Is the Tax Industry in an Unprecedented Era? And What Will it Mean for Those Practitioners the industry needs most? 

Accounting has always been a key enabler of capital markets, though rarely has it been front and center like it has in recent years, with Big 4 firms exploring IPOs and the acquisitions of top accounting firms by private equity. 

Like the partners of the major investment banks when they had their initial public offerings (IPOs) or were acquired, these events are great news for the senior partners of these firms given the liquidity events that they will experience. For the next generation of up-and-coming leaders in these organizations, the news is less compelling since a portion of their firm’s future profits will now be owned by investors. 

For clients, the results are unclear. New investors may translate into capital investments enhancing client experiences, though higher prices may come with it. 

For smaller firms, the need to evolve will continue to accelerate. The large capital investments will also likely drive some investments in marketing and technology. Small firms will have to find ways not only to stay competitive for retention of existing clients but also the wherewithal to win new ones in an evolving market. 

Though all of this change may seem unprecedented, it has a very relevant analog in one of the taxes sibling professions, financial advisory. 

The Evolution of the Independent Financial Advisor

For most of the 20th Century, wirehouses, broker-dealers, and banks dominated the financial advisory business. Financial advisors, even the most entrepreneurial ones, largely felt that the resources of large firms would be incredibly difficult to compete with as an independent player in the marketplace. 

However, in the past three decades, the confluence of tech innovation, and the democratization of financial product distribution and private capital have led to a boom in the independent registered investment advisor (RIA) channel. According to McKinsey, today, the independent financial advisor segment is the fastest-growing area of wealth management with more than 1,600 advisors joining annually. Advisor platforms like Dynasty, Hightower, and Focus Financial, among others, have enabled financial advisors the opportunity to be entrepreneurs while delivering what they refer to as a “best-in-class” experience relative to the large institutions they came from. 

The appeal of being an entrepreneurial advisor is strong. Typically, break-away advisors have more control over how they operate and who they serve while making more money for the same work.

This trend has also taken hold in other advisor markets like insurance brokerage where new platforms are creating additional leverage for advisors. 

A New Era for the Entrepreneurial Tax Advisor?

The entrepreneurial tax advisor has, to date, faced the binary option of either working for a large regional/Big 4 firm where they have to carry the baggage of bureaucracy that comes with attractive resources or shoulder the burden of starting, running, and trying to grow their own practice. 

Before even considering the drawbacks for the advisor, it is worth noting that neither consistently delivers an exceptional experience for clients. Big firms tend to have high administrative costs and less flexible structures that inhibit advisors from being able to provide the best pricing for clients or take on high-value ones that may be lower fee today with the expectation of massive complexity down the road. For the small firm, maintaining a contemporary and cyber-protected tech stack can be a full-time job, let alone hiring & managing staff, cultivating an expert network of resources for client issues, developing new clients, and staying abreast of tax policy changes. 

Who are the entrepreneurial advisors?

Not all professionals want to be or should seek to be entrepreneurs. Key questions to ask:

The acceleration of mergers and private equity investment in the tax industry is likely to lead to the stifling of autonomy for those that had it in larger organizations. 

What do entrepreneurial advisors need?

Technology is on the precipice of being able to provide these entrepreneurially inclined tax advisors the ability to scale the volume of clients they can serve and the positive financial impact they can deliver to them. The recent capital market activity has brought attention to the value of the tax industry. However, it will be those next-generation entrepreneurial tax advisors that will create the most long-term value for themselves and their clients. 

Meet the Authors 

David Snider

David Snider is the Founder & CEO of Harness, the leading platform for empowering entrepreneurial tax advisors and serving their equity owner clients. Previously David served as an Executive in Residence at Bain Capital. He was the COO & CFO of Compass, the leading platform for real estate advisors which he helped grow from pre-launch to over $350 million in revenue

Stanley Goldstein 

Stanley Goldstein was the founder of Goldstein Golub & Kessler, which went on to become a major accounting firm and was purchased by American Express in 1998. It was one of the largest tax firm acquisitions at the time. He has been an entrepreneur in multiple fields, including as the founder of the New York Hedge Fund Roundtable and an active financial technology investor.

Tax services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisors LLC, collectively referred to as “Harness Wealth”. Harness Wealth Advisors LLC is an internet investment advisor registered with the Securities and Exchange Commission (“SEC”). Harness Wealth Advisors LLC solely acts as a paid promoter for unaffiliated registered investment advisors. Harness Wealth Advisors LLC’s registration as an investment advisor with the SEC does not imply a certain level of skill or training.

This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, the reader is encouraged to consult with the professional advisor of their choosing.