Hedge Fund CFO Headaches

Alternative investment chief financial officers’ five biggest headaches are regulations, transparency, complexity, investor timidity and efficiency, according to a new survey from TKS Solutions.

Tackle even one of those challenges and you’ll set yourself up to move ahead. After all, anyone with a headache automatically loves the co-worker who’s got a bottle Motrin in her desk.

The five most vexing issues for fund CFOs were:

Evolving Regulatory Requirements
A complex regulatory framework has long been a facet of fund life, but this year's abrupt changes have created new challenges for even the most sophisticated shops. Take, for instance, US Form 90.22 (or FBAR) covering both taxable and non-taxable ownership of foreign funds, feeder funds, and tax exempt entities. At least you have until fall to get it done.

Investor Demands for Greater Transparency
Reporting requests are now coming from the capital side and the portfolio front. Thanks to Madoff, investors want to see their ownership percentages in any underlying funds and managed accounts.

Managing Asset Complexity
Has your fund set up side-pocket for non-performing 2008 investments? Managing those along with the main fund may mean an upgrade from spread-sheets to investor accounting software.

Investor Timidity
Hedge funds are offering skittish investors creative liquidity gates. New offerings include: early redemptions with a fee; periodic ability to withdraw partial capital; and/or splitting a single contribution into multiple lock-up schedules.

Operational Efficiency
It may have helped the bottom line to reduce head-count, but it sure didn’t do anything for your workload problems. Brute force deployments of small armies of staff armed with spreadsheets are no longer an option for handling the many complexities of investment partnership and shareholder accounting. Demonstrate your worth by quickly getting up to speed on any new investor accounting systems and updates.

The Institute of Management Accountants' 20th annual salary survey showed that despite the economic crisis:

• the average salary for accounting professionals (among IMA members) actually increased by 2.2 percent in 2008,
• accounting professionals with an advanced certification (like a Certified Management Accountant or Certified Public Accountant) earned 24 percent more than their non-certified colleagues and
• respondents ages 19-29 with an advanced certification earned an average of almost $13,000 more than their non-certified colleagues in the same age.

The survey also found that the pay gap between men and women working in the field grew in 2008. “The shocking factor is that the average total compensation for women in 2008 is less than the average salary of men (i.e., without adding the additional compensation) for every age category,” study authors David L. Schroeder and Karl E. Reichardt, CMA said in a commentary about the survey.

Women start out fairly even with their male counterparts, but the longer they stay in the field, the wider the pay gap grows, the survey showed. “The average salary and average total compensation for women in top management decreased 13.6 percent and 2.3 percent, respectively, in 2008, while the same figures for top-management men increased 7.5 percent and 5.6 percent, respectively,” the authors said.

The survey authors point out that women surveyed were, on average, younger than men (45.5 vs. 48.2), less likely to have advanced degrees (46% vs. 53%) or certifications (63% vs. 72%) and had fewer years in the field (17.5 vs. 20.4), in their current position (5.5 vs. 6.7), and with their current employer (9.6 vs. 10.2), all of which are statistically significant.

The survey also looked at the role certification may play in compensation. Average salary for the 69 percent of respondents who have some kind of certification was $112,068.

The 31 percent of respondents who were not certified reported an average salary of $86,225—a difference of more than $25,000.

In the 2008 survey, CMAs reported higher average salary and total compensation than CPAs in the first two age categories (19–29 and 30–39), while CPAs reported earning more in the remaining three older age categories.

“Those with both certifications have greater average compensation than those with only one certification for all age categories except the 19–29 category. Throughout the 20 years of this study, there has been no uniform pattern when comparing compensation among certifications,” the authors concluded.

Jackson, Rolfes, Spurgeon to Merge with Plante & Moran in Cincinnati

Jackson, Rolfes, Spurgeon & Co. (JRS), Cincinnati, is merging with Plante & Moran, PLLC tomorrow and plans to expand the firm in the future.

“Locally, the jobs we had here are going to stay,” said Plante & Moran’s incoming Managing Partner Gordon Krater. “If anything we’re looking to add jobs to the area, and to the city. Cincinnati is a city we intend to invest in and we’re looking to grow the office significantly over the next several years.”

JRS Managing Partner Jim Rolfs added: “We don’t anticipate any changes really in any of the jobs except some minor changes in roles and responsibilities, possibly.”

The merger brings JRS access to specialty practice professionals in international tax and consulting, corporate finance, financial advisory, healthcare, manufacturing and not-for-profit organizations.

JRS has five partners who will become Plante & Moran partners and a total of 50 staffers. It provides financial, tax and consulting services to small and mid-size companies in Southern Ohio. JRS’ specialty practices include manufacturing, real estate, construction and auto dealerships.

Plante & Moran sees the merger as a way to increase the firm’s local footprint. “Cincinnati rounds out our Ohio presence…we’ll be able to expand west and south from there,” Krater says.

CFOs, Treasurers, Staff Saw Modest Pay Hikes in 2008, AFP Survey Finds

Chief financial officers, treasurers and their staff saw their paychecks grow by an average of 3.4 percent between January 2008 and January 2009, more than the average white-collar worker, but somewhat less than the 4.5 percent increase they saw in 2007, according to the latest salary survey from the Association for Financial Professionals http://www.afponline.org/.

