Mandatory retirement is a daunting reality for many partners in large accounting firms, particularly those in tax. Based on decades of experience representing tax experts in the industry, we know that firms offer few options economically commensurate with post-retirement opportunities. While exceptions exist, the harsh truth is that large accounting firms employ strategic methods to sever partners from their client relationships, making it difficult for them to transition elsewhere.
A common tactic involves giving soon-to-retire partners impressive new titles, such as “head or leader of XYZ Practice,” while simultaneously transferring their client portfolios to lower-level partners—who cost the firm significantly less. This process is not accidental; it is a well-thought-out, systematic strategy embedded in the firm’s long-term structure. The result: when partners seek post-retirement opportunities at a law or consulting firm, they struggle to secure a comparable role of responsibility due to a lack of portable business.
The Market Misconception
Many partners assume that their technical expertise in tax and track record in business development will naturally translate into an equivalent financial incentive. This is a dangerous misconception. The primary economic driver in this space isn’t exclusively expertise—it’s a portable client following that justifies a competitive compensation package. However, by the time partners reach the end of their tenure, firms have often stripped them of their leverage.
The Tools Firms Use to Prevent Client Portability
Accounting firms use multiple tactics to limit partners ability to maintain their client following:
- Mandatory Retirement – A structured mechanism to enforce a timely departure.
- Title Promotions – Offering a temporary enhanced leadership title to distract from the transfer of key client relationships.
- Legal Threats – Firms rely on non-compete clauses to discourage client transitions, though these agreements are often legally unenforceable.
- Pension Intimidation – Threatening to withhold or reduce pension benefits to ensure compliance, despite legal protections against such actions.
While non-compete agreements are a primary tool, recent legal trends have weakened their enforceability. California has banned most non-competes, and the Federal Trade Commission recently ruled against them in most employment situations, excluding only top executives. In reality, firms often rely more on intimidation than enforceable contracts.
The Bottom Line
For partners approaching mandatory retirement, understanding these dynamics is critical. Firms are highly strategic in how they manage transitions, ensuring that departing partners have limited leverage in the job market. Those who recognize these tactics early and take proactive steps to maintain client relationships and can fully appreciate the concept of ROI, will have far more success securing meaningful opportunities beyond their tenure at their current firm. Those who have aspirations of transitioning to a competing environment in the legal or consulting industry should expect to provide a detailed estimation of their client following in the form of a lateral hire questionnaire or a business plan. The strategy of planning appropriately for such a contingency can be complex and worth some mindshare.
