wealth management, with or without a cpa · efits associated with building or buying wealth...

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partner meetings we would ask, “Howcan we grow by further monetizing ourtrusted client relationships?” The imped-iment was the lack of time required todeliver additional services with the samehigh caliber, technical proficiency thatclients had come to expect. In the end,we found a way to generate growth eachyear by penetrating the wealth manage-ment market.

Many people believe that wealthmanagement is only for the verywealthy, but this is simply not true.What about the middle-income familythat needs to pay college tuition in 15years? Or the small business ownerwho needs additional financing?What about retirees who need to knowhow much they can afford to spendduring retirement? All of these typesof individuals, none of which have lim-itless resources, require wealth man-agement services. People searching foranswers to these (and other) questionswill be looking for assistance; they willbe seeking wealth management ser-vices, with or without the help oftheir CPA.

One of the reasons that I became aCPA was to become my clients’ pri-mary financial problem solver. Whynot embrace these wealth managementneeds for what they are—an addition-al way to help clients in their time ofneed? If we don’t, they will have tonavigate a very complex and unfriend-

ly landscape on their own. When itcomes to wealth management, CPAsneed to stop asking if we should getinvolved and start asking how we canget involved. In my opinion, the pre-ferred choice for CPAs is to out-source wealth management via a solic-itor’s agreement, and I will share belowsome best practices for choosing anappropriate partner.

Outsourcing: The Only Real Optionfor Most Firms

Firms that have decided to add wealthmanagement services to their repertoirehave a choice to build, buy, or outsource.For the vast majority of firms, the ben-efits of outsourcing far exceed the ben-efits associated with building or buyingwealth management capabilities. Thebenefits of the outsourcing model, ascompared to the other availableoptions, are as follows:■ Little to no start-up or maintenancecosts (profitable from day one)■ Little to no licensing or compliancerequirements in New York■ Indemnification protection■ Non-exclusivity, to maintain inde-pendence■ Recurring revenue stream■ Minimal time commitment■ Economies of scale.

Each of the above benefits is dis-cussed in more detail below. But first itis necessary to understand what a solic-itor’s agreement is and how it works.

Solicitors. CPAs can refer clients toinvestment advisers and receive a cashreferral fee from the investment advis-er. The SEC refers to the persons receiv-ing such fees as “solicitors.” A solici-tor is generally not required to register

By Daniel J. Griesmeyer

recently came across an advertisement for an upcoming meeting of the Nassau–

Suffolk Chapter of The National Conference of CPA Practitioners, titled

“Expanding Your Practice—How to Offer Additional Services and Get Paid

for Them.” This caused me to reminisce on my time as a partner in my fam-

ily’s CPA firm. Although we were tremendously effective at maximizing rev-

enue via our core competencies, this left little time for additional growth. At

Wealth Management, With or Withouta CPA

I

P E R S P E C T I V E S

v i e w p o i n t

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How to Get Involved and Grow a Practice

SEPTEMBER 2012 / THE CPA JOURNAL 7

p u b l i s h e r ’ s c o l u m n

HeadlineHeadline

as an investment adviser with the SEC if hisactivities are limited to referring clients tothe registered investment adviser. In orderfor a solicitor to lawfully receive compen-sation from an investment adviser, the fol-lowing conditions must be met:■ The investment adviser must be regis-tered.■ The investment adviser and the solici-tor must have a written agreement.■ Each client must receive a copy of theinvestment adviser’s Form ADV Part II.■ Each client must receive a copy of thesolicitor’s brochure, which explains therelationship with investment adviser.■ Each client must sign an acknowl-edgement of receipt of both the Form ADVPart II and the solicitor’s brochure.

Little to No Start-up or MaintenanceCosts

In stark contrast to the capital investmentrequired to build an internal wealth man-agement department or acquire an existingpractice, outsourcing via a solicitor’s agree-ment requires no start-up costs. CPA firmstypically receive 20% to 25% of the netinvestment advisory fee from client rela-tionships each and every year. In otherwords, this is not a transactional businesswhereby CPAs receive a one-time com-mission on the sale of a product, as is thecase with a broker-dealer relationship. Thisis a key difference between the solicitor’sagreement model and the broker-dealermodel, but it is frequently misunderstood;however, it can be illustrated with anexample.