The average bonus was 15 percent, unchanged from 2007.

Middle managers reported slightly larger increases in total compensation than did VPs of finance and CFOs, said AFP, which collected its data from 3,000 professionals at 2,000 primarily North American companies in February 2009.

Managers of treasury/finance reported the highest percentage increase, 5.7 percent, and an average base salary that rose from $88,000 in the 2008 survey to $93,900 in 2009.

Here’s what AFP reported for other positions’ 2009 base salaries:

• CFO 184,300 up 3.2 percent
• VP of finance 161,600 up 3.2 percent
• Treasurer 161,600 up 3.9 percent
• Controller 116,500 up 3.3 percent
• Director treasury/finance 125,400 up 4 percent
• Assistant treasurer 124,700 up 3.8 percent
• Cash Manager 71,000 up 3.6 percent
  

PwC's Plans for India

India is the fastest-growing market for PricewaterhouseCoopers (PwC), and the company plans to add 3,500 staffers there over the next four years, up from the current 6,500, PwC Chairman Dennis Nally said during a recent tour of the country.

In an interview with The Economic Times, Nally talked about the use of non-Indian auditors in the wake of the Satyam debacle, how the growth of the Indian economy has increased demand for auditing and off-shoring:

Q: PwC recently decided to bring in auditors from its various international/outside affiliates to run a check on the audit work done in India. Is it to maintain consistent audit standards?

A: It is based on the whole idea of cross-border expertise, where we take individuals with skill sets in one country and share that expertise in another country. The idea is to make the firm stronger.

Q: What are your plans for India?

A: China, India and Vietnam are important markets for us, as the growth in such regions is very positive. We have over 6,500 employees in India, and plan to take the number to 10,000 in three to four years. We also plan to add a significant number of jobs from our sourcing strategy.

About 4 percent of PwC’s employees are based in India.

Nally told The Times of India that the company regrets its failure to detect the fraud at Satyam Computer Services. Two of PwC’s partners were arrested earlier this year in the case:

PwC has particularly brought about changes in the process of recruitment, in terms of looking out for qualities of ethics and values in an individual. "If we don't have those type of attributes from day one, it is pretty difficult to build them down the road. So this is what we really look for in our recruits and make those judgments right upfront on day one even before those individuals are offered to join the firm,'' said Nally.

CFOs Try to Avoid Layoffs

To avoid layoffs, nearly half (47 percent) of chief financial officers are trying other options ranging from salary freezes to shortened work weeks, according to the most recent quarterly survey conducted by Financial Executives International (FEI) and Baruch College's Zicklin School of Business.

About a fifth (21 percent) of the 334 CFOs surveyed said they expanded early pensions and other retirement incentives, while 17 percent implemented furloughs.

Forty-seven percent of respondents were trying other tactics, including salary reductions, unpaid vacations, pay raise stalls and preferences to hold onto experienced personnel:

• Salary freeze – 51 percent
• Redistribution of responsibilities – 29 percent
• Elimination of bonuses – 29 percent
• Restructuring – 29 percent
• Salary decreases – 20 percent
• Shortened work week – 16 percent
• Mandatory unpaid time off – 11 percent
• Option to telecommute – 3 percent

On a more optimistic note, over a quarter (28 percent) of CFOs are witnessing signs of stabilization at companies where layoffs did not occur this quarter (30 percent).

The job outlook for recent graduates and interns was still challenging when the survey was conducted at the end of March. Nearly all (95 percent) of the CFOs whose companies traditionally hire students had either hired fewer, or the same amount as the previous year. A scant 5 percent of the CFOs had increased graduate hiring.

Among companies that have historically hired paid summer interns, 61 percent planned to hire fewer interns, and only 8 percent said they would hire more interns this summer.

Redundancies at Large UK Accounting Firms

The 50 largest accounting firms in the United Kingdom have reduced their headcount by about 3,000, or 5 percent, over the past year, according to an annual survey from Accountancy Age.

The top 50 firms by revenue now employ 56,669 qualified accountants, the survey found.

“Experts expect the job cuts to continue as firms try to slash costs in response to a sharp slowdown in demand for corporate finance and other services,” Accountancy Age predicts.

Even KPMG, which last winter reduced UK staffers to a four-day work week to avoid layoffs was planning to cut 200 jobs.

Phil Shohet, director of Kato Consultancy, told Accountancy Age firms are cutting managers and recruiting graduates:

This has forced partners to "trade-down" and handle more technical work, Shohet said, meaning that clients are often relying on inexperienced graduates to help them survive the recession. "You need more rounded managers who are technically very good, but who can also manage staff better," he said. "In independent firms there is very little management training."

Here in the U.S., the Bureau of Labor Statistics reports CPA firms employed 438,600 people in April of 2009, down 4,800 people from April of 2008.

The BLS also offers seasonally-adjusted numbers for the broader accounting and bookkeeping industry. Those figures show 5,100 fewer people working in the field in May of 2009 than were working in May of 2008.

Anecdotally, our viewers continue to share the news about layoffs in many cities by accounting firms, including the Big 4, as they comment on our blog What's Behind Layoffs at the Big Four.