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How much does a Big 4 accounting partner make? | Big 4 Interview Questions

How much does a Big 4 accounting partner make?

After all the long gruelling years working at a Big 4 firms KPMG, PWC, Deloitte or
EY, one might finally scale the heights to the top of the totem pole and become a
partner. It is a very low percentage of people that do make it to the top due to
various reasons, one being the pyramid structure and other people wanting to get out
of the long hours and hierarchy structure familiar to most firms. We have often
heard quoted that under 2% of new starters will end up making it to partner.

Nevertheless, there is still huge interest from many to understand what these
partners earn and after finally reaching the top of the accounting industry. It's a
bit murky that's for sure, but we have some idea what it is. Numbers vary wildly
from the few hundred thousand well into the millions of dollars. Most info is
hearsay and conjecture as partners do not want to disclose how much they are making
for various reasons. Probably one being, clients realising how much they are paying
for them to earn this exorbitant amount, and also their staff seeing how little they
are making in comparison while doing most of the work in the trenches!

Let's first off remember, that a partner is an equity owner in the business. Thus to
buy equity in the partnership, the partner to be must have the funds to buy the
equity. Generally, partners take out a loan to do this, so lets remember that they
will have to pay interest on this, so it does reduce their total compensation

So what does a partner actually make at a big 4?

Generally newer partners make less than the stalwarts who have been at the firm for
a long time. This is because they start off with a smaller client base that they
need to grow. Partners will usually be compensated with a relatively low base
salary, but they earn all their money through the profit distribution of the firm.
So the better the firm is doing the more the partner will make. How it is determined
what percentage of the profit the partner gets is where it all gets a bit murky, and
can actually vary considerably from firm to firm. Usually one of the ways that the
profit split is determined is dependent on the revenue the partner brings in. So a
partner with some big clients who are spending big money at the firm can be expected
to be bringing in a larger salary.  For example, PWC as the auditor of Goldman Sachs
in 2012 received a whopping $55.5 million in audit fees alone! The partner(s) who
control that job can be expected to be earning a pretty penny being responsible for
that much revenue, plus that doesn't include other clients they may have.

We should also mention that advisory partners tend to earn a bit more than  their
Audit/tax counterparts due to the services being more specialized and expensive, but
also requiring smaller numbers of staff to complete and therefore being a lot more
profitable to the firm. For example, coming back to our Goldman Sachs auditing
example, performing an audit on this global behemoth of a bank would require huge
numbers of staff meaning huge costs. Whereas, say an advisory team involved in a
sale transaction of a $500 million business may earn fees of $10 million for doing
so with a small staff of probably well under 10 working on the project.

Below is a table with some of the commonly believed compensation in the Big 4, but
obviously can vary wildly if you have partners who are pulling in massive revenue
early on in their tenure as partner.

Audit/Tax Partner Compensation
1 - 5 years: $300k to $600k
5 - 10 years: $500k to $2 million
10+ years: $750k to $5 million

Advisory Partner Compensation
This can be anywhere from $250k to $5+ million

As you can see, it certainly pays well to be partner at a Big 4 accounting firm!
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