Latest / Transforming: Tales of Business Evolution / TfP 021. Evaluating the Independent CPA Firm Model

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TfP 021. Evaluating the Independent CPA Firm Model · Transforming: Tales of Business Evolution

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[MUSIC]
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Erin Hartman: Welcome to Transforming:
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Tales of Business Evolution,
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where we delve into the dynamic worlds
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of business transformation.
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Each episode is designed for firms
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of any size and scale,
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exploring both innovative long-term planning
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and day-to-day operating practices that help
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organizations adapt to a changing landscape.
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Join us each month as we hear from leaders in
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the public accounting profession
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sharing their experiences
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of reshaping their business models and inspiring
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you to explore new ways to evolve your own organization.
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Let's dive into this month's conversation now.
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Hello. I am Erin Hartman,
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senior manager with the Firm Services Team
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here at the AICPA,
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and I'm joined today by Andrea Wright,
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a partner with Johnson Lambert,
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a top 200 firm.
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I asked Andrea to speak with us
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today because I came across an article that
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she wrote with the Illinois State Society called
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Not for Sale: Independence is Still
1:00
a Viable Choice for CPA Firms.
1:02
We've seen a tremendous amount
1:05
of interest from private equity
1:06
and other outside investors in
1:08
our profession over the past few years.
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The level of activity in transactions is having
1:13
a huge impact on the market right now in various ways.
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But today, we're going to focus on
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what it looks like for a firm who has chosen,
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at least for right now,
1:22
to remain intentionally independent.
1:24
Andrea, thanks so much for being here with us today.
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Before we get too far into the conversation,
1:30
can you tell us a little more about Johnson Lambert?
1:32
How big is your firm,
1:34
your employees, that type of thing?
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Andrea Wright: Johnson Lambert is,
1:38
we like to call a specialty or a niche firm.
1:41
We were founded back in
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1986 by Debbie Lambert and Larry Johnson,
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both formerly of Ernst & Young.
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I think it was Ernst & Whinney
1:50
at the time when they left the firm.
1:52
We have eight offices, about 200 professionals.
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As you mentioned, our primary niche is insurance.
2:02
Commercial and captive insurance
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is where we get our most work.
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Probably about 80% of our revenue comes from.
2:09
Then we also service not-for-profit organizations
2:13
and employee benefit plans.
2:15
Erin Hartman: Great. Is that mostly a test work?
2:17
Andrea Wright: Yeah, we're pretty compliance heavy,
2:20
though, over the last,
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I would say 10 or so,
2:23
15 years maybe, we have increased
2:26
our consulting non-attest services.
2:29
We're probably more focused on
2:30
that in these last few years,
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but still currently our revenue
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was derived from attest service.
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We audits and tax returns.
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Very compliance heavy.
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Erin Hartman: Independence for Johnson Lambert has been
2:44
a very intentional and deliberate choice, I believe.
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I'm not trying to, like, steward from you.
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You can talk about it.
2:50
But I'd love for you to walk us through
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your firm's journey and
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what led you to using this as
2:56
a strategy for the long-term future.
2:59
Andrea Wright: You're correct. Independence for
3:01
Johnson Lambert currently is intentional.
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We are a firm who subscribes to
3:09
that fiercely independent mantra
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that you hear a lot of firms talk about.
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For us, it's in our DNA.
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It's who we are from our founding.
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The reason that Larry and
3:21
Debbie founded this firm
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was that they wanted to have autonomy.
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They thought, Hey, we could provide a service as
3:28
well and as technically savvy
3:31
and capable as any of the large firms,
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but with agility, being able to be nimble
3:37
and make decisions without a lot of bureaucracy.
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We were founded by two partners who,
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if I had to describe were embracing the Wild Wild West;
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let's just go out,
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let's do what we love and not have a lot
3:56
of maybe what they might say is unnecessary bureaucracy.
4:03
That's just the partners that have grown up here.
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A lot of partners have been here
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since they were interns or started
4:11
when they were interns or joined the firm,
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fairly young in their career.
4:16
We've been around, and that's what we've
4:18
been raised on is the value
4:21
and really I'm going to use
4:24
this word greatness of independence
4:26
or the responsibility of independence.
4:28
It's at least this current partnership makeup
4:32
is just who we are.
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It's all we've known.
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Erin Hartman: When you talk about independence,
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it's more than ownership structure.
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The two people that started the firm,
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it's very important that they
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were able to lead with autonomy.
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But I think you're saying it's more than that.
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Andrea Wright: It is. It's charting your own future.
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It's having a say in where you go as a firm,
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how you get there, what success looks like,
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we get to define our own success.
