What I wish I’d known when partners exit a firm

There is much discussion around changes in the accounting profession due to generational shifts and the impact that technology has on the profession. As we discussed in a previous column (Walker, “What I Wish I’d Known Before Becoming Partner,” 55–6 The Tax Adviser 48 (June 2024)), becoming a partner/owner in an accounting firm is often seen as the pinnacle of one’s career. The fruits of that labor will mean a successful career and a plan to transition to retirement. As with our discussion about the unexpected twists and turns that come with being an owner, determining how to gracefully exit an accounting firm can also be bumpy or can go well, depending on the planning involved. Here, seasoned partners and members of the AICPA Tax Practice Management Committee reflect on lessons learned when their respective firms have dealt with retiring partners.

What steps do you think retiring partners could take to better prepare the firm for their exit?

Mark Gallegos: Ideally, you should begin planning your exit three to five years before your intended retirement date. This foresight allows for a thoughtful, organized transition that benefits everyone involved.

Develop a comprehensive transition plan that outlines client handoffs, responsibility transfers, and knowledge–sharing protocols. A documented, step–by–step transition plan serves as a road map for the firm, outlining key milestones, client handoffs, internal responsibilities, and timelines.

Gwen Larkin: One of the most important factors is having a well–defined retirement age. Second, you need to have a minimum three–year transition plan. Some partners may require a longer transition period. A project manager and practice group director or managing partner should be involved from the beginning in creating the three– to five–year plan.

Chris Wittich: One of the frequently overlooked items is the transitioning of referral sources. A retiring partner who has a 30– to 40–year career has developed some great referral networks and contacts. That’s part of the value the retiring partner should be transitioning to others at the firm. The current client relationships are a focus for good reasons, but all the connections and referral partners can be just as valuable to the success of the firm.

Michael Whitmore: The firm needs to have a culture of coaching and mentoring. Partners should never hold client meetings without bringing someone else along. This not only helps teach the next generation of partners, but it gives the client an additional person to reach out to and helps the transition be much smoother.

Matthew Becker: Retiring partners need to understand that clients often choose the timing of their relationship partner’s retirement to reevaluate service providers. By getting a new relationship partner involved well before retirement, it’s more likely the retiring partner’s firm will survive the transition of the relationship. Retiring partners should have a goal that nobody notices when they actually retire.

Julie Welch: Develop a transition plan for clients. Be sure every client has been introduced to the “next” person handling their account, and make sure the client is comfortable with that person. Ensure that next person gets the institutional knowledge you have about the client. Be sure important client information is documented in the permanent file. If you continue to work in the firm after your retirement, allow the next person to take the lead on the client relationships.

Shannon Hudson: Planning, communication, training, and financial security of the successors are the main components of a strong transition. It’s not uncommon for retiring partners to be burnt out, exhausted, and eager to relinquish the reins. This is entirely understandable, especially since retiring partners have likely had a 40– to 50–year career. It’s important that there is a collaborative effort between the retiring partner(s) and successor partner(s) to ensure an efficient and smooth transition.

Ensure financial stability to the firm and team succeeding you. A fair and proper valuation of the firm and buyout to the successor partners is imperative. If the retiring partner(s) will be receiving deferred compensation, consider the fairness of how that is calculated to the remaining partner group. There must be a financial incentive and motivation for the successors. If the retiring partner buyout is too much, it will cause a sense of “this isn’t worth it” to the partners who remain and may risk the future of the firm.

Angela Alexander: Many firms have an age where partners retire and only in rare instances does that retirement occur earlier than planned. Partners should start years before retirement to get the next generation of younger partners, directors, and senior managers involved in meeting their clients, discussing what their needs are and making the client comfortable working with more than one partner or contact. This saves strain on both the client and successor partner to step in when retirement occurs.

What are some lessons learned around transitioning clients and responsibilities?

Larkin: Change can be challenging, and someone needs to be responsible for proactively ensuring that these conversations and steps are happening. A retirement plan should not be an option; it needs to be mandatory. Retiring partners must be compensated for a successful transition, not by hoarding clients until the day they leave. A planned transition is better than being surprised by an unplanned forced transition (such as by death, sickness, or the partner decides that they don’t want to work anymore). In addition to the rushed administrative implications of a forced transition, the conversations with the clients and others involved become more challenging than necessary.

