Baby Boomers hang up the pencilby
Baby boomer accountants have had enough. With an eye towards the exit sign, should these practitioners create an environment fit for the future or cash in?
“I know first-hand 70-year old accountants who have said enough is enough,” said 2020’s Gordon Gilchrist summing up the plight of the baby boomers at this year’s 2020 conference from Westminster’s QE11 Centre.
The morning agenda for the 2020’s annual conference focused primarily on the generation gap in the profession. It’s an issue close to the heart of at least half the audience members at the event who raised their hands as being baby boomers.
The last 10 years have scuppered retirement plans and inflicted some nasty compliance shocks for the baby boomer accountant. Gilchrist charts their woes back to the last economic crash.
The recession meant interest rates died, annuity rates hit rock bottom, which meant pension funds weren’t giving anything back.
So these accountants clung on and carried on working. “A few years became six, seven and eight years,” said Gilchrist. “And now they are well past what they originally thought would be their retirement date.”
During those years these accountants have weathered GDPR, Making Tax Digital and the general cloud revolution, and add to that elderly care for parents and financially struggling children.
According to Gilchrist, many baby boomer accountants have reached the point where they can’t cope.
Bullish market for accountancy firms
That’s why Gilchrist encouraged the baby boomer accountants with an eye towards the exit to seize this opportunity. “It’s a bullish market at the moment,” he said. “But the bear market is coming. So if you want to cash in and de-risk, this is the time to do it.”
And, indeed, it is a bullish market. As Gilchrist noted: “The city has fallen in love with the accountancy profession.” You need not look any further than the shopping sprees from the likes of Baldwins, while the largest accountancy firms in the UK have grown beyond recognition.
In 2003 the largest firm in the UK was a £500m turnover. But now, Grant Thornton has a £500m turnover while the Big Four are in the billions region. “If you’re in the accounting profession, there is only one way this is going and that’s up.”
The profession has the reputation of being a trusted business which is why Gilchrist has seen “outside money” coming in from private equities and outsourcing Indian operations.
Opportunity to acquire and transform
More people looking to sell in the next five years than ever before presents a huge opportunity for the rest of the profession. One option, Gilchrist suggested, was to acquire and transform firms that are ten years behind on technology where team members are anxious to change. The well-established sole practitioner is likely to have some very loyal clients who are paying far too much, he said.
Gilchrist asked the audience to talk to sole practitioners in their local community and ask if they want to “hang up their pencil”. “They can sell-up now and even stick around for two-to-three years and credit their capital account with, say, £0.5m and when they retire they can have that £500,000,” advised Gilchrist.
For that, they can sell the practice now and nurture the clients and make sure they’re happy for when they want to cut and run.
Join forces with other sole practitioners
If you’re struggling and don’t have the critical mass to offer services like wealth management alone, another alternative Gilchrist raised was to join forces with another local sole practitioner.
If you combine for two-to-three years, you’d then have £1m to play with, said Gilchrist. “You can afford to set up a wealth management joint venture because you have enough clients to make that viable.
“And then you can both pass it down to the next generation or know that you have a wealth management part to our business which could become the single larger revenue stream.”
Create a winning culture
For those baby boomer and generation X practitioners not looking to pack their bags, the resounding issue for the majority of 2020 members over the last 12 months was the lack of accountants coming through to satisfy the recruitment demand.
Without a compliance shock currently plaguing accountants, firms can now look to remedy other issues within their firms like recruitment and culture which arguably took a backseat during the onslaught of MTD and GDPR.
The conference programme supported this with a session on creating the right environment and culture. In order to have a practice fit for bright-eyed new recruits, the 2020 team and keynote speaker Dr Eliza Day advised the audience on how they can engage the next generation of business owners and employees.
Filby used the example of how EY brought in flexible working. The Big Four firm engaged every level of management on trust and responsibility and got buy-in from the older members by promoting how flexible working benefits all generations.
“The baby boomers in the audience now realise that they have to approach it from an understanding that they’re not the same as the generation X and they're not the same as millennials,” said Gilchrist.
“So if we want to hire millennials, we need to do recruitment in a slightly different way and position our firm differently. Because people continue to be a number one issue, it's going to get worse.”