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That can change, and it has changed over the years,
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but we have the flexibility to have that change.
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I think independence gives us
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the flexibility to try things
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and either succeed or fail,
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but to keep trying them.
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It's more than about who owns the firm.
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It's how those owners
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allow growth to happen and what capacities and
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what autonomy they give non owners
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as well to contribute to the success of the firm.
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That was one of the things I know
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before I became a partner,
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and what made me stay at the firm is
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that even as a non owner,
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I had so much autonomy to just try things.
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Often, Debbie Lambert,
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our managing partner at the time, would say,
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Just ask for forgiveness, not permission,
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and it really gave me the license to just try things.
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I've appreciated that.
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I think that the current partners, I like to think,
6:04
we tried to make sure that we're operating
6:08
still with our colleagues in that same manner.
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That is what independence has meant,
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at least to me within the firm.
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Another aspect of independence is doing
6:19
things on your own terms and not being
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so scripted and so prescribed
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to how things have always been done.
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I think that gives us a competitive edge.
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I think, particularly with young talent
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with talent coming through now,
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recruiting is one of my favorite things,
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so I love to go to campus events and talk to students.
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They always ask the same question.
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What's the day in the life of
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a new associate or an intern?
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What am I going to be doing?
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We explain all the things
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that they're doing that are not audits
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or not ticking and tying or not client-word,
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they're surprised because a lot of it,
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and this is intentional has been
7:02
giving particularly young people space to innovate,
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the space to tell us what
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their ideas are, the space to say,
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Hey, take this process
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and tell me how you might change it,
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or what are we missing?
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I think that has been a great differentiator for
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Johnson Lambert from other firms
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is from the time that people are interns here,
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you get the sense that you can try things
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and you can try things and fail, and it'll be okay.
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Erin Hartman: Great. You mentioned that you were able
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to try things before you were a partner.
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You were given that luxury, maybe,
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and newer people are and
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you like to be able to do that for them.
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Can you give an example of
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something maybe you did or something you're
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seeing someone else do that they
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might not see at another firm?
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Andrea Wright: I tell people, I was so grateful.
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I was able to do all the things
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I wanted to do that had nothing to do with work.
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I serve on different boards
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and volunteer my time in different ways.
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I at one time, was seeking
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a different type of degree and I thought,
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Oh, I am going to maybe try to merge careers
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and so I went off and I believe it or not,
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I got a master's of
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divinity something totally not related to accounting.
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But something I wanted to do,
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I was able to do and it turned out great.
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In that, I said,
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Hey, we should have a niche while we service
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religious organizations or affiliated organizations.
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We do some audits of
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nonprofits that service different religious groups,
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whether providing insurance to them or other things.
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But that was an aspect of on the surface,
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you would say, why is the firm allowing her to do this?
9:00
But I was able to tie in back to the firm,
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and now we have a sector
9:06
of our not-for-profit business that we
9:08
serve that are religiously affiliated.
9:11
Things like that, where it's just been great.
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Erin Hartman: That's fantastic. You're still here.
9:17
Andrea Wright: I'm still here.
9:19
Erin Hartman: I love that. You're talking
9:21
about niches and specialties.
9:23
In the article, you mentioned that
9:25
the error of the generalist is fading.
9:28
Johnson and Lambert
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is a great example of specialization.
9:31
It's hard to call such a large firm a boutique firm,
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but you do have this special niche
9:39
in a couple of different areas.
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Do you think this somewhat
9:43
led to your decision to remain independent?
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Andrea Wright: I think so probably.
9:49
Again, I think we as a firm, have said,
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we're going to do things that we're really good at
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and we're not going to be able to
9:57
be everything to everybody.
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We've been okay with that.
10:00
We said, it still works.
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We have serviced three industries
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for 20-something years.
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I know when we first started,
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insurance was our only industry for 10 years.
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Before the not-for-profit industry was added on,
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and then the employee benefit plan industry
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really grew out of the needs of our clients.
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It's not that we're not open to new things,
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but we want to do what we know and what we like.
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We see that there is still a path for more growth.
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We've expanded services, but we really haven't changed
10:33
our niche focus in the entire existence of our firm.
10:37
That did play a part
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into do we want to remain independent?
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Erin Hartman: Insurance, nonprofits,
10:44
and employee benefits.
10:46
I know you were saying,
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you never know what you guys
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are going to do or take on next,
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but if somebody else comes to you
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in some area that does not fit into these,
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you say, I'm sorry, we don't do that.
10:59
Andrea Wright: You mean, if somebody wants
11:01
services from us, yeah,
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and it's outside of the scope of what we know.