Wittich: Start early and have a firm cutoff agreed to in advance. Transitioning clients cannot be done all at once; you need to break it down into the two or three years prior to the retirement date so it can be done at a manageable pace. One suggestion that may provide a clear cutoff is for a retiring partner to not be allowed to sign tax returns in the final year or two of their career. That could end up being the one or two years they work after redemption from the firm, but it draws a clear line, forcing the delegation and transitions to occur.

Whitmore: I think sometimes we get caught up thinking no one else can service our clients as well as we can. Generally, it’s the opposite. If we introduce clients to our team early, they get comfortable pretty quickly.

Becker: When transitioning clients, you need to force the new primary contact into the relationship. Sometimes this feels awkward, as we are all trained to be responsive and give clients what they prefer. If the transition doesn’t feel awkward to the retiring partner, it’s probably not an effective transition.

Alexander: Our retiring partners have an option to stay on, still with a title but without ownership. Most have chosen to do that, which is a benefit to our firm. However, the communication between what they want or will handle and what they expect others to handle has been gray. Clear communication and understanding well in advance would help to reduce the ambiguity.

Gallegos: A CPA firm’s value lies in its relationships. Resist the urge to hold onto clients until your last day. Instead, gradually introduce clients to their successors, attend meetings together, and allow clients to build trust with the new team.

As it is possible, foster a team–serving culture for clients. This approach makes the transition less jarring when a partner retires, as clients are already accustomed to working with multiple team members.

What challenges were encountered during a partner’s exit and how could those have been mitigated?

Larkin: Sometimes resistance from the partner occurs when there is a need to alert clients of the retirement. It’s best to avoid surprises with clients. Proactive planning and communication with clients and successors will mitigate this challenge.

Wittich: We have found that it’s incredibly challenging to successfully keep the client relationship when the retiring partner is the only person whom the client knows at the firm. If the retiring partner is also the bill manager on the account, the client only has one contact person for all of their work. For partners who are retiring, we recommend that the final two years be treated as the transition period, and the retiring partner should not be allowed to be the bill manager on the account. Involving at least one other person in the account for the final two years provides some level of continuity for the client.

Whitmore: I think that for a lot of accountants, their careers are their identities. We need to learn early on that we are more than an accountant. Work should not be our hobby, and we should not be spending most of our time in the office with co–workers. My impression is that retiring is scary for a lot of partners because they don’t know what to do or who they are without accounting.

Welch: My experience was with a sudden, unexpected retirement that caused uncertainty and concern among both clients and staff. Helpful steps were developing a clear communication plan for staff and developing a well–crafted script to proactively engage with clients to provide uniform responses to anticipated questions and concerns.

Hudson: A big challenge I have noticed is the resistance from both clients and the team. During a rushed and unorganized partner exit, the aftermath can be a challenge for the transitioning partners. This can leave the client with doubts about their new adviser/leader. This can absolutely be mitigated with thoughtful planning, clear communication, and the support and leadership of the retiring partner(s).

 Alexander: Lack of communication and planning can cause a tremendous amount of stress. This can lead to those managing the client being overwhelmed and the client not sure of whom to turn to. Also, without a communication plan, clients are left feeling as though they are not important to the firm.

How could the communication of retirement plans to clients and staff have been improved?

Larkin: Be open and transparent; let everyone involved know.

Wittich: I think being upfront with staff about the retirement plans has been very helpful. The staff understand that clients are being transitioned, and it’s an opportunity for them to work more closely with clients. As it relates to the clients, I do think that some mass communication about the timeline for a retiring partner would have been helpful. Transitioning clients can be hard, and it’s made harder when the client doesn’t understand why it’s being done or what the exact timeline is for the retiring partner. Clients might have a 30–year history with the retiring partner. Being able to tell them key dates such as the redemption date, the full retirement date, and what the firm is planning can help the clients understand what’s going on.

Whitmore: Earlier is always better.

