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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 stress.

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 to say:

"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 services professionals.

Strategic Alliances

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 clients demand.

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 financial firm.

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.

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