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We just say, we're so sorry.
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We're not qualified to offer those services.
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Let us refer you to colleagues who can.
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We are very friendly with our colleagues,
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several firms that we refer work to
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and it goes both ways.
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Other organizations refer things
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to us, they don't work on.
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But that was part of the trade off when we said,
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we're just not going to be able to
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be everything to everybody.
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Is everybody okay with that?
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So far we've said, yeah, we think we are.
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Unless we get another expert at
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the partner level that can do something
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else, this is what we've got.
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Erin Hartman: Right. I love that.
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You've said that several times.
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I say that a lot when I'm talking to farms, too.
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You can't be everything to everybody.
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That's when you fall.
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You need to be comfortable and confident in who you are.
12:00
That's enough. Because we see so many firms,
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it's like, this is what we do.
12:05
But firms are scared to say
12:07
no to something or this is my friend,
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and I should take on that work.
12:12
I love your position on that.
12:14
We talk a lot these days about firms moving away
12:18
strictly from compliance into more advisory services.
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I know you're saying that you do have
12:24
this niche and you're more compliance focused.
12:28
But this can also lead
12:30
to just these firms moving away from
12:32
so many compliance clients to
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more advisory clients to more specialties.
12:37
Could you give advice to
12:39
even a smaller firm that's looking to really specialize,
12:43
like a two to $10 million firm?
12:45
How do you accomplish this while
12:47
safeguarding around not getting too narrow?
12:50
Andrea Wright: I can't be sure if we fell into
12:55
it or if there were
12:57
some grand strategy, I was not a part of it.
13:00
Let me just say that first. But one
13:02
of the things I think that has made
13:04
us successful in being
13:05
a niche firm is while we have added two niches,
13:08
there's a commonality in all of our niches,
13:11
and that's investments for us.
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Insurance companies are pretty much investments.
13:15
We do a lot of work with private foundations,
13:18
pretty much that's an investment portfolio.
13:20
Then employee benefit plans.
13:21
That's an investment portfolio.
13:23
We have added things where there is a common thread.
13:30
If a small firm were
13:33
listening to me and wanted my advice,
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I would say, hone in on what you do well,
13:39
but there will be industries.
13:41
I guarantee you there will
13:43
be opportunities in other industries where
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there's enough similarity to what
13:49
your expertise is that you can transfer that knowledge.
13:53
While we stay pretty focused, what we've said is,
13:59
if there was a new industry that we became interested in,
14:03
is there enough or a significant amount of
14:06
commonality with what we
14:07
know that we could learn the other things?
14:10
It wouldn't be a huge lip.
14:12
I guess we haven't been totally
14:14
strict and we're only going to do these things.
14:16
We would do something else if it
14:18
aligned with what we knew in a significant way,
14:21
and it wasn't a huge lift.
14:22
I would say hone in on what you know and then look for
14:26
opportunities to transfer the knowledge
14:29
that you know to a different industry.
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I think, in my opinion,
14:33
having industries that are unrelated in
14:36
any significant way is what we have tried to avoid.
14:41
There's just some industries
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that we would say all the time,
14:45
we don't audit anybody that has inventory.
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We don't know how to audit inventory,
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we don't want to audit inventory.
14:52
If you have inventory,
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and this is a significant part of your balance sheet,
14:56
we're just not the firm for you
14:58
If you have investments,
14:59
all kinds of investments.
15:01
We're your people, but you look at,
15:06
just take an example of insurance.
15:08
Insurance really lends itself to financial services.
15:11
You can do a financial services audit,
15:14
get up to speed fairly quickly
15:15
with an insurance background.
15:17
It doesn't mean we would never do something else,
15:20
but we certainly are not going to go
15:22
do a manufacturing company.
15:23
That just is so different than than what we do.
15:27
Erin Hartman: Right. And when you talk about
15:29
these specialties, I'm thinking about
15:31
the people that you hire.
15:32
Do you tend to hire people
15:34
with an investment background or
15:36
financial background versus necessarily
15:40
an accounting degree or CPA license?
15:43
Andrea Wright: No, our strategy has been to hire–
15:46
we get over 90% of our people
15:48
come from college campuses.
15:50
We have a very robust internship program.
15:55
All of our offices,
15:56
we have eight offices, generally have interns.
15:59
We take people with an accounting degree.
16:02
Now, we can talk about as technology is infiltrating.
16:07
All of our lives,
16:09
we are asking ourselves what will the student,
16:13
the future accountant,
16:15
or maybe non-account,
16:17
what's our future hire?
