Guide for Alternative Investment Funds

What to Look for in a CPA Firm as the Accounting Industry Consolidates

The accounting landscape is undergoing rapid consolidation, and for alternative investment funds, this transformation presents unique challenges and opportunities. As these funds grow and their financial environments become more complex, the demand for specialized tax, accounting, and consulting services has never been greater. For these funds, choosing the right CPA firm is about more than just crunching numbers; it’s about fostering a partnership built on trust, shared values, and a long-term vision.

In this article, we’ll explore what to look for in an accounting firm as the industry consolidates, and how to ensure your chosen firm will remain a valuable partner throughout your fund’s lifecycle.

1. Ownership Structure and Long-Term Stability

The pace of mergers and acquisitions in the accounting industry has accelerated, leading to a surge in private equity-backed and larger national or super-regional firms acquiring smaller, middle-market firms. For alternative investment funds, these changes may raise valid concerns:

• Is bigger always better? While larger firms may bring additional resources, the personal touch and deep industry knowledge of smaller, independent firms can often provide a more tailored experience. If your long-time CPA firm merges with a larger entity or brings in private equity capital, it’s important to assess how this shift could impact the quality of service you receive.
• Service team continuity: Will the professionals who know your fund’s business remain the same? In larger firms or those backed by private equity, changes in staffing can sometimes occur, which might affect continuity and the depth of your relationship with your team. Understanding who will be managing your account long-term is a critical consideration.
• Ownership transparency: It’s essential to have a clear understanding of the firm’s ownership structure. Firms with a strong commitment to partnership, like independent or partner-owned firms, often prioritize long-term client relationships over short-term financial goals. In contrast, private equity-backed firms may face pressure to adjust pricing and service models to meet investor expectations.

2. Strength in Proactivity and Long-Term Partnerships

Gone are the days when accounting firms focused solely on preparing tax returns and financial statements. Today, firms need to be proactive in offering consulting services that guide clients through the entire business lifecycle—from start up to exit.

• Proactive engagement: Choose a firm that demonstrates a genuine interest in your business. A firm that seeks to understand your industry, goals, and challenges will be better positioned to offer timely advice, whether it’s regarding tax planning, structuring, or regulatory compliance. Firms that take a long-term approach to their client relationships are more likely to offer continuous, customized advice as your fund evolves.
• Advisory services that go beyond the numbers: A proactive accounting firm will provide more than just reactive services during tax season. They should be engaged throughout the year, offering strategic advice that aligns with your fund’s long-term goals. Whether that’s providing insights on upcoming tax reforms or structuring advice for new investments, having a firm that acts as a true advisor is invaluable.

3. Customized and Flexible Solutions

As alternative investment funds navigate a shifting regulatory environment, a one-size-fits-all approach to accounting and advisory services won’t suffice. Firms should be able to provide bespoke solutions that reflect your fund’s unique needs, goals, and challenges.

• Industry expertise: Choose a firm that has deep industry knowledge and understands the intricacies of alternative investments. Specialized expertise is especially crucial in times of significant regulatory and tax changes. Firms with a strong understanding of these shifts will be able to provide relevant, timely guidance that ensures compliance and strategic advantage.
• Flexibility in service offerings: With evolving federal policies and potential tax reforms, the need for flexibility has never been greater. Look for firms that can customize their services to your fund’s unique requirements and adapt as the market and regulatory landscape change.

4. Client Communication and Engagement Beyond Tax Season

A strong client relationship goes beyond just completing annual tax returns. The most successful accounting firms foster a culture of continuous engagement and open communication throughout the year.

• Ongoing support and engagement: A client-centric firm should prioritize clear and frequent communication. In addition to handling routine tax and audit matters, they should be available to discuss long-term initiatives, regulatory changes, and strategic goals—especially during quieter times in the year when there is space for planning and reflection.
• Strategic discussions: These quieter periods are an opportunity for in-depth discussions about long-term growth, risk management, and future structuring. The best firms engage with clients year-round, offering insights and guidance that help navigate both immediate challenges and future plans.

5. Stability in Pricing and Fee Structures

With the consolidation of firms, changes in pricing structures are a common concern. As larger firms are often driven by external financial metrics, fees may fluctuate more than those at independent firms, which can complicate long-term financial planning for funds.

• No surprises: Transparency in pricing is key. Be sure to ask potential firms about their fee structures and whether any changes might be on the horizon due to shifts in ownership. Knowing what to expect financially will help you plan for the long-term.

6. Adaptability to Evolving Market and Regulatory Demands

Alternative investment funds operate in an environment where regulations, tax laws, and financial strategies are constantly changing. As such, it’s vital to choose an accounting firm that is adaptable and capable of providing timely, actionable advice in response to shifting demands.

• Dedicated subject-matter experts: Choose a firm that has experts specializing in the alternative investment sector. These professionals will not only stay current on industry-specific regulations but will also be able to offer actionable insights tailored to the unique challenges faced by funds like yours.
• Quick adaptation to change: A firm that remains agile in response to changing tax codes, financial regulations, and market conditions will help you stay ahead of the curve. Whether it’s adapting to new compliance requirements or offering strategic advice during uncertain economic times, the right firm will be prepared to offer timely solutions.

Conclusion: A True Partnership for Long-Term Success

As the accounting industry consolidates, the most important consideration when choosing an accounting firm is whether they will remain a trusted partner throughout your fund’s growth. Firms that prioritize long-term relationships, offer customized solutions, and provide stability in both pricing and service will help guide your fund through an increasingly complex landscape.

Ultimately, the goal is to find a firm that will scale with you, adapt to changing market conditions, and offer consistent, personalized support as your business evolves.