The 21st Century CPA
by David Burros, CEO, CPA, CFP
As the 20th century comes to an end, CPAs face a world that
is dramatically different than the one they are used to. New competitors
from outside the profession are starting to take away business that was
once the sole domain of CPAs, while new markets are opening up that can
dramatically increase a traditional CPA's income. One thing is for sure---the
old way of doing business will never be the same again. Driving this paradigm
shift of change and opportunity is the 21st century consumer, a creature
who still wants the services of a trusted CPA.
The 21st Century Consumer
As the 1990s come to a close, overwork and stress seem to
be common denominators in most people's lives. From the factory floor
to the executive suite, the complaint is the same---"I'm working too much
and there's never enough time." Corporate downsizing, dual-career families,
and new technology are often the blame for this problem.
Since the late 1980s, almost every company in corporate
America has downsized its workforce in order to become more competitive
in the growing global economy. While this efficiency has been good for
corporate earnings and stock prices, lean and mean companies often require
people to pull double duty---literally covering the work of more than
one position in order to cover the slack. Because of this, people seem
to be working harder than ever.
In addition to working harder, most households these days
are also facing jumbo mortgages and growing college tuition bills, while
also trying to save for a lengthy retirement. Because of this, most families
have both spouses in the workforce. According to USA Today, more than
80 percent of women between the ages of 25 and 54 are currently in the
laborforce. With no one home full-time, it's no wonder people feel more
Dramatic increases in technology have also increased the
speed and stress of America's citizens. With e-mail, cell phones, voice
mail, faxes, and the Internet, it's almost impossible to get away from
work. Technology was supposed to make life easier, but in an ironic twist
of fate, it has only made it more complicated.
Because people are on a non-stop treadmill, they don't have
the time to meet with several different individual financial services
professionals, each handling only a piece of their total financial pie.
Instead, the 21st Century consumers will want the timesaving convenience
of having all of their finances in one place, so that their lives won't
be so complicated.
The New Financial Services Industry
Up until recently, people couldn't have their finances all
in one place because the financial services industry was kept apart by
the Glass-Steagall Act of 1933. The act banned banks, insurance companies,
and brokerage houses from merging into one corporate entity. Fortunately
for consumers, these financial regulations, which were crafted in the
depths of the depressed 1930s, are finally being dismantled.
With Glass-Steagall no longer holding them back, the big
players in the financial services industry are trying to meet the needs
of the 21st Century consumer by offering one-stop shopping. To accomplish
this, they are shedding their niche banking, brokerage, and insurance
identities; instead, they are becoming full-service financial firms. The
classic example of this trend was embodied in the 1998 merger of Citibank
and Traveler's. The new company, now called Citigroup, joins together
$700 billion in assets, 100 million customers in 100 countries, 162,600
employees, and 3,200 offices.
The Changing Profession
Because of our history and tradition, most CPAs still consider
themselves just part of the accounting profession and not part of the
overall financial services industry. Unfortunately, the marketplace no
longer sees it that way. Clients are now lumping their CPA in with the
rest of their financial services professionals like their stockbroker,
banker, and insurance agent. Because of this change in consumer outlook,
traditional financial services companies are now starting to offer accounting
and tax services---so that their clients' needs will be all met in one
place. The classic example of this scenario is American Express.
American Express (AMEX) is one of the biggest players in
financial services. It has financial planners all across the country through
their subsidiary, American Express Financial Advisors. But since 1990,
the company has also become a huge player in the accounting profession
through their new subsidiary, American Express Tax & Business Services,
Inc. AMEX Tax & Business Services has acquired over 55 accounting
firms since 1990, and its goal is to have annual revenues of $500 million
and a 5 percent market share in the country's top 50 markets.
In the October 1996 and May 1997 editions of The Practical
Accountant, the CEO of the firm, Robert C. Basten, sometimes referred
to as the "Oakland Raider" of the accounting profession, had the following
"A lot of people are saying American Express is changing
the accounting profession. We are not changing the accounting profession.
The marketplace is changing it!"
