Beware The Sirens – They Can Stunt Your Income Growth

A number of candidates that my team and I have spoken with in recent months (especially during tax season) have expressed an interest in moving out of public accounting and into industry, and that’s not unusual.

Many a ‘bright young thing’ that might have recently passed the UFE, completed their 30 months practical experience and become a member of their provincial and national Institutes start to develop a wandering eye.

The bigger salaries, ‘interesting industries’, opportunities to travel and bigger bonuses seem to have a magnetic power, almost like the effect of the sirens on early sailors.

Opportunities in Industry appear glamorous at first glance, and thus more attractive to the newly qualified accountant, but on reflection, these opportunities may not be all they seem.

So let’s look at the options that the newly qualified accountant has:

1. Stay where you are and develop your career in public accounting
2. Move to another firm and develop your career in public accounting
3. Hang a shingle and start your own public accounting firm
4. Move into industry
5. Move into local government
6. Move into a ‘Not-For-Profit’ organization
7. Move into academia

There are, of course, many other career options, but these are the most common choices facing the newly qualified. Indeed, I see a clear division of this group of people; those whose sole focus is to go into industry and who only went into public accounting in order to attain their designation, and those who entered public accounting because the role ‘spoke’ to them and they truly love helping their clients achieve success.

Indeed, you may accuse me of being biased, and I would be found guilty as charged, but I found that public accounting provided me with a truly enjoyable, financially rewarding and mentally stimulating career before I moved into consulting to accounting firms.

The profession itself does too little to promote itself as an exciting, fast-paced, challenging and truly stimulating line of work, but if the truth were told, it truly is. For example, where else could you, in one day, help one business challenge an unfair tax assessment from CRA, then assist another to complete an IPO, break for lunch, and in the afternoon, save a business from receivership and then help another to raise a million dollars from their bank?

Variety, they say, is the spice of life, and as far as variety of work is concerned, public accounting is where it’s at!

Contrast this to the typical cycle in industry for the newly qualified. Month end reports to prepare, quarter end reports to prepare, year end reports to prepare, help the auditors to complete their work, then back to the month end, quarter end, year end routine again.

If your idea of excitement is conducting an analysis of auto expenses for the auditors, then be my guest, industry will provide you with a reasonably well-paid and ‘exciting’ lifestyle.

However, long term, if you truly want to have an unlimited earnings capacity, a really unpredictable – but truly enjoyable - work day, and enjoy interacting with clients who value what you do for them, then you’re already in the right line of work – public accounting.

You see, during the process of learning the ropes (to go back to our sailing analogy) while you are training, you do have to go through some pretty mundane tasks as a part of your daily work routine.

Let’s face it, who wants to go out to an inventory count on 31st December in the snow?

But (and it’s a big but) after qualifying, as a new CA or CGA in public accounting, you will start to have more responsibility, manage a small team of people, get more involved with clients and play a more central role as a real business advisor to clients, and start to learn new skills, such as business development, taxation, forensic accounting or one of any number of new disciplines that open up to you once qualified.

Let’s talk about money for a moment. Initially, should you decide to stay in public accounting, you might find that former colleagues who went into industry take a small jump ahead of you in earnings, but over time, those who make it to partner level in public accounting (or who start their own firms) will leap-frog ahead of their former peers, never to be caught.

For example, let’s look at Janet. She qualified in 1997 as a CA with a big four firm. After being approached by a headhunter when the UFE results came out that November, she joined a large public company as a financial analyst.

Her salary at the time went from $43,500 to $55,000 overnight.

Nine years later she has worked her way up to controller of a small subsidiary and is making a salary of $140,000 plus a bonus of $15,000.

She’s worked hard – she was used to that during tax season in public accounting – but in industry, she is now working 60 to 70 hours a week all year round. To add insult to industry, she’s bored half of the time with the reporting routines and yearns to be doing something more meaningful where her expertise was put to better use.

Contrast this with Andy’s situation. Andy also qualified in 1997. Indeed he sat next to Janet in the examination hall when they took the UFE and trained with the same firm.

After qualifying, Andy left the ‘Big Four’ firm where he trained and joined a smaller ‘boutique’ practice as Senior Accountant.

His salary did not change too dramatically upon ’jumping ship’, he went from $43,500 to $47,000.

However, the Partners at his new firm were very smart. They saw the ‘spark’ in Andy and felt that he truly would make a good Partner in a few years time. He steadily moved up the ranks, to Manager, then Senior Manager and it was clearly just a matter of time before he would make Partner.

Last year that time arrived, when one of the Partners retired and as a part of a planned transition, Andy became a Partner in the firm.

In 2004 he made $95,000 plus a bonus of $10,000 - still some distance behind Janet. But oh, how things were about to change.

The firm he joined was a very well run practice, and the average partner managed a book of business around $1 million in size, with an average net income per Partner of $420,000.
In his first few years as a Partner, he would not make that much, probably nearer $220,000 but in time, he would move up the ranks and achieve a substantially higher income level. (Figure it out: if the average partner compensation was $420,000, the lowest around $220,000, then some a the top must be making $620,000.)

There is never a dull moment in Andy’s professional life. One day could comprise of a round of golf with three Bankers in the morning (who refer a substantial amount of business to his firm), and giving a seminar to a room full of prospective clients in the afternoon, is an example of how he spends his time.

Another day could be spent starting with a meeting with the board of directors of a not-for-profit client in the morning, lunch with a prospective client who runs a $100 million revenue private company then back to the office where he has a number of meetings with staff to monitor progress on several client files.

On top of that his earnings will do nothing but grow in the years ahead, and if he makes senior Partner one day, he could be up in the $600,000 plus income group.

Now who seemed to have made the best career decision back in 1997? You be the judge.