How does the risk/reward of being a big 4 partner investing extra money into firm and receiving profit share compare to being an MD and investing into general stock market?

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You aren’t investing in the firm as a partner, unless you’re referring to the buying of shares. You get a loan for that and it’s a long payback period. You can value the pension at 0 and it’s still a better long term financial position than MD.

Comp is materially higher as a partner and has better exit opps if you want to make a move later on. You invest excess cash into the general stock market, similar to an MD. The difference is that as a partner you have more cash to invest and more tax advantage accounts (with no firm risk) to utilize.

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“… as partner you have … more tax advantaged accounts (with no firm risk)”

Could you explain that? Is it because partners are not employees, so you can open ‘solo 401k’ accounts with higher contribution limits?

Yeah. I don’t really see the comparison. Your earning potential is not the same or even close at all.

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Partners make multiples of MD comp. If an MD could close the gap through investments, they would be better off quitting to remove all independence restrictions

So at my big4, we can make investment back into the firm. ROI on that currently is 10.5%. Plus various tax benefits immediately and at retirement. Compare to just general investment account….

It’s only 10% right now because rates are high. It’s not usually 10%.

Thanks all!

B4 = Way Better

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