Cure-all for changing profession
Any commentary on the value of consolidation has to start with the question, why? What are the issues driving this process?
The accountancy world has undergone major change in the past 25 years.
Much of it has been good for technical development, improved standards, and quality control. But all of this has come at a cost that many firms have found hard to sustain as competition continues relentlessly.
The business environment has changed. No longer is there the cosy notion of a profession. Changes have altered fundamentally what was the traditional balance of risk and reward that used to compare so favourably with the corporate sector.
Accountancy is no longer a bolt hole. What was the lifetime opportunity of a secure future in professional practice no longer exists without all the attendant risks of the corporate sector, and crucially with few of the upside wealth-creating opportunities.
Many firms, consequently, have struggled to recruit, retain and reward the people needed to sustain their business. Add to this the technological revolution of the last decade, the heavy burden of investment that this has placed on firms and the consistent demand from clients for more specialist services and you begin to understand some of the drivers towards consolidation.
So is consolidation the panacea? I believe so. Consolidation offers a solution through a corporate vehicle that provides access to capital.
It promises a properly resourced environment that facilitates investment in services, in people, and in technology. Moreover, it equates opportunity with risk for partners and staff through wider share ownership coupled with the sort of capital incentives that are the performance drivers for many in the corporate sector today.
All of this will hopefully encourage people back to practice and reverse the dangerous trend that has developed over recent years. It will be good for clients and good for the people who serve them. It should also be good for investors!
Inevitably, there are fears about independence and the pressures on performance that stock market quotation will create. These concerns may have some validity, but the model adopted both in the USA and in the UK sees the regulated audit practice as a stand-alone vehicle. Ultimately this must create a more independent and conflict-free environment for audit services and perhaps points the way forward for the profession as a whole.
- Julian Synett is managing partner at Levy Gee, and chief operating officer at Numerica Group.