There was once a time when managing a project at work was fairly straightforward.
Last year, the number of partners over the age of 50 in America’s CPA firms declined from the previous year for the first time ever. According to 2016’s Rosenberg Survey — a sort of annual industry report card — each size range of firms “experienced a decrease in partner ranks that ranged from 2% to 9%,” despite “robust revenue growth in the industry.”
Though at first glance this seems to be a fairly quiet milestone, the implications of this aging workforce mark a burgeoning transition period for CPA firms (and professional services practices in general) that stands to mold the near future for services firms of all sorts. Here’s why:
The onset of the Great Wealth Transfer
“The Great Wealth Transfer” is a term used by economists referring to the transfer of roughly $30 trillion in assets from baby boomers — the largest and wealthiest generation in US history — to their millennial and Gen X offspring. This shift will unfold over the next 30 years, and is projected to dramatically affect virtually every industry, with particularly prominent implications for the wealth management industry, consumer spending, and taxes.
For professional services firms in particular, the way they respond to this transition will likely play a large part in deciding their profitability in the future. As a generation that has never known life without the internet takes up the reins, services firms will need to show great capacity for growth and adaptation to burgeoning technologies in order to both survive the transition period, and redefine the way professional services practices do business.
The onset of new technology
It should go without saying, but the firms seeking out and adopting the most technologically-advanced approach to business are most likely to thrive during this transitory time. There are many ways in which technological advances have already changed various subsets of the professional services industry, for example:
- Big data: Auditors now leverage big data analytics to parse through different (and massive) databases of information. In just two years, this has become pretty standard practice, to the point that the Institute of International Auditors published an official guide to auditing big data.
- Artificial intelligence: H&R Block’s use of IBM’s Watson technology, and PwC’s report on the use of AI and machine learning in tax analytics are only two of the many indicators of increasingly heavy investment in AI for servicing tax clients.
The decision to adopt these new technologies is no longer a luxury in the professional services space — it’s an endeavor to not be left behind. With this forthcoming time of change and transition, business leaders need to be actively emphasizing professional development for younger employees, technological adoption, and growth in general to ensure that their firms help shape the future, instead of becoming a relic of the past.