16:18
I think the consensus is it may
16:20
not be a person with an accounting degree.
16:22
Actually, it's likely not a person
16:25
with an accounting degree.
16:26
It's a person with some other degree,
16:29
but generally, right now,
16:31
we hire right from college campuses.
16:34
We have a robust internship program.
16:37
I would say we convert
16:39
about 85 or 90% of our interns become full time hires,
16:43
and we grow people from the internship all the way up.
16:47
We very rarely hire outside of that.
16:52
There are times when we need to.
16:55
Quite honestly, we've had
16:57
mixed success with experienced hires,
17:00
but it's usually somebody who has
17:02
an accounting or finance background.
17:06
Erin Hartman: Let's talk about talent and culture
17:08
and how those things can be
17:11
differentiators among firms.
17:13
You've talked about your recruiting,
17:15
and I can tell you're
17:17
passionate about it because you're
17:18
making me want to come work for you.
17:19
But I love that, the way you're
17:21
focusing on what you know best,
17:23
and that's what we do,
17:24
and that's who we are,
17:26
and that's what we focus on,
17:27
and we're securing that.
17:29
Do you use at all,
17:31
or do you think remaining
17:32
independent is a recruiting tool that you use?
17:36
Do you have new recruits,
17:38
college students, asking about that?
17:40
Andrea Wright: We do. They see the headlines,
17:44
and I'm sure their professors are talking
17:46
to them about what's happening in the industry.
17:49
It has been, I believe,
17:51
a really positive differentiator for us.
17:55
We tell students,
17:56
we are partnership-owned, we're still independent.
18:00
We have every intention to remain independent.
18:03
They're like, Okay, great,
18:05
but then we say, this is what that means.
18:08
It has definitely helped with recruiting.
18:11
I just saw a stat for summer 2025 and internships.
18:17
They start to tell us accept or reject
18:20
our offers towards
18:22
the end of the year, beginning of the year,
18:24
and we have over 90% acceptance, which is great.
18:28
Right? So I'm positive some of that is we try to,
18:32
like other firms, give them a great experience.
18:35
But I also think it speaks to the fact that
18:37
they know who they're coming to work for
18:40
and the partners and
18:42
the managers that they
18:43
interacted with at their internship,
18:45
those are the people that are going to
18:47
be in the office when they show up on the first day,
18:50
and that they're going to continue to work for.
18:53
I think that that is a very positive thing,
18:57
and we're very transparent.
18:58
We tell not only are we independent and what that means.
19:02
We have 28 partners.
19:04
These are it, these are the partners of the firm.
19:06
But also, we only serve three industries.
19:09
I know when I'm on campus,
19:10
I tell students, these are the three industries.
19:13
You're not going to come here and
19:14
work on a Google account.
19:16
You're not going to work on Apple's audit,
19:18
you're not going to work.
19:19
If that is your goal,
19:20
and there's nothing wrong with that,
19:21
like, that's awesome,
19:22
but you're not going to get it here.
19:24
They know the type of clients they're going to work on
19:28
and the industries and who,
19:31
and I think that security or that knowing that safety,
19:35
that they feel safety in that.
19:37
I think it has helped us.
19:39
I'm confident it has helped us be
19:41
successful in our recruiting and our retention.
19:43
We have an enviable retention rate.
19:46
Erin Hartman: You haven't said exactly that,
19:48
but I was gathering that.
19:50
Andrea Wright: Yeah. So we don't lose a lot of
19:53
people who self-select out.
19:58
We have I've been with the firm over 20.
20:01
Most of our tenure is
20:02
10 plus a good amount of our tenure,
20:04
and so we do have
20:06
an enviable turnover rate, and that helps us.
20:09
We talk about differentiation on the client side.
20:12
Our clients want to see stable teams.
20:15
They see stable teams,
20:17
they want a stable partner,
20:19
or a partner that they know is this
20:22
is the person making the decision at the end of the day.
20:25
One of the things that we say in
20:27
our process for bringing
20:30
on new clients when we're in the process is.
20:33
We don't have a national office.
20:35
I don't need to send your file to
20:37
somebody else who doesn't know you,
20:39
who's going to give feedback at the 12th hour,
20:43
and now we have to go back and read.
20:45
Another thing about being independent is,
20:48
I'm the decision maker on this engagement.
20:50
Do we have quality control?
20:52
Absolutely, but you know
20:53
who your quality control partner is.
20:54
We don't hide that from our clients.
20:56
There's two sets of
20:58
partner eyes on every audit that goes out.
21:01
But you know that going in,
21:03
and you know them both.
