Big 4 Partner compensation – how high is it really?
The pinnacle of the public accounting profession is making it to Partner, mainly because of the lavish compensation packages. However, this is something that most people in public accounting think
- Is unattainable due to the pyramid like structure of the firm and the limited spots available, and
- They can’t stay in public accounting and endure the long hours / stress long enough to make partner.
It is still something that drives curiosity, especially since you often hear wild numbers thrown out. I’ve heard numbers as low as $200k, and as high as $10m per year. So where is it actually and how can you tell who is making what?
Consider the following when discussing partner compensation:
1) New partners have to “buy in”
When someone becomes a partner, they are no longer and employee but rather a part owner in the partnership of the firm. This doesn’t just come as a promotion, but they have to put up serious capital to be able to buy in. There are programs within the firms where they can have the loan paid out of their partnership draw at a low/zero interest rate, but it definitely eats away at their compensation.
2) The partnership structure has different levels
Outside of the regular partners who deal with certain clients in their office, there are other partners with different roles and different income streams. You may hear partner titles thrown out such Office Managing Partner (OMP) or PCAOB reviewing partners, partners in specialized accounting roles, and then there are regional partners who may be over an entire state or two. For example, Scott London was the (former) Partner-in-charge of the audit practice of KPMG’s Los Angeles involved in a recent scandal in which he received a petty amount of cash and gifts totaling around $100,000 while his compensation was in the millions.
3) The bigger the client the bigger the fees
If the partner is like most other partners and handles client accounts, the engagements they work on drive most of their profits. For audit, general publicly traded companies have much higher fees and profit margins than the smaller private companies. For tax it really depends on the clients the partner has brought in. If a tax partner brings in a slew of individual returns they could be compensated higher than the partner working on a few corporate returns
4) Advisory trumps all
Advisory practices are specialty practices that have service lines dealing with technical issues such as implementing a new ERP system, planning the risk of expanding to a new country, buying/selling a company and even IPO’s. These are all very expensive services that are extremely profitable and have driven a ton of growth in the past 10 years. Additionally, they don’t necessarily have to stay with a Big 4 to make some serious money. Many of the middle market companies go to smaller boutique consulting firms that specialize in the service they are after and can make more than the Big 4 Advisory Partners.
Audit/Tax Partner Compensation
(Years : Low-Max)
1-5 years: $300-$500
5-10 years: $400-$1.3M
10+ years: $600-$3M
Small firm: (10-50 people): $140-$450
National Firm: $200-$800k
Advisory Partner Compensation
Local CPA firm: $200-$500
Big 4: $350-$5M
Boutique Advisory: $300-10M+
Do you have any comments or want to provide more data points for how much they’re bring in? Leave a comment below.