Under a solicitor’s agreement, the 20%to 25% payout is the actual cash the CPAfirm receives. Most broker-dealers will pay

out 50% of the commissions; this is notcash, but rather is credited to a compensa-tion grid. The amount credited to the gridultimately determines the actual cash pay-out. Thus, the cash that most CPA firmsreceive is actually closer to 25% of the grosscommissions generated under the broker-dealer model. Although it first appears thatCPA firms receive a substantially higherpayout from broker-dealers, this is typical-ly not the case. (See Exhibit 1.)

A further example will help illustratethe immediate profitability of outsourc-ing via a solicitor’s agreement. If a CPAfirm executes a solicitor’s agreement andrefers a client with $1 million in invest-ment assets at a 1% investment advisoryfee, the firm will receive $2,500 peryear for the life of the client relationship.Without incurring any costs, the CPAfirm immediately realizes a profit of$2,500 on the very first client during thevery first year.

As the client account grows, the firmwill continue to benefit. For example, ifthe account grows to $1.1 million in thesecond year, the CPA firm will receive$2,750, representing a 10% increase. ManyCPAs detest the delicate and difficult taskof negotiating increases in client fees; how-ever, such negotiations are not necessarywith wealth management because feeincreases occur naturally as a result ofclient account growth. A multi-year, multi-client example is shown in Exhibit 2.

To be most profitable under a solicitor’sagreement, CPAs must exceed clientexpectations and maintain relationships overa long-term period, which aligns perfectlywith how CPAs operate their core business.

Little to No Licensing or Compliance

RequirementsIn New York State, CPA firms gener-

ally do not need to be registered toreceive fees via a solicitor’s agreement.This is because solicitors do not meet thefederal definition of an investment advi-sor or investment advisor representative,and solicitors are not defined by NewYork State law, ensuring a quicker, lessexpensive start-up process. It also elimi-nates the cost and time necessary to main-tain licenses and comply with regulatoryrequirements. That said, this is a complextopic and must be treated as such. CPAsshould consult with a registration con-sultant, such as National RegulatoryServices, to discuss their specific cir-cumstances.

Indemnification ProtectionFinancial services firms typically indem-

nify a CPA firm, its partners, and itsemployees from any damage, liability, loss,or expense related to or arising from invest-ment advisory services provided to anyindividuals introduced to the firm.

Non-exclusivityOne concern that occasionally arises

with CPA firms is the perception of a con-flict of interest. Solicitor’s agreements aretypically non-exclusive, so CPA firms arenot beholden to any one financial servicesfirm. By establishing solicitor’s agreementswith multiple firms, CPAs can leave thefinal choice to the client and eliminateany perceived conflict of interest. Thisgrants an advisor the opportunity to fullyevaluate the firms that will advise clients,advocate on behalf of clients with eachfinancial services partner, and still leavethe final choice up to the individual; it isthe best of all worlds. On the contrary,under the broker-dealer model, CPAs aretechnically employees of the broker-deal-er; therefore they are not supposed torefer business away from it. This is a muchclearer example of a conflict of interest.

Recurring Revenue StreamOffering wealth management services is

one of the best ways to monetize existingclient relationships. In addition, it is possi-ble to continue to receive benefits even afterretirement. If the solicitor’s agreement is


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Solicitor Broker-DealerGross Fees $100,000 $100,000

Solicitor’s Payout: 25% $25,000

Broker-Dealer Payout: 50% $50,000

Broker-Dealer Grid payout: −50% $25,000

Cash to CPA Firm $25,000 $25,000

EXHIBIT 1Solicitor’s Agreement Model vs. Broker-Dealer Model

executed by an individual (or a separate enti-ty established by the individual) and not afirm, one can continue to receive the rev-enue share during retirement. With manyCPAs devoting their working years to theirbusiness, how to best monetize this workupon retirement is a typical concern.

Minimal Time CommitmentOne of the most difficult aspects of

growing a CPA firm is effectively lever-aging the time of partners and staff. It isoften very difficult to significantly growrevenue without hiring additional employ-ees. Recruiting, training, motivating, andoverseeing staff is time-consuming andexpensive. Outsourcing allows growthwithout the corresponding investment ofadditional time and capital.

Consider the following example. If aclient wishes to have an additional taxreturn prepared, more work must be per-formed in order to realize the additionalfees. Once a wealth management plan isestablished, however, it does not requiremore time or work to realize the addition-al fee revenue if the client wants to addmoney to the plan. It generally takes a sim-ilar amount of time to manage a $100,000portfolio as it does to manage a $1 mil-lion portfolio. Wealth management is amore scalable business than accounting.

Economies of ScaleThe economies of scale realized from

outsourcing wealth management are mostprominent in the following three areas: ■ Flexibility to service a range of clients■ Negotiating preferred pricing ■ Marketing support.