21:05
I know we get a lot of questions lately in
21:07
RFP processes of what are your thoughts on independent.
21:11
Are you all talking about it? What are you thinking?
21:13
How are things going to change or work?
21:16
It's the talk of the whole industry,
21:18
from students all the way through clients.
21:22
Erin Hartman: You're talking about that
21:24
you guys are able to
21:26
retain an enviable percentage of your employees.
21:30
How are you creating
21:31
clear pathways for future leaders and partners,
21:35
because that's something that we do hear a
21:37
lot about retiring partners?
21:39
It's no secret that some people would say that
21:41
private equity is a way of handling partner succession.
21:45
I'd love your thoughts.
21:47
Andrea Wright: I will say we
21:50
had an amazing founding partner who
21:53
thought about succession and
21:56
wanting to make sure that
21:57
the firm lived on in perpetuity.
22:00
She put things in place before she retired to
22:02
ensure that partners would
22:04
get out when they needed to get out.
22:06
We have mandatory retirement.
22:08
Our mandatory retirement is 60,
22:10
which, when I say it, people are like, that's so young.
22:13
Yes, but that signals to our managers.
22:18
We're not saying forever,
22:20
equity partners have the first opportunity.
22:23
They're fully vested at 55,
22:26
so we have some partners that will go out at 55.
22:29
That's fairly young in the accounting world.
22:33
That is how we have
22:35
created visibility so that younger people
22:39
know there is a pathway because these partners
22:42
have to retire no later than 60.
22:46
We've also made a concerted effort to identify
22:50
what we call our top performers or our bench strength,
22:54
and we have provided mentorship.
22:56
We've told them we see you on the partner track.
22:59
We've created coaching and mentoring programs
23:03
so that they can work on
23:05
any areas that we believe
23:08
they need to shore up to make them a strong partner.
23:11
We usually identify those people
23:13
at the manager, senior manager levels.
23:15
We're working with them four or five years out,
23:19
but they know that four or five years out, that we,
23:22
the partnership, have identified them and believes that
23:25
they are partner material
23:27
and want to help them get there.
23:29
We're very vocal,
23:31
we're transparent, and having conversations.
23:34
We have a pathway to
23:36
partnership document that gets updated every year.
23:39
Another thing about being until we share financial data.
23:44
It is not a secret what our revenue is.
23:47
It's not a secret how much revenue
23:49
it takes to make a partner.
23:51
We share monthly financials
23:54
every month with the entire senior management team.
23:59
We're very transparent with our people so that
24:03
they are not having to just rely on me saying,
24:06
I promise you there's a spot for you or
24:09
I promise I'm not going to stay beyond 55.
24:12
They can see the numbers,
24:15
and I think it incentivizes them, too,
24:18
when they do see a path, if that's the choice.
24:21
One of the things we've also started to
24:23
notice is not everybody wants to be a partner,
24:27
but how do we create a path for somebody who doesn't
24:29
want partnership or who adds a lot of value to the firm?
24:33
In the last maybe five years have really worked on
24:36
alternative pathways and what that might look like,
24:41
and people change their minds.
24:44
Sometimes people say, I want to be a partner,
24:47
and then they get to a point in life,
24:50
or maybe have some life experiences,
24:51
where they say, I love it here,
24:53
I want to contribute, but I honestly don't
24:55
want to be a partner for whatever reason.
24:58
We have created alternative pathways
25:02
to partners, and it's fluid.
25:05
You don't have to once you declare something,
25:08
it's not declared forever.
25:10
Erin Hartman: Now, that's interesting.
25:12
You were saying that you
25:13
have 28 partners right now,
25:15
and the equity partners.
25:17
Andrea Wright: No, we have, I don't know,
25:20
maybe 17 or 18 equity partners,
25:24
and then we have non-equity partners.
25:26
Erin Hartman: It's interesting that you talk about that
25:28
because we do see that everywhere,
25:31
that a lot of people are not as interested
25:33
in being a partner as they used to be,
25:36
that used to be the goal.
25:38
I was curious to find out your thoughts
25:41
on what could make that more attractive again.
25:43
It sounds like you guys are doing
25:45
a lot of those things by giving
25:47
people clear goal and timelines.
25:52
Andrea Wright: At least from what I hear,
25:54
the number one detractor from wanting to be
25:57
a partner is the perceived workload.
26:00
I say perceived because some of it
26:02
is factual, it takes a lot.
26:06
You're a business owner,
26:08
and your business succeeds based on what you put in it,
26:12
so you've got to contribute.
26:14
Every single partner has to contribute at
26:16
their highest level all the time,
26:18
and it can be exhausting.
