I’ve had enough. I’ve been beaten up for the last five years straight with Covid and Consulting on PPP and ERC, and here in California in Los Angeles, we just had tax seasons extended for the fourth out of the last six years. So we’ve got complex tax rules, the new administration, obviously there is going to be even new tax guidance. The tax deadlines are changing. It seems like we can never get a break. Oh, here is money treated as capital gains, not ordinary income that I never thought I’d get—maybe I’ll just take a couple of years off.”
The other issue with demographics is, so my youngest son is almost 14, so he was born in 2011. He was one of the few born during the recession. So when we look at demographics of years coming up, there are less people, there are just less births from 2000 to 2008 than there were in the period before. But now you get to 2009, ’10, ’11, ’12, the number is even worse. It’s probably 15% lower than it was pre-recession. So we’ve got this next wave of not enough people, forget about who’s going into accounting. It’s just a pure birth perspective. And then on the heels of that, you’ve got Covid, and how the birth rate dropped during Covid. So there will be less supply. How the industry is making up for this—part of it is offshoring, which it’s a Band-Aid. I mean, I think there’s a place for it, but how are you going to get a really good senior, a really good manager to review work when they’ve never prepared it? And there are a lot of firms where the model is all the preparation happens offshore. It’s a Band-Aid. It’s not going to solve a lot of the issue of having people who can do the work, people who can confidently interact with clients, interact with people in the team.
Then we’ve got the CPA issue. I’m confident that at some point soon all the states are going to get behind moving from 150 hours to 120 hours, which removes one obstacle, which is the master’s or those extra units of education. We still have poor CPA exam pass rates. We need to get all the stakeholders on the same page. And so the stakeholders are the states, all the state societies, the AICPA, but we need the universities on board. When I went to school, and even though I wasn’t an accounting graduate, I knew a lot of accounting students and back then the exam was twice a year—it was in May and November—and it was understood, you’re going to take the exam. The same month you graduate college and the expectation is you’re going to pass all four parts. And I came from a small school in Northern California, we had about a 50% pass rate, just pretty awesome. But you knew that was the expectation. So we need to get the professors and the schools on board.
The firms have a vested interest. So whether it’s paying for the coursework, not waiting till somebody passes and reimbursing, let’s front the money. Let’s reward good behavior. Employees, candidates need to know there’s an expectation that when you come in, you’re going to sit for and pass the exam within a certain period of time. You really want to incentivize them, create some bonuses, including stay bonuses, that in order to receive the money, they’ve gotta stay for a certain period of time. And then there’s responsibility on the employees. So all of the stakeholders have a responsibility.
I’ll give a final thought: One of the reasons why so many people leave public accounting—so this is the worst type of attrition, which is they just leave public accounting—is because I don’t think they understand the pot of gold at the end of the rainbow. And it’s not their fault. Firms don’t do a good enough job at letting them know how much they can make. So the Rosenberg Survey, which includes firms all over the country, I think the most recent number I have is 2023, the average partner made north of $600,000. That’s the average partner. Now, that includes high cost of living areas, low cost of living areas, small firms, big firms, Big Four. Do your staff really understand that’s what the average partner makes, and I would argue, you know, it’s even greater now? Let’s do a better job of making sure that our staff understand what partnership is, not just the hours and the responsibility and the potential liability. But what about the good stuff that comes with it?
It’s not an easy path. Let’s don’t kid ourselves. And when I say that, I don’t mean it’s an, it doesn’t have to be harder than we make it. And I think that’s what we do in the industry. I’ve always had a mindset, Allan, when I hire people, I want to hire them to be extremely successful within the confines of who we are and what we do. I want to teach them how to be increasingly successful year over year, over year. I want them to make very good money and if somewhere along the way they decide they want to go do this for themselves and make more money, “Hey, let’s figure out a way to help you make that happen.” I don’t want to lose good people, but that might happen.
And I’ve got people that have said to me for years, well, gosh, you know, you’re basically training your competition. I tell them, no, I’m not. I’m training great employees that if they stay and I didn’t train them to be great, now I’ve got an average to mediocre firm that I’m running, because that’s all I’ve got working for me. But I’ve got exceptional talent that I’ve told that there is a great opportunity in this industry, whether it’s in partnership with my firm or I’m going to teach you how to do this so well, you could go do it on your own—either way, as we talked about when we got on this call, we’re increasing the level of the water across the board, and all of our boats are going to go up because of it.
Completely agree. Loved that you said that.
So I think that if we do that in the industry and we can portray to the kids, the younger people coming into this business, hey, there’s some significant upside here. Yes, there’s some paying of dues, but the beautiful thing is there are a lot of great firms out there that the dues that you had to pay 20 years ago from a time investment aren’t the dues you have to pay today. Doesn’t mean the work isn’t as hard, doesn’t mean that it’s not going to be challenging. It just means there could be a better path for you. Let us help you get there.