Flexibility to service a range of clients.Outsourcing makes it possible to take onsmall accounts, but have the depth andbreadth of resources and solutions to servicethe most complicated accounts. This is impor-tant because once individuals have accumu-lated significant wealth, they are extremelydifficult to acquire because they have devel-oped loyal relationships with advisors whoguided them from the beginning. Thus, it iscritical to have the ability to open smallaccounts for clients, while also having theskills and resources to grow with them astheir wealth increases and their financial sit-uation becomes more complicated.

For example, I have worked with manydoctors. Most of these relationships beganwhen they were residents with no income,significant debt, and no assets to invest.Within 10 years, however, these same indi-viduals have become department chairs orpractice heads, and they have a seven-fig-ure income, no debt, and a multi-milliondollar portfolio. When they reach this levelof success, there is no possibility of anew financial advisor gaining the rela-tionship. Clients like these are very loyal;they remember who advised them whenno other financial professionals were inter-ested because of their lack of assets.

Negotiating preferred pricing. I call thisthe Walmart effect: Walmart, because ofits sheer size, can negotiate much betterprices with suppliers than the local neigh-borhood retailer. In the same fashion, largefinancial services firms can negotiate bet-ter pricing on behalf of their clients thansmall practitioners can.

Marketing support. It may be a stereo-type, but many CPAs are not great mar-keters. Outsourcing, if done properly,immediately adds a staff of marketingand sales professionals to a CPA’s team tohelp grow that side of the business. Bestof all, these additional resources comewithout a capital investment.

The Next Step: Choosing an Outsourcing Partner

Once a CPA has decided on the out-sourcing model, the next step is choosinga partner. Focusing on the following deci-sion points can help streamline the deci-sion-making process:■ Experience■ Internal controls■ Marketing support and execution■ Investment philosophy and servicemodel■ Team versus individual■ Customization.

Experience. Because a wealth manage-ment partner is an extension of the firm, onemust identify a partner that has the experi-ence and expertise to match. Wealth man-agement providers should be evaluated notjust on their experience with clients, but alsoon their experience servicing CPA firms. Inaddition, an outsourcing partner’s experi-ence should be congruent with a CPA’s

client profile. For example, if one primari-ly serves not-for-profit institutions, any pro-fessional partners should specialize in not-for-profits as well.

As for expertise, look at credentialsand client case studies. Just as clients valuetheir accountants because of the commit-ment they made to technical expertise byobtaining their CPA license, finance pro-fessionals should make a similar commit-ment to their professional excellence. Lookfor designations such as CPA, certifiedfinancial planner, certified investment man-agement analyst, certified private wealthadvisor, and chartered financial analyst.In addition, review a case study withprospective partners to see the way theywork with their clients and the types ofsolutions they can provide.

Internal controls. With so many mov-ing parts, it is easy for things to slipthrough the cracks. CPAs must understandthe internal controls in place for service,monitors, investments, and the financialplanning process. Going through all suchcontrols is beyond the scope of this article,but CPAs should make sure that theirwealth management partner has these con-trols and that the CPA understands them.

Marketing support and execution.CPAs should ask the following question ofa potential partner: “What is your processfor supporting my marketing efforts toincrease wealth management business?” ACPA can typically refer between $5 and$10 million in assets to a provider imme-diately upon signing a solicitor’s agree-ment. After this initial burst, however, thebusiness often comes to a grinding halt.Some CPAs might add only one client totheir wealth management platform afterseveral years. But this doesn’t mean thatthe CPA only had one client who neededwealth management services over a sev-eral-year time span; despite having the bestintentions, wealth management often getspushed to the back burner as CPAs con-centrate on their core services. The bestpartner is one who understands this, willbecome actively involved in the marketingprocess, and most importantly will helpexecute and make wealth management athriving segment of a CPA’s business.

Investment philosophy and servicemodel. Even though CPAs are auditors,



forensic accountants, and controllers, mostpeople associate CPAs with taxes. In thesame way, most people assume all financeprofessionals are stockbrokers ready witha hot stock tip. But financial advisors,much like CPAs, conduct business in dif-ferent ways. Some are stock pickers, whilesome are trade intermediaries; some areinsurance specialists, while some are retire-ment plan specialists. Still others take aholistic planning approach, of which invest-ment management is just one component.While I would argue that the holisticapproach is best, the most important con-sideration is to thoroughly understand apartner’s approach; there is nothing worsethan thinking a partner will provide holis-tic planning, but discovering that everyclient seems to end up in an annuity. CPAsmust understand what is important to them,their practice, and most importantly theirclients, and then find a partner that com-plements and augments these needs.