"In the past year, there's been a recognition of the strategy
that we were creating, which is a personal distribution of integrated
services for small businesses..."
"We want to pull all solutions together, including business
consulting, employee benefits, and financial services, under one roof.
And we'll add services as we need them."
In addition to American Express, another company---Century
Business Services, Inc.---is also affecting the profession by acquiring
small- and medium-sized accounting firms at a breakneck pace. Their goal
is the same as American Express---business and financial services all
under one roof. Since 1997, Century has acquired approximately 100 firms
in over 28 states.
The action of American Express and Century is just the beginning
of the accounting profession's baptism into the waters of the financial
services industry. Over the next couple of years, we shouldn't be surprised
if firms like Merrill Lynch, Prudential, Citigroup, Morgan Stanley, Dean
Witter, and Wells Fargo start to hire CPAs so that they can provide accounting
and tax preparation services along with all the other services that they
provide their clients. In addition to this, do not be surprised if these
services are used as loss leaders and offered at huge discounts so that
these companies can steal clients away from traditional CPAs.
If the traditional CPAs are going to survive in the 21st
Century, they must start to provide their busy clients with more than
just accounting and tax preparation; they need to provide a full range
of financial products and services like these other companies. To accomplish
this, CPAs, whether in sole practice or in a small- to medium-sized firm,
are going to need to develop strategic alliances with other financial
In today's ultra-competitive global economy, the windows
of opportunity are often frustratingly brief. Few companies boast the
in-house expertise to quickly get into new markets by themselves. So,
to offer new products and services, most companies now form strategic
alliances with partners who have the expertise that they do not have.
Some examples include:
Microsoft and NBC coming together to form the cable channel
and Internet site MSNBC
Paramount Pictures and 20th Century Fox jointly financing
and producing the blockbuster film, "Titanic."
Walt Disney and McDonalds jointly promoting the Magic Kingdom's
animated films, such as "A Bug's Life" and "Mulan".
Starbucks and PepsiCo, forming a partnership to make and
distribute a bottled version of Frappuccino.
Like these highly successful companies, 21st Century CPAs
will also have to team up so that they can offer the services that their
The 21st Century CPA will operate as part of a team comprised
of other professionals who have expertise in investments, retirement planning,
insurance, and estate planning. Working as a team, however, doesn't mean
that all the professionals show up for every meeting with the client.
Instead, the CPA may act as the quarterback of the team and bring in the
other professionals, only after they have determined the client's needs
and desires. This way, the CPA can control the quality of the services.
Choosing Your Partner
Most large financial services companies now offer a broad
range of products and services. Companies like Merrill Lynch, who used
to be known just as a stockbroker, now sell billions of dollars worth
of annuities issued by New York Life. Likewise, companies that used to
be known for their insurance operations, like the companies of the Principal
Financial Group, now have billions of dollars under management (Fidelity
and Salomon Smith Barney). In addition, most of these companies have cross-selling
agreements with other financial companies so that their in-house professionals
are not limited just to their company's product. Because of this, CPAs
looking to offer a full range of financial services and products can now
get all of their needs met via a strategic alliance with just one full-service
When deciding on what company to team up with, the most
important thing that the CPA should look at is the local support they
will get from them. It is critical that the firm has people who can help
locally---not just an 800 number.
According to the perceptions of the 21st Century consumer,
CPAs are now part of the much bigger financial services industry. In the
next millennium, more and more financial supermarkets, like Citigroup,
will start to offer accounting and tax preparation services in order to
snare clients from CPAs---just like American Express. To survive and thrive
in the 21st Century, traditional CPAs will need to offer a full range
of financial services and products in order to satisfy their busy clients'
needs for simplicity and convenience. To accomplish this, they will need
to form a strategic alliance with a full-services financial company that
offers lots of local support.
The pace of change in the industry will continue to accelerate;
expect more consolidation in the next five years than what has occurred
in the past ten. When the new industry structure finally locks into place,
cutthroat competition will be the norm in all areas of financial services.
David Burros is the CEO of Burros Consulting & Speaking.