26:21
But one of the things that I like to see firms,
26:24
including my own,
26:25
do a better job of is demonstrating how you can balance,
26:30
how that gets balanced out.
26:32
I take my vacation and my team knows I want to
26:37
travel every year international and I'm going
26:40
to be gone for three weeks and it's on my calendar,
26:42
and a month before I'm telling everybody–
26:45
everybody will know if you need me to look at something,
26:47
this is the last day I'm looking at
26:49
something so that they know you can
26:52
disconnect for a significant amount
26:55
of time and life will be okay.
26:58
Well, I'd like to see more firms do that.
27:01
I think that is a detractor though,
27:03
for younger people to say,
27:05
all I see is you working all the time,
27:09
and you're sending me emails all the time.
27:11
Yes, sometimes, but that does get balanced,
27:16
and you have a lot of autonomy
27:18
over your schedule and how things get scheduled.
27:21
I'd like to see a share more with
27:23
the younger people to help that,
27:25
because I do think that's the number one,
27:27
I think, perception is that there's
27:30
never any time for other things,
27:32
and that is not true,
27:34
and it doesn't have to be true.
27:35
It doesn't have to be true.
27:37
Erin Hartman: We talk so much
27:38
about doing the worst publicity
27:40
for our profession by talking about how much we work.
27:43
Andrea Wright: Billable hours, if we could get
27:45
away as a profession from billable hours,
27:48
I think it would serve us so well.
27:51
If we could never say
27:52
billable hours again to your- [OVERLAPPING]
27:55
Erin Hartman: To your friend.
27:56
Andrea Wright: To anyone. [LAUGHTER]
27:57
Erin Hartman: Now, talking about that for a second,
28:00
because you are in this specialty area.
28:03
I don't know how that affects tax season hours.
28:06
Andrea Wright: We still have a traditional busy season,
28:09
and the way that we have framed it is there is a time of
28:13
the year where our services are in high demand,
28:18
and in order to respond to our clients,
28:20
we will have to put in extra effort.
28:23
I don't know how great that worst thing is.
28:26
Erin Hartman: How long have you been with the firm?
28:27
Andrea Wright: I've been with the firm for 24 years.
28:30
Erin Hartman: Okay. Have you seen a change in that as
28:32
far as the hours people work?
28:34
Andrea Wright: No. I have not seen the hours change.
28:37
All of our industries are quite regulated.
28:40
There are regulatory deadlines
28:42
where the insurance folks,
28:44
you got to file and due
28:46
to your state June 1 or June 30th.
28:48
That is it. Everything is due on some date.
28:54
Erin Hartman: It goes to everything
28:56
you're talking about and how passionate I can
28:58
tell you are about your career that
29:02
the culture lends itself to be okay with that.
29:05
Like, yes, we are going to work really, really hard.
29:08
We have deadlines we have to meet.
29:10
But you're also going to be able
29:12
to do it when it works for you.
29:15
You're going to be able to take off when
29:17
you don't have those deadlines,
29:19
and we're going to give you the ability to
29:21
explore areas that you want to explore
29:23
and do things you want to do as long
29:25
as everybody remembers that we have these deadlines.
29:29
You're a great example of how it can work
29:32
and people can still be happy and
29:36
healthy with those deadlines in place because honestly,
29:39
we talk a lot about firms
29:41
moving more to advisory services,
29:43
so they're not doing
29:44
so much deadline-driven compliance work.
29:46
But those deadlines are still here.
29:48
They're not going to change
29:49
and somebody needs to do them,
29:51
and I think you guys are doing
29:52
a great job of making that work.
29:55
Another big area where
29:57
outside investment can be beneficial is technology.
30:02
How do you ensure that independence
30:05
doesn't lead to under investment in technology,
30:08
or can you talk about that as far as technology,
30:11
how important that is for your firm?
30:13
And how you're handling that?
30:15
Because that's another area that
30:16
younger people are very interested in as well.
30:19
Andrea Wright: Technology is our number one
30:22
probably focus on the last few years,
30:26
and that is the area where as
30:28
a firm in the last three to five years,
30:30
we've put most of our resources.
30:33
In deciding to remain independent,
30:37
that's an area where the firm leadership has
30:40
really tried to impress upon
30:43
the partnership like we have to invest.
30:46
There's just no way in our opinion that one can remain
30:50
independent and not invest
30:52
significantly and not just significantly,
30:55
but for my firm,
30:56
it's been significantly more than
30:58
we have ever invested in the past.
31:03
We see it as
31:07
really in the linchpin
31:10
of if this project is going to work.