The same goes for service—no twoadvisors are identical, so CPAs should youunderstand exactly how their clients willbe serviced. Some advisors meet withclients quarterly and contact them month-ly. Some contact quarterly and meetannually. Some only meet when clients areupset. Still others segment their book ofbusiness and provide a higher level ofservice to their largest clients. Whateverthe model, understand it and be comfort-able with it.

Team versus individual. Most individu-al advisors do not have enough time in theday to properly service a heavy referralflow—especially when one considers that

to have sufficient past experience, a finan-cial advisor must already have several refer-ral relationships. I believe in the merits ofthe team approach. A team gives one theflexibility to service multiple types of per-sonalities. It affords the ability to have manyspecialists within one team, giving clientsaccess to vast technical expertise underone roof. A team creates the depth to ser-vice heavy referral flows in short periods oftime. It ensures that clients always havesomeone from whom they can get advice(i.e., in the event of vacation, sickness, orfamily emergency). Finally, clients often rec-ognize the benefits of a team as well.Perception is reality, and having a relation-ship with a 10-person team appears morepowerful than a relationship with a singleindividual advisor.

Customization. No two CPA firms oper-ate in the exact same manner. SuccessfulCPAs have invested significant time to cus-tomize operating procedures that are ben-eficial for them and their clients. Therefore,when searching for an outsourcing partner,it is imperative to select a team that has theexperience, resources, flexibility, andconfidence to customize each of the abovedecision points (experience, internal con-trols, marketing support and execution,investment philosophy and service model,team versus individual). CPAs shouldremember that this wealth managementplatform will ultimately be a direct reflec-tion on themselves, their firms, and theirreputations, and they shouldn’t sacrificeprocedures that are important.

Building on Trust

A CPA’s clients will seek solutions totheir wealth management needs with orwithout their accountant. As their mosttrusted advisor, CPAs owe it to clients toguide them through this very important—but extremely complex—landscape. It isimperative for CPAs to develop a meansof providing wealth management in thesame technically proficient manner thatclients have come to expect from coreservices. For the majority of CPA firms,the most effective method of providingthese services is by outsourcing via a solic-itor’s agreement with a partner that has theexpertise, experience, internal controls, anddepth and breadth of resources to provideboth the firm and its clients (big and small)with a repeatable process and an exemplaryclient service experience. ❑

Daniel J. Griesmeyer, CIMA, is a finan-cial advisor with Morgan Stanley SmithBarney, Garden City, N.Y.

Investment Investment Beginning Cumulative Advisory Advisory CPA Revenue CPA Revenue

Year Assets New Assets Assets Fee (%) Fee ($) Share (%) Share ($)1 – $5,000,000 $5,000,000 1% $50,000 25% $12,500

2 $5,000,000 $5,000,000 $10,000,000 1% $100,000 25% $25,000

3 $10,000,000 $5,000,000 $15,000,000 1% $150,000 25% $37,500

4 $15,000,000 $5,000,000 $20,000,000 1% $200,000 25% $50,000

5 $20,000,000 $5,000,000 $25,000,000 1% $250,000 25% $62,500

EXHIBIT 2Solicitor’s Agreement Model over Time

Business Credit Scores

What CPAs Need to Know

By Tracy Becker

Credit scores have become a major fac-tor in today’s economic climate, not

just for consumers, but also for business-es seeking financing, credit extensions fromvendors, business credit lines, and bankloans. In the same way that restrictionshave tightened on personal credit and homemortgage loans, business loans and linesof credit are issued with greater trepidationand stricter qualifications than before.

CPAs, like many professionals today,must expand their ability to offer creativesolutions for the many challenges that busi-nesses must face in order to succeed. CPAscan offer advice to companies by makingthem aware of the high interest rates and feesthat result from poor business credit scores—not to mention the loss of potential new busi-ness. CPAs can determine if a business isoverpaying by asking questions about pay-ments and interest on credit extensions, loans,leases, and lines. In addition, CPAs who askcompanies to provide them with a copy oftheir Dun & Bradstreet (D&B) credit pro-files can also provide insight into creditimprovement needs.

