Private equity is making notable inroads into the industry, presenting opportunities for firms that have positioned themselves well. Meanwhile, technologies like artificial intelligence are streamlining the path for firms to become comprehensive one-stop shops for financial services.

The choices made by the industry in navigating these changes will profoundly shape the future role of tax and accounting professionals. The evolving landscape calls for strategic foresight and adaptability.

Overview of the retirement wave among accountants

More tax and accounting professionals are retiring than being replaced. According to a January Going Concern update, the AICPA experienced a decline in membership from 430,000 in 2017 to 415,000 last year. Notably, the organization fell short of its membership targets in four of the past five years, indicating a shifting landscape within the accounting profession. This follows the “peak 65” phenomenon as a record number of baby boomers gracefully step into retirement.

In 2024, an unprecedented average of 11,000 Americans are set to commemorate their 65th birthday daily until the year’s end. The sheer magnitude of this retirement surge marks a historic demographic shift. It serves as a harbinger of change, prompting reflection on the evolving retirement landscape in the United States.

According to the CPA Journal, the average age of a U.S.-based CPA hovers around 52 to 53 years old. In a profession where many accounting firms enforce a retirement age of 65 or 66, a significant cohort of CPAs is poised to retire within the next decade or two. An escalating demand for skilled accounting and finance professionals further accentuates this demographic reality. The impending retirement wave among CPAs underscores the evolving dynamics within the profession and amplifies the urgency for strategic solutions to address the imminent gap in expertise. As seasoned professionals prepare for their well-deserved retirements, the industry grapples with the imperative to cultivate and empower the next generation of accounting professionals to meet the surging demand.

The need for the tax and accounting industry to evolve

Change is no longer on the horizon—it has already arrived. CPAs, accountants, and tax professionals must either reclaim their cool factor or redefine their approach to ownership requirements, service offerings, and technology utilization.

Contrary to the mainstream media narrative, the demand for professional services is surging, evident in the strategic moves of private equity firms acquiring accounting practices. Survey after survey consistently affirms that the profession is regarded as the most trusted advisor. It’s time to break free from conventional molds and envision a new reality for what a modern practice should embody.

Good growth vs. bad growth: Most tax and accounting practices were built by word of mouth. For years, you’ve probably taken on individual clients from all walks of life and business owners from various industries. This means you’ve probably ended up with businesses in unrelated categories where you have to learn the nuisances of each industry or with 1040 jobs that span income levels and demographics. In a word-of-mouth business, you also rely on your client base’s goodwill to send the referrals your way.

The challenges this brings are the quality of the client base and the amount of time spent solving each client’s unique set of issues. You also fall into the bill-by-the-hour trap, which limits your compensation and makes it harder to scale.

Is it better to grow by targeting a service or niche? Generally speaking, tax and accounting professionals who niche down see more success. By asserting authority in a specific niche, prospects will be more likely to pay you extra for your expertise. This means you can reduce the number of clients you take on but still earn more money.

Examples could include targeting high-net-worth individuals with a virtual family office setup, working exclusively with restaurants, or moving tax preparation clients to tax planning memberships.

Furthermore, bad growth with many clients paying you lower fees leads to burnout. Good growth—working with fewer clients with similar backgrounds, expectations, and pocketbooks—leads to higher margins and the ability to take control of your time. Welcome to accounting in the 21st century.

Captain of your ship: Taking control of your practice entails risks, yet the current challenges of burnout, health issues, and work-life balance are serious concerns for the profession. Strategic shifts aim to optimize ROI on both time and income. You can gain pricing power with sustained demand and focus, allowing you to say no to lower-tier clients. Trends like remote work, technology tools, and automation redefine your role as a client relationship leader, not just a production worker. Successful firms leverage senior partners for relationship-building, empowering an army of production staff through offshoring, nearshoring, or technological efficiencies—a new horizon in practice management. Your personal time clock no longer limits you.

The role of AI in your transformation: Artificial intelligence is improving how you work, and it’s time to dispel the notion that robots are here to replace you. Your unique blend of human intelligence, intuition, and analytical skills makes you irreplaceable. The demand for your services will far exceed any notion of captivity in the foreseeable future.

AI opens avenues for scaling your practice efficiently. Let’s start with daily tasks—imagine AI seamlessly handling document retrieval, email responses, client issue research, tax strategy formulation, and even crafting engagement letters. The right AI can significantly reduce your daily workload, freeing up precious hours.

In terms of software enhancement, AI is a game-changer. From automating data entry to analyzing financial statements, monitoring KPIs, and streamlining the audit process, developers are crafting solutions tailored for the tax and accounting industry. This translates to accomplishing more in less time. Consider value pricing over the traditional hourly rate to transform your practice into a scalable enterprise with immense growth potential. At the very least, you can drastically cut down your workload, affording you more time to enjoy life without compromising the essence of your practice.

Additionally, by outsourcing tedious day-to-day tasks to an AI assistant like TaxBuzz AI, you can spend more time focusing on providing great service to your clients.

How do we attract more people to the profession?

Attracting fresh talent to the tax and accounting field begins with rebranding the traditional accountant, moving away from the stereotype of a pocket protector-wearing number-cruncher. While I’m not suggesting a transformation into a character from Ben Affleck’s portrayal in The Accountant, we can undoubtedly infuse a new cachet into the superpowers we possess. Who else can drive superior financial outcomes for our clients without falling into the stereotypical image of being sleazy or unethical?

It’s high time for the AICPA to reconsider ownership and educational requirements. Technological advancements have reshaped the skill sets crucial for modern business and individual success. Traditional accounting services alone cannot provide a holistic view of clients’ financial well-being. Accountants serve as the gatekeepers of trust, and by allowing non-CPAs to have substantial ownership, we can pave the way for modern accounting firms to meet the growing demands of clients. Whether this involves adjusting the 150-hour requirement or redefining the ownership structure of practices, tremendous opportunities are waiting to be seized with an expanded role.

The future of the tax and accounting profession

The accounting industry doesn’t want to follow the example of the National Association of Realtors. So set in its old ways, it misses out on how technology has changed the way services are consumed and the expectations that accompany them. They are now facing a wave of lawsuits and new designations that might upend the old model.

If you want to lead the profession, start this great reset. You will attract younger talent, improve the financial outcomes for your client base, and improve your lifestyle. Working as hard as you do for such long periods is flat-out unhealthy. Technology is here to save the day from this great retirement wave. If we make accounting sexy again, more of the younger generation will seize the opportunities. The same way as last year doesn’t work anymore. But the opportunities ahead are boundless.

ABOUT THE AUTHOR:

Lee Reams II, CEO of TaxBuzz, has 20 years of experience in the tax and accounting profession.