31:12
If our desire to remain
31:15
independent is going to be realized,
31:17
it's going to really be dependent
31:19
on how much we're willing to invest.
31:22
It's a significant amount,
31:24
but one of the things that I really appreciate about
31:26
firm leadership is their explanation
31:29
to the partner group of it's a short-term,
31:32
really hard number to look at,
31:35
but it's for long-term, it's for longevity,
31:39
it's the legacy of the firm and our own legacies.
31:43
We've decided as a group that yeah,
31:45
we are willing to make that investment in
31:47
ourselves and for the future.
31:49
But it's significant.
31:50
I think if a firm is not significantly
31:54
investing or realizing that they
31:56
need to significantly invest in technology,
31:59
then they really are missing the boat.
32:02
We have a CIO who is amazing and always bringing ideas,
32:09
but things are moving so fast,
32:11
and that team is growing so fast,
32:13
but it has to.
32:15
Technology for us is our number one investment,
32:19
and we have invested more in technology.
32:21
I think and related
32:24
ancillary things in the last three years,
32:26
then I think I can remember since I've been a partner.
32:30
Erin Hartman: I would dare say most firms say
32:32
the same thing that
32:33
they're investing more now than ever.
32:36
If you had to,
32:37
I don't know how close you are
32:39
to that and to the technology,
32:41
but we have firms that are also like,
32:43
I'm just going to wait and see what other people are
32:45
doing because it's changed so rapidly.
32:48
What would you say are
32:49
the top two to three investments in AI or
32:53
technology that actually move
32:55
the needle and that firms need to
32:56
be thinking about right now?
32:58
Andrea Wright: I don't know that
32:59
I'm qualified to tell you that,
33:01
but one thing I will say is a firm should not wait.
33:06
That is not the answer,
33:09
because in my opinion,
33:11
the longer you wait,
33:13
the further behind you are.
33:16
One of the things that we have done
33:19
as a firm is to try to get the technology out to people.
33:22
You've got to get people starting to use,
33:24
whether it's AI tools in
33:27
their hands so that they can just experiment.
33:30
A big part of it is figuring it out.
33:33
You're right, it's changing so fast,
33:35
but if you miss Gen 1, 2, 3, and 4,
33:38
by the time you get caught up,
33:40
some of that learning
33:42
by playing with the tools will have been
33:45
missed and there's a lot of
33:46
value in playing with the tools,
33:51
seeing how you need to
33:53
work with and partner with the tools,
33:55
and also how you need to train people.
33:58
One of the benefits that we are
34:00
seeing in just getting tools in
34:03
people's hands is that it is
34:05
helping us determine who we need to hire.
34:08
How we need to train them,
34:10
what skills we need them to have
34:13
because it's different than debits and credits.
34:16
It is very different,
34:17
and so I would say, do not wait.
34:22
Start. You've got to just start.
34:25
I don't know to tell you
34:27
which software to go to or what tool to go to first,
34:30
but you've got to start.
34:31
Erin Hartman: You think you aren't
34:32
qualified for that answer,
34:33
but I think what you said
34:34
definitely rings true with what I've seen.
34:37
We do the management of
34:39
an accounting practice survey every couple of years,
34:41
and this year, we asked a lot of questions about AI.
34:45
I'll tell you, firms that are growing and
34:48
the most profitable are just doing something.
34:51
Data point, not waiting because even
34:54
if it's not the latest
34:56
and the greatest and we're still getting there,
34:57
they're learning from that and
34:59
they're seeing what they need to do.
35:00
I hear firms that are going to look at
35:03
30 different things and next year make a decision.
35:06
Again, we have seen that
35:07
the most profitable firms are just
35:10
doing something and learning from that because it is.
35:12
A lot of it is new for everyone,
35:16
and we don't have all the answers,
35:18
but I totally agree
35:20
with what you're saying and what we've seen.
35:22
So private equity is a huge topic right now.
35:28
Private equity, staying independent.
35:31
I imagine you guys continue to have
35:33
these conversations from time to time.
35:35
I would love to just get your opinions on
35:39
what you think firms should be asking
35:41
themselves right now when they're looking at this.
35:43
What type of firm might
35:45
work best for an independence model and
35:47
where might it be more challenging and
35:50
someone might want to think about an outside investment.
35:53
Andrea Wright: Firms that find themselves
35:55
without a succession plan are
35:58
probably either for merging up
36:01
or looking at outside investment.
36:04
There was a really big push or a lot of
36:08
conversation some years ago in
36:10
the industry of we've got to get these succession plans.
36:12
Like, what are we doing?