Once businesses are educated and madeaware of the cost of their credit, they canwork on payment patterns and creditimprovements by deciding which options bestsuit them. Depending upon the type of busi-nesses, companies can either use creditrestoration and monitoring tools or can hireadditional staff to oversee fluctuations in cred-it scores. For CPAs, this is a great way tobuild and solidify relationships with existingclients by offering added value. CPAs whounderstand that business credit—like personalcredit—must be protected will deliver moreopportunity, financial security, and savingsfor businesses by helping them qualify forhard-to-get loans and credit, and save moneythrough interest rates and closing costs.

Achieving High Credit ScoresMany bids and products are rejected due

to low business credit scores. Vendors,lenders, business-to-business services, and

even potential customers review D&Bcredit reports when they make businessdecisions. The key is having a solid D&BPAYDEX score of 75 or higher over longperiods of time. Because creditors andpotential clients are reviewing a business’shistory over a 12- to 24-month period, hav-ing a great credit score today might notbe enough. The right consistent credit scorecan be the difference between the approvalor rejection of loans, lines of credit, andleases. It can signify that a business haspaid its bills on time and has the ability tomanage financially with foresight.

When a company can show continuouspositive credit scores over a long period oftime, it will be more successful when com-peting with other companies for approvalon a bid; many companies will absolutelynot do business with suppliers or vendorsif their D&B PAYDEX score drops belowa certain threshold. Thus, CPAs shouldadvise businesses to—■ review costs on leases, lines, equip-ment, loans, credit cards, and vendors,while analyzing interest rates and fees asso-ciated with credit ratings;■ oversee their business credit profiles,whether they hire a third party or managethem on their own, in order to review andmonitor credit (i.e., update current finan-cials and resolve frivolous derogatory infor-mation before it mars the view of poten-tial creditors, vendors, lenders, and clients);■ pay all bills on time (especially high-er-debt vendors);■ avoid sloppy payment experiencesand incomplete profiles that show outdat-ed information;■ check if there are any late payments,liens, judgments, or collections;■ know what vendors are listed on theirbusiness profile and add more vendors thatthe business knows will be paying on time;■ know who is viewing their profile (whichcould be an opportunity to find potentialclients and learn more about the competition);■ focus on the consistency of creditscores, not just the current score;■ remember that any financial informa-tion that is posted becomes viewable bythe public; and■ refer clients to a sophisticated andreputable source for credit education andrestoration.

Case StudyThe following example demonstrates

how one diligent New Jersey CPA helpedan industrial manufacturer save thousandsof dollars on a large equipment loan forhis factory.

This CPA’s client planned on financ-ing the purchase of equipment; however,around the same time, he decided to setup automatic online payments for aMacy’s credit card and a mortgageaccount, both of which were usuallyhandled by his wife, who was ill at thetime and unable to manage the bills.About two months later, the clientreceived a call from Macy’s and a noticefrom the mortgage company looking forpayment on both accounts. After investi-gating, he realized the automatic paymentsnever took effect. He promptly paid thecreditors, but did not uncover the damagethat the late payments had caused to hiscredit score until he applied for financing.To his shock, his FICO score was reducedfrom a high 725 to a low 615.

Furthermore, his D&B PAYDEX scorewas low, at 55, and his company hadpaid creditors late due to slow collectionsof their own receivables, creating a domi-no effect. Although it was not his fault thatclients had paid late, leaving him with lim-ited funds to make timely payments to hisown creditors, his score was negativelyaffected. After contacting Macy’s and hismortgage company, he was very frustrat-ed and surprised to learn the law allowsthem to report the late payments forseven years.

At a loss, he called his CPA for advice,who knew enough to immediately referhim to a credit restoration expert, who wassuccessfully able to remove the late pay-ments from Macy’s and the mortgage com-pany, increasing his FICO score to wellabove 700. Within 10 days, his D&BPAYDEX score increased to 70, leavingthe client able to get approval for thefinancing he needed.

Based upon the information he wasgiven by his CPA, the client was able totake action in restoring his credit andimproving his business. By guiding him toan appropriate solution, this CPA notonly had a grateful client, but was soonreferred to other potential clients.


b a n k i n g

t h e c p a & t h e c o m p u t e r


Considerations onCloud Computing

for CPAsBy Ralph Awad

One service that is changing the land-scape of business and information

technology in significant and far-reachingways is cloud computing. Cloud comput-ing is an efficient, on-demand service thatuses the Internet and central servers to storeand access information remotely. It hasbeen around for many years, but has gainedvisibility recently through applicationscalled integrators. Cloud computing tieseach component together to allow usersto go from ordering cloud space to usingthe space in less than one hour. CCH, thedeveloper of the ProSystem Suite ofaccounting software, is making headwayin the world of cloud computing; it con-tinues to work toward using the cloud tohouse CCH products. Other accounting-related programs, such as QuickBooks,Peachtree, and BNA, can conceivably behosted in the cloud as well. This article willdiscuss the benefits and drawbacks of cloudcomputing and how it can be useful toCPA firms and their clients.