Hudson: Transparency and timeliness are the key to success. Often, we are hesitant to upset people or cause a splash. This aspect of human nature can cause delay and/or procrastination with tasks that should be at the top of the priority list. Sharing the message with clients well in advance of a partner’s upcoming retirement is crucial. This allows the client to prepare themselves and get accustomed to the new team. Scheduling transition meetings with the clients, the retiring partner, and the new partner is a great way to gain the client’s trust and prove that you are putting them first.

This same concept is true with your internal team. The team members should be made aware of partner retirement at the earliest opportunity. They, like the clients, need time to adapt, digest, and accept the transition, especially if the partner was a strong and influential leader in the practice.

Pamela Slatten: Heavy communication with the clients. We transitioned one person out with plenty of notice and were able to communicate with the clients several months in advance. The clients were contacted by the retiring person as well as the person taking over well before the retired partner left, giving ample time for questions and concerns and reassurances that the new person could handle everything. In contrast, another retirement was with relatively short notice. Communications went out from the retiring and the new partners, but there was no time for continued correspondence with the old. Clients had a much harder time transitioning and took more hand–holding than we would have preferred. In retrospect, this should only happen this way in an emergency.

Alexander: Be as transparent as possible with your team. There were always questions for years at our annual firm meeting, but the response was always vague and left employees feeling out of the loop. People don’t like change, and had they known the exact date of transition, it would have helped calm some fears about the firm’s succession plan.

What are some key elements of a smooth transition plan?

Larkin: The partner accepts that the retirement is happening in order to plan for it!

Wittich: Obtaining agreement with all parties on the expectations. Having very clear guidelines for the actions required and expected two years prior to redemption and what it might look like after redemption if the partner wants to continue working. Instead of saying the retiring partner will transition to a new partner on the account by year end, be more specific. Say that the retiring partner and the new partner will have a joint meeting with the client prior to year end. This will mean that the new partner will have already met with the client, been introduced to the new client, and will understand the scope of work that the firm performs for the client. 

Whitmore: The transition plan is well thought–out and not rushed.

Becker: Transparency with clients is the most important aspect of a successful transition plan. Don’t leave the client guessing what’s happening, or the change can be viewed as lack of interest. Being explicit that a transition is happening and why is key.

Welch: The retiring partner should share important information — and then let go. Let the new person handle the client relationship. They should ideally be available as a backup to assist, but it is important to not undermine the transition team. This will help ensure client confidence and satisfaction along the way.

Slatten: Having good lead time to work everything out is the most important factor. If a guideline is set for retirement on the front end, it is easier. Adding in negotiations/discussions for buyout delays the timing of client communication, adds stress to the situation, and, in our experience, made for a less smooth transition.

What are the most important factors for a successful transition plan?

Alexander: Getting the right person to know the clients or areas of expertise the retiring partner is leaving behind and transitioning the new partner in as the retiring partner reduces their time in that area.

Gallegos: Based on experience, here are the most critical factors for a successful transition plan:

• Sufficient lead time;
• Clear timeline and milestones;
• Client retention focus;
• Successor development;
• Flexibility;
• Financial alignment;
• Post-retirement boundaries;
• Knowledge transfer;
• Client communication strategy; and
• Team approach.

Remember, a well–executed retirement transition isn’t just about saying goodbye — it’s about securing the firm’s future and leaving a positive legacy. The true measure of a partner’s impact isn’t just in their years of service but in the strength of the firm they leave behind. By addressing these aspects, you can significantly improve the transition process, benefiting yourself, your successors, the firm, and most importantly, the clients you’ve served so well over the years.

Ensuring a smooth transition

Navigating the exit of partners from an accounting firm is a multifaceted process that requires careful planning, transparent communication, and a collaborative effort. By implementing a well–defined transition plan, firms can ensure a smooth and successful transition that benefits both the retiring partners and the firm as a whole. The insights shared by seasoned professionals in this column highlight the importance of early preparation, client retention strategies, and fostering a team–serving culture. As the accounting profession continues to evolve, these lessons learned will serve as valuable guidance for firms looking to maintain stability and growth during times of change.