36:14
Some firms got on board,
36:15
but there are quite a few firms who maybe had
36:19
a succession plan
36:20
and it hasn't panned out
36:22
or they needed to shift.
36:24
Those firms will look at various exit strategies.
36:29
If you're looking for exit strategies.
36:31
One of the questions we ask ourselves and
36:33
we decided we're going to ask ourselves every year,
36:36
is can we maintain the pace of change financial?
36:42
Are we still willing to invest at the level
36:46
and maybe higher than we have?
36:48
Are we still willing to do it?
36:49
If the answer is no, at that point,
36:53
any firm should think about,
36:55
well, what are our alternatives?
36:59
PE may be one option.
37:02
PE is certainly not the only option,
37:04
but it's an option.
37:06
I think it's a fair and serious option
37:09
that every firm should be thinking about when you get
37:12
to that point or as you're making
37:15
your annual assessment of where you
37:17
are and what you're willing to invest.
37:19
Then it's probably followed by how
37:22
important is it to us to remain independent?
37:26
Like, what would we be losing?
37:28
Are we willing to lose that?
37:30
If we're not willing to lose it,
37:31
then what are we willing to invest to pay for?
37:34
In my opinion, those are really the only questions.
37:37
You're either going to fund
37:40
the investment yourself, self-fund.
37:43
One of my partners always says,
37:45
We should be betting on ourselves or you're not.
37:49
That's what it comes down to.
37:51
Erin Hartman: That's a good way to look at it.
37:52
I love what you said that you relook at this each year.
37:56
And decide, is this our strategy
37:58
or do we need to be doing something else?
38:00
Is everybody on board? I like what you're saying.
38:04
I know you used the word fiercely independent,
38:06
but it also sounds like you guys aren't so adamantly
38:10
against some investment that you're not
38:13
even thinking it through and what that means.
38:15
It's not just for the sake of it.
38:17
It's truly thinking about whether you are able to bet on
38:21
yourselves and feel comfortable
38:22
doing that for another year.
38:24
Just from everything you've said,
38:26
I can tell Larry and Debbie,
38:28
your founding partners really had a lot of foresight,
38:32
thought things through, and you guys have continued to
38:35
just have an amazing strategy.
38:37
You can just tell that you're not
38:39
just flying by the seat of your pants every day,
38:41
although you can if you want to.
38:43
Andrea Wright: Yes. You could do that, to the extent, yes.
38:46
You got to have fun.
38:47
If you're not having fun,
38:49
I'm not sure what you're doing.
38:50
Erin Hartman: What excites you most about the future of
38:53
the profession separately from independence,
38:56
private equity, just what in general,
38:59
do you love and will continue to enjoy
39:02
about the profession?
39:04
Andrea Wright: I love the technology,
39:08
and I am so excited to see how
39:12
technology is going to further change the industry.
39:15
It excites me. It's new.
39:18
It's ever changing, which maybe for
39:21
the typical accountant who likes things to
39:23
be static is not good,
39:25
but maybe I'm not the typical accountant.
39:27
I am so excited to see
39:29
how technology is going to help us serve
39:31
our clients better and how we're going
39:35
to really bring in people from other disciplines.
39:39
I mention, I don't think people with
39:40
an accounting degree are going to be
39:42
our only recruits in the very near term.
39:45
How are they going to change how we think?
39:48
How we deliver services.
39:50
All that stuff is so exciting to me.
39:53
It can only make our profession better.
39:55
It can only help us deliver
39:57
better outcomes with our clients
40:00
and really partner with them.
40:03
Those are the things that I'm excited
40:04
about of the profession.
40:06
I can't wait to look back in five years.
40:09
I used to say 10 years,
40:10
but I actually think 10 years is way too long, Erin.
40:13
I can't wait to look back in 3-5 years and say,
40:16
Wow, how has traditional services
40:19
changed in the last 3-5 years?
40:22
I think that is so fascinating,
40:25
and I'm looking forward to it.
40:26
I'm excited about it. I'm excited to see it.
40:29
Erin Hartman: Well, thank you so much.
40:31
I have enjoyed talking to you so much,
40:32
getting to know you, getting to know your firm,
40:35
and I'm really glad that
40:36
you're involved with recruiting because I am
40:38
sure prospective employees see
40:41
your passion and excitement.
40:43
We need that these days, especially.
40:45
On behalf of [inaudible],
40:47
we appreciate you being more
40:49
and getting more people into it.
40:51
But this has been wonderful,
40:52
and I really appreciate your time.
40:54
Andrea Wright: Likewise, thank you so much, Erin.
40:56
It's been wonderful.
40:57
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