Problems with ServersTraditional software applications such as

Microsoft’s Dynamics GP can be compli-cated and expensive. They run on bulkyservers and reside in data centers that areresponsible for the powering, cooling,networking, and storage of these applica-tions. Traditionally, IT professionals orconsultants are tasked with physicallyinstalling, configuring, testing, and runningcompany servers while also providingbackup and restore support for any pro-duction failures.

The average lifespan of a server is onlythree to four years, depending upon sizeand usage. In addition, some accountingfirms may not require large amounts ofserver space for the months of the yearoutside of the busy season. This couldmean they are wasting resources on a sys-tem designed to meet the needs of thepeak season.

From a business continuity perspective,housing servers and their backup in a sin-gle location places organizations at agreat deal of risk in losing important data.It’s worth considering the risk of losingsignificant information such as clientrecords, quarterly sales figures, and taxID numbers if something happens to theserver location.

Advantages of Cloud ComputingBusinesses can reduce the use of space,

equipment, and IT labor while improvingapplication backup with cloud computing.It is scalable and flexible. Instead of build-ing, owning, and staffing a data center,cloud computing lets outside experts takecare of the management, maintenance, sup-port, updates, and upgrades.

When users utilize an application that runs“in the cloud,” they log in to a customizedinterface and can then begin working.Businesses using cloud servers can bringideas to market faster and respond quickerto customer needs. Some accounting firmsalready run all types of custom-built cloudcomputing applications for customer rela-

tionship management, human resources, andspecialized accounting needs. Through cloudcomputing, these applications can be up andrunning in minutes, which traditional busi-ness servers cannot do.

Cloud programs provide a cost-savingopportunity because businesses do not payfor staff, products, or facilities to runthem on their own. Their sharing of thephysical hardware with other users dis-tributes the cost. Payment for cloud-basedapplications is bundled into a monthly sub-scription, so companies only pay for whatthey actually use. The model is similar topaying a monthly electricity bill, which isbased on voltage used.

Within the accounting profession, therehas been debate about the effects of cloudcomputing on capital versus operatingexpenditures. The current literature doesnot suggest a financial benefit in movingthe costs from one area to another.Nevertheless, there is a business benefitin having a cash outlay over time becomea fraction of an upfront investment overthe same period of time.

Security is an important factor for CPA

CLOUD COMPUTING TYPES

SaaS (software as a service). Software is hosted in a central location and availablefor distribution on demand through the web. The software is configured, updated, andmaintained centrally while made available for users remotely. One example of anSaaS application is Google Docs, which is an online application for creating and stor-ing basic information in documents accessible from any computer.

IaaS (infrastructure as a service). Provides all the hardware, software, facilities, andexpertise for an application to be installed and complete the application life cycle.Think of it as a virtual server with an operating system and associated services thatis made available for installing your applications in the cloud. The author’s company,ReliaCloud, and Amazon EC2 are examples of IaaS cloud computing providers.

PaaS (platform as a service). Designed with developers in mind. It is a set of tools,rules, and guidelines for developers to follow when building an application in thecloud. Microsoft Azure services is an example of a PaaS cloud computing provider.

Each of these types of cloud computing services has managed enterprise-classinfrastructures that offer scalable, secure, and reliable environments to host datastorage, customer relationship management software, messaging programs, and othertypes of applications.

firms to consider. Security safeguards forcloud-computing users continue to improvedue to advancements in network, micro-processor, and virtualization technologies.When properly managed and configured,cloud hosting can be as safe and secureas any in-house solution running on dedi-cated servers. The areas of greatest con-cern include data integrity, theft, backupand recovery, and regulatory compliance.Each of these issues can be addressed withprivileged user access, multiple layers ofphysical security, storage area network(SAN) backup and storage, and privatecloud solutions.

In a traditional business environment, theaverage server uses less than 15% of itstotal capacity; the rest of the time, serversare consuming power, producing heat, andoccupying data center space. It takesmore power to cool the equipment and startthe cycle over again. Studies suggest thatonly about 40% of data center power isactually used to fulfill the IT load. A cloudcomputing environment with a well-designed architecture can have average

server utilization rates as high as 85%.

