The near future of the accounting profession will be uniquely challenging both in terms of the obstacles and the opportunities facing accountants, according to American Institute of CPAs president and CEO Barry Melancon — starting with their ability to live up to their reputation as their clients' most trusted advisor.
"Being a trusted advisor today is a very difficult task," Melancon said in his keynote address at last week's Digital CPA conference, held in Las Vegas. "We like to bring concrete answers or almost-concrete answers to our clients — really solid answers with a high degree of certainty — but today we need to be able to deliver advice despite the uncertainty we're dealing with."
That uncertainty is only going to grow, he told attendees, not least because of "hard trends" in three areas: demographics (where, for instance, future sources of new staff will be far different than in the past), technology (where the pace of change and the impact of new solutions like artificial intelligence will only increase), and regulation.
"We live in a world with increasing, more and more complex regulation happening," Melancon said. "That's the space we deal with."
Regulatory change at every level — from the hyperlocal to the global — is creating both challenges and opportunities for accountants.
On the one hand, emerging regimes in environmental, social and governance reporting around the world are likely to create a huge potential market for services that accountants are primed to deliver.
"Climate and sustainability are a huge opportunity for our profession, and a message that we can send to young people about the meaningfulness of a career in the field," Melancon explained. "Admittedly, it's hugely controversial and politically sensitive here in the U.S., but these changes are happening. The impact on our profession is the reporting and the controls and the measurement of those issues going forward. That's a sweet spot for our profession."
On the other hand, a disturbing development in regulation at the state level is threatening the CPA license itself.
"In almost every state, there have been more than 200 pieces of legislation that would undermine the ability to have state licensure in a range of professions. People on both extremes want to do away with licensure — even for CPAs," Melancon explained. "In most states, there are between 100 and 200 licensing regimes, and people are going after those."
The human capital problem
While regulatory changes create both threats and opportunities for the profession, most of the hard demographic trends have negative implications for the profession.
"There's the big exodus of baby boomers, with smaller generations following them," Melancon explained. "The desire to go to college at all is dwindling. Those fundamentals are changing rapidly," and that means accounting firms can expect their current struggles with staffing to persist long into the future.
"The human capital challenge is a big issue in our profession, and for those of you who think there are simple answers or silver bullets, I'd be happy to have a long conversation with you," Melancon said.
While a multitude of causes contribute to problems in filling accounting's pipeline of new staff, he highlighted one in particular: "One of the problems is the issue of compensation. People would prefer that I not talk about that, but the fact is our starting salaries don't compare well with other majors."
Entry-level salaries in the profession have increased recently, he acknowledged, but at an average of $55,000, they don't compare well with equivalent salaries in engineering (which average $75,000) or for business graduates in general ($62,000).
"It's true that partners today are making more money than they ever thought — but over the long term," he continued. "Young people aren't thinking in terms of 40-year careers. So we need to address our starting salaries."
He noted that even as the structure of accounting careers is changing, so is the structure of firms. The standard structure — the highly leveraged "pyramid shape" first promulgated by Arthur Andersen in the first half of the 20th century that involves a large number of entry-level staff supporting an ever-narrower number of managers and partners — is being replaced by a "fat middle" firm where the largest employee cohort is a band of experienced staff between the entry-level accountants and the partner group.
"This has a huge effect on billing and how firms look and operate, and what their economic models look like," Melancon said.
Those changes, along with many others, such as the entry of private equity into the landscape, are revolutionizing how people expect to be rewarded over their careers as CPAs.
"There is a profound shift in how people value CPA firms, and how they enter and exit a CPA firm," Melancon said. "Previously, you exited based on a formula — but that has shifted overnight to a fair market value approach to them selling all or part of their value of the firm — and the value to come in is also at fair market value."
"That's a fundamental shift in how people think about being entrepreneurial inside an accounting firm," he concluded.
More changes to come
Those aren't the only areas of change for accountants to look out for.
In his introduction to Melancon's keynote, CPA.com executive vice president of strategic alliances, business development and communications Michael Cerami highlighted a quartet of major developments that were both key themes of the DCPA conference, and important areas for accountants to focus on:
- The GenAI phenomenon. Recalling that ChatGPT had been launched almost a year to the day earlier, Cerami said, "Who knew that five days later over a million people would be subscribed to it? Gen AI may end up being the most transformational product of our lifetime."
- The transformation of practice areas. Technology and new business models are revolutionizing many of the core services of the profession, and while client accounting services are a model for this, it's not going to be alone for long. "Audit is now undergoing a very similar transformation as CAS did," Cerami said.
- Building capacity. Anticipating Melancon's comments about the war for talent, Cerami noted, "Across the profession, capacity is a challenge for firms, and those challenges are likely to persist — but firms are adapting strategies to mitigate these."
- Leadership. Finally, the unprecedented challenges that firms and the profession face mean the ability to chart a course forward is critical. "Leadership, culture and skills development have never been more important," Cerami warned. "Firms need strong stewardship, and they need to invest in developing people."
