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Why You Need to Ask Your CPA About Their Succession Plan

by | Nov 14, 2022 | Business

Succession Planning

According to the American Institute of CPAs, 75 percent of today’s CPAs will be retiring in the next 15 years. Will yours be one of them? If so, what do you know about their succession plans? Should you care? Here’s why you should.

A survey by the National Society of Accounts reveals that just 28 percent of accounting firms have a succession plan in place. That means when your CPA retires or is forced to leave the practice due to an illness, you could be left without a tax advisor. If a CPA retires without a succession plan, their practice could be dissolved and, along with it, the long-standing relationship you had with a trusted advisor. 

CPAs without a succession plan can do one of three things when they want to retire:

Hand you off to a partner: If they work in a firm with multiple partners with a partnership agreement, they could distribute their clients to the remaining partners. Do you know the other partners? Do you trust them? If so, you could have a smooth transition. If you don’t know them and they aren’t familiar with your situation, you could be in for a rocky transition. 

Sell the practice: Most CPAs will try to sell their practice. Potential buyers might include another CPA firm or even a less-credentialed enrolled agent or licensed tax consultant. If they receive multiple offers, there’s a better chance of selecting a higher-quality CPA buyer. Still, that doesn’t guarantee they will be a good fit for you. Also, when a buyer tries to absorb hundreds of new clients, you could experience a drop-off in service. 

Walk off into the sunset: If your CPA is a sole proprietor and decides to simply walk away, they may refer you to another CPA. That means you will be starting over, having to build a new relationship and learn a new process while paying potentially higher fees. 

It Could be Difficult to Find a New CPA

In any of these three scenarios, you will not likely know who you will be working with until you meet them. If you decide to find a CPA on your own, you may be challenged by the lack of choice. With thousands of baby boomer CPAs retiring each year, not nearly enough younger people are entering the field to replace them. You may find many higher-quality CPAs not taking on new clients because their book of business is full. Going down any of these paths could likely lead to a traumatic experience. 

On the other hand, if your CPA has a succession plan that involves grooming successors, you will likely have the opportunity to meet them and maybe even work with them in some capacity. You will have the chance to establish a relationship and determine if they are someone you can trust. It can be a smoother transition because they will likely adopt the same values, work ethic, and processes as their predecessor. 

What to Ask Your CPA About Their Succession Plans

In an effort to put your mind at ease, the next time you meet with your CPA, ask them if they have a succession plan. If they do, ask them what it is. If it involves grooming successors, ask how they will be transitioned to take over and if you can have the opportunity to meet them. If they’re the right fit for you, it can make the transition much easier.

If they don’t have a succession plan, ask what they intend to do when they are ready to leave the practice. If they plan to sell the practice, ask if they have a buyer lined up. You may have the opportunity to do your due diligence on the buyer to determine if they’re a potential fit for you. 

If they don’t yet have any plans, you could wind up in one of the three scenarios without a clear idea of who you can trust to file your taxes. It’s best to find this out sooner rather than later so you have sufficient time to find a new CPA. You’ll need that time because quality CPAs taking on new clients may continue to become scarce. 

At Trivium Point Advisory, you have access to our entire team of CPA professionals. This way, we intend to have someone familiar with your tax situation working with you for the best possible outcome. By developing a strategy, you won’t be left high and dry by a CPA who is retiring or must suddenly leave their business.

*The LPL Financial registered representatives associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.

Securities and Advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.. Trivium Point Advisory and LPL Financial are separate entities. Tax and accounting related services offered through Trivium Point Advisory LLC, DBA Trivium Point Advisory, LLC. Trivium Point Advisory is a separate legal entity and not affiliated with LPL Financial. 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for individualized tax or legal advice. Please consult your legal advisor regarding your specific situation. LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

LPL Financial does not offer tax or legal advice or services

The opinions expressed in this material do not necessarily reflect the views of LPL Financial.

This article was prepared by Lexicon Advisor Marketing. This article was prepared for Trivium Point Advisory’s use.

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