Implementing Cloud ComputingIn evaluating cloud computing platforms

for a CPA firm or business, it’s best to startsmall. Try using cloud service for a fewshort-term projects to test its efficiency andeffectiveness. If the short-term experienceis a success, then opt in for a longer-termcloud approach. The following are a fewimportant items to consider when choos-ing the right cloud partner:

Provider. Transitioning to cloud servicesis not a simple task. Base the decision ona proven track record, financial stability,and technical competency. Selecting theright partner will help staff adopt this newtechnology more easily.

Application type. Not all applicationswork well in the cloud; a lot depends upona user’s specific application needs. Talkwith cloud computing experts can talkabout the most-used applications and howthey will function in the cloud.

Security. A well-designed cloud com-puting environment should have a solid,

logical separation between servers.Utilizing economies of scale, cloudproviders can assemble a team of experi-enced security engineers to analyze andfend off any threat, something that is vitalin a shared environment.

Making the ShiftCloud computing is a simple idea that

can have a huge impact on a business byleveraging economies of scale. Using thecloud is a paradigm shift that an IT depart-ment can struggle with at first, because itwill no longer be responsible for the tech-nical details of a company’s server use;however, letting go of the reins will opennew doors to innovation. Trust is essen-tial when changing one’s hosting approach,but cloud computing has the potential tostreamline any business’s operations.

Ralph Awad is director of data center oper-ations for ReliaCloud, a company that offerssmall- to medium-sized enterprises cloudcomputing servers and storage space.


v i e w p o i n t

The Best AccountingFirms to Work ForPopularity, Prestige, and Quality

of Life Rankings Explored

By Christina Doka

There’s no question that the Big Fouraccounting firms dominate the market

in terms of size and revenue. In a recentsurvey, CPAs also rated the Big Fouramong the top five accounting firms towork for in the country; however, a clos-er look at the results reveals that these sameaccountants thought that smaller firmsoffered a better quality of life.

The Vault Accounting 50 is an annual sur-vey conducted by Vault, a publisher andwebsite that provides rankings for categoriesranging from accounting firms to law

schools, as well as overviews of various pro-fessions, companies, and universities.

“We get inside information about what it’slike to work for a company … so our read-ers can make informed choices,” said DerekLoosvelt, finance editor at Vault.com.

To compile the rankings for itsAccounting 50, Vault asked approximate-ly 80 national firms to participate in itselectronic survey; of those firms, approx-imately 30—more than 4,100 accountingprofessionals (e.g., accountants, CPAs,tax professionals, auditors)—actually par-ticipated. In each category, a minimum of20 survey responses was required for a firmto be ranked, Loosvelt said.

Survey respondents rated public account-ing firms on a scale of 1 to 10 in quality-of-life categories (including their ownfirms) and based upon levels of prestige(excluding their own firms). Using aweighted formula combining a firm’s pres-tige ranking (40%) with several of its qual-

ity-of-life rankings (20% firm culture, 10%work/life balance, 10% compensation, 10%business outlook, 10% overall job satis-faction), Vault created a single “best towork for” category.

And the Winner Is…Ernst & Young led the list, rising from its

prior-year rank of 22 and knocking GrantThornton down from first to second place,according to the survey results. Theremaining three Big Four firms followed:Deloitte held steady at third; Pricewater-houseCoopers ranked fourth, falling fromsecond place; and KPMG rose to fifthplace from its prior-year rank of 23.

The strong performance of larger firmslike Ernst & Young and KPMG—whichcompleted the survey this year after notparticipating last year—reveals that pres-tige remains important to accounting pro-fessionals, Loosvelt said. This year’s strongperformance by the Big Four could also

have resulted from changes made withinthe firms to rectify weaknesses and bettersatisfy employees, said Ernest PatrickSmith, a partner at Nawrocki Smith LLPand a professor of fraud and forensicaccounting at Hofstra University.

“Ernst & Young, from the responses thisyear, was pretty far ahead of Pricewater-houseCoopers and Deloitte in a few cate-gories, like work/life balance, culture, andhours,” Loosvelt said. “That’s why theycame out on top.”

Following the top five firms were PlanteMoran in sixth, which formerly held the27th place; Moss Adams, dropping to sev-enth place from sixth; Baker Tilly VirchowKrause, rising to eighth place from 16th;Rothstein Kass & Company, whichslipped to ninth place from fourth; and EideBailly, which rose one ranking into the top10, according to the survey data. (SeeExhibit 1 for a closer look at the top 10 firms.)