Agreed.
One of the last questions I have for you, and I want to get your thoughts on, I had a client about six months ago, they’re now a client. They weren’t a client then he called and had a question for me, and I’ve always thought it was a very interesting question: They ran a good firm. As a firm internally, one of the things that we do is we keep a list of the firms that we can’t recruit people out of—and when I say can’t, I don’t mean they’re a client, we don’t want to, that’s not what I mean. What I mean is it doesn’t matter what we dangle in front of them, people don’t want to leave. We keep a list of who those firms are because those are the firms that we want to do business with. Those are the firms that ultimately, if the opportunity presents itself, we’d love to partner with them.
And so he and I were talking one day, he called me out of the blue and his question was, “Hey John, what can we do to make our firm bulletproof against recruiters like you calling in, trying to take our people?” And I’ve always thought that was an intriguing question. So ifif someone says to you, “Hey, Allan. What can we do to bulletproof our firm so that when people from your firm or other firms call our people, they won’t talk to them, they don’t want to leave, they’re good where they are?” What would you say to firm owners that have that question?
It probably doesn’t exist. So we can get as close to bulletproof as possible, but the things that are going to make you close to bulletproof might scare some of your employees, because now what you’re going to have is you’re going to have a high-performance team, very likely a team or a firm that’s very profitable, and then comes in the philosophy. So two things that firms can do with profits: Distribute them to partners as compensation or bonus, or reinvest them somehow, which could be higher salaries, better benefits, better technology, and a lot of firms take those as profits. So the firms that are making themselves virtually bulletproof are saying, “We don’t need to make every last dollar. We’re going to take some of that, we’re going to reinvest it. We’re going to make sure that our people are in the top 10 percentile of salary across the board. We’re going to have the best benefits. We’re going to have all of these things.” But that could scare some of your people. Not everybody is built to be a high-performing employee. But in that case, those people are going to self-select out.
So I’ll tell you about one firm that I work with. So if you were to say, is there one firm that comes to mind that really does this? There are a couple—but there’s one I’ll talk about, they’re here in Los Angeles. The tax partner in charge probably bills 300 hours a year. The industry average for a partner is probably 1,000, maybe 1,100, and he says, “My billing rate is exceptionally high. I know that I could produce a lot of revenue by billing a thousand hours a year. However, my time is better spent on creating my next generation of leaders.” And one of the things he said is, “It would be irresponsible of me to not create my succession plan. Not just mine, but theirs.”
And so instead of billing another 7 or 800 hours a year, he spends that time with his team. First interview is with him, and he spends an hour getting to know somebody. And what he shares is his vision. And his vision is unlike anybody else’s I’ve ever spoken with. 95% of candidates that interview there and interview elsewhere say, “I don’t want to interview anywhere else. This is where I want to be.” So the 5% that say it’s not for me are saying I’m mediocre, you know? I am not elite. And that’s okay, because there is absolutely a place for people that aren’t in the top 5 or 10%. And so you could design something where people aren’t going to get poached out, but when you create that type of environment, there are going to be people that say, “I don’t belong.” And so either they’ll leave on their own or they will be susceptible to that.
And they absolutely come. Doesn’t matter who the firm is. Well, Allan, I’m very impressed with a lot of the things that you’re talking about, a lot of the things that you’re obviously doing with your team and the business that you’ve built over 20 plus years—two decades doing this is something to be commended for. It is amazing what you guys continue to do in your firm and the impact that you’re making in the CPA firm space. So if there are firm leaders that want to get in touch with you about helping with their recruiting processes or have questions about what you are seeing in the industry, or if there’s even possible candidates that are considering a job move sometime in the near future, what is the best way for people to reach out and get on your calendar?
Email, text. I’ve got a Calendly link on LinkedIn and I love speaking with partners about the market, about some of the things you and I talked about. So even if it’s just sharing information. John, I think I’m like you—passionate about the industry, even a little nerdy as it relates to public accounting and why it’s such an amazing profession. So I welcome the opportunities to talk with partners and leaders in public accounting.
We’ll make sure that in the show notes that we put your email address, a link to your LinkedIn profile, and also a link to your Calendly link. So if anybody wants to grab some time on your calendar, they can do that. So, Allan, I want to thank you for carving out a little bit of time and spending that with us today because you’ve given a lot of insight into what you’re seeing in the industry. So thank you very much.
John, thank you for the opportunity. And more importantly, thanks for all you’re doing to elevate the industry of recruiting, and elevate and amplify awareness in public accounting.
I appreciate that—that means a lot, Allan. I want to thank you again. And for those of you that invested a little bit of your time today listening to Allan and I talk, we appreciate that. If you like what you heard, please leave us a comment down below, subscribe on the platform of your choice, because the last thing that you want to do is miss any of the episodes that we have coming up with some pretty amazing guests as we spend a little bit more time talking about this thing that we call CPA Life. Until next time.
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