Vault also created individual lists forprestige and for multiple quality-of-life cat-egories. Surveyed accountants votedPricewaterhouseCoopers the most presti-gious firm for the third consecutive year.

But none of the firms named by Vaultas the top five firms to work for placedhighly in any of the 15 quality-of-life divi-sions, which ranged from work-life bal-ance and formal training to business out-look and green initiatives. (See Exhibit 2for a complete list of quality-of-life winners.)

“People … still care about prestige, butthey care about their daily work life,”Loosvelt said. “They want places that aregoing to foster their development, wherethey want to go to work every day.”

And smaller firms plan to continuepursuing higher rankings in coming years,according to Friedman LLP HumanResources Director Jeff Agranoff. He citedhis company's policies that promote opencommunication, informal and formal men-toring programs, and flexible scheduling—such as “summer Fridays,” during whichthe office is closed every Friday betweenMemorial Day and Labor Day—as somereasons for the firm’s first place ranking inboth work/life balance and overall satis-faction categories.

“I run my own fifty-person smaller

firm,” Smith said. “And because of oursize, we are able to create situations forpeople so that they can have both a careerand a home life.”

Implications for the ProfessionThe Big Four’s standing in surveys like

these may be unlikely to change in com-ing years; these firms aim to recruit high-performing students graduating fromcollege and “the only way they’re going tocontinue to get those candidates foremployment is to continue to achieve thesekinds of rankings,” Smith said.

Students who strive to work at Big Fourfirms “want a star on the resume,” saidCaleb Newquist, editor of the accountingblog Going Concern. “The advantage justlies with the Big Four. That’s the game.”

But Norman Strauss, Ernst & YoungExecutive Professor in Residence at BaruchCollege, isn’t so sure that that’s the casefor everyone. Although he advises studentsto consider aiming first and foremost forthe Big Four, he knows that firms outsideof the Big Four offer opportunities forambitious young professionals as well.

“I remember way back, when you didn’tthink so much about the quality of life.You just went in, rolled up your sleeves, andhope you continued to advance,” Strausssaid. “Now … it’s much better.”

Smaller firms have witnessed an increasein the number and quality of graduatingcollege students who seek employmentwith them, Agranoff said. And in at leastone graduating accounting class at Hofstra,not one person has plans to work at a largefirm, according to Smith.

Ratings like these help graduating col-lege seniors analyze individual firms andcompare firms across a variety of cate-gories, Smith said. But given the tougheconomy, it’s optimal for students to max-imize the number of interviews they go on,regardless of their firm preferences, Strausssaid. After they receive job offers, they canthen choose the firm that they prefer.

“I tell my students that I think publicaccounting is a career where you can actu-ally advance primarily based upon yourown abilities,” he said. “If … you’re will-ing to work hard and continue to keeplearning, then you can do very well in the

accounting field.” ❑

Christina Doka is the assistant editor ofThe CPA Journal, New York, N.Y.


Iam a first-year associate at Ernst &Young, and I recently read Joanne

Barry’s article about the importance of pro-fessional association and the growing gen-erational gap in groups like the NYSSC-PA (“Mending the Gaps in theGenerational Bridge,” The CPA Journal,July 2012). I just wanted to reach out andsay that your article has inspired me to bemore proactive in joining professionalgroups. I have colleagues who are youngprofessionals like myself who have passedthe CPA exam and have not continuedthe process of submitting the necessarypaperwork to join these professional groupsbecause they view it as just a formality,rather than a “collective society”—as youreferred to it—that can accomplish greatthings. There is also not much of a pushfrom baby boomers to invite profession-als from the younger generation intothese professional organizations, usingmeans like Twitter, Instagram, orFacebook, which is what our age groupresponds well to. Hopefully, a solution canbe found so that there’s a steady succes-sion within these professional groups.

After reading your article, I have joineda few organizations, including the New Yorkchapter of the Chamber of Commerce, andI look forward to obtaining my NYSSCPAmembership after I complete the final por-tions of my CPA exam.

Reuel Matthew Ernst & Young LLP


i n b o x : l e t t e r t o t h e e d i t o r

Potential BenefitsBusinesses must take steps to monitor and

improve their credit scores, especially if theyare seeking financing, credit extensions, bankloans, or credit lines. CPAs should advisetheir business clients to aim for long-termpositive scores and should share the tipsdescribed above. As demonstrated in thecase study, both CPAs and businesses canbenefit from remembering the importanceof good credit scores. ❑

Tracy Becker is president and founder ofNorth Shore Advisory, Tarrytown, N.Y., acredit restoration and advisory company.

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