As more partners retire, fewer are filling the ranks to replace them. Instead, the next generation of senior professionals is being held back in the role of non-equity partner, meaning they receive a salary rather than profit-sharing status.

James O’Dowd, the founder of the global executive recruiter Patrick Morgan, which specializes in senior partner hiring and industry analysis, told BI that non-equity partner roles had become more prevalent over recent years and had picked up as the market slowed down. EY has had non-equity partners for more than a decade, while the role has existed at KPMG since 2021.

“From the partners’ perspective, if they continue to admit more equity partners, that dilutes the profit pool, and therefore, they make less money,” O’Dowd said. Instead, firms are using the non-equity title as “a stopgap” that allows them to give out the partner title but not share the profits per the traditional partnership model, he said.

There’s a lot of frustration among non-equity partners as they see their path to partnership get further away, O’Dowd added. Whereas 20 years ago, Big Four employees could make equity partner by about 35 years old, now they’re probably looking at their early 40s, he said.

PwC, which does not have a non-equity partner status, has introduced a “managing director” grade, which comes into effect on July 1 this year.

O’Dowd said the role would ease the pressure on “what was a very burgeoning director grade where they couldn’t afford to make them an equity partner.”

A PwC spokesperson told BI the new role reflected the firm’s commitment to adapting to the evolving business landscape.

“Our new MD grade offers our senior, high-performing staff an alternative to partnership,” the spokesperson said. “The role will help us provide more diverse career opportunities, ensuring we attract and retain the very best talent.”

The shake-ups to the partnership model are changing how junior employees view the executive role, Webster and O’Dowd told BI.

O’Dowd said the prestige of being a partner in a major firm isn’t what it was 10 years ago.

Younger professionals are less motivated by the title and more interested in meritocratic compensation models, O’Dowd said.

“The problem with the partnership is that it’s not inherently meritocratic. The profits are distributed often based on tenure and perceived contribution. What you’re seeing now in the market are lots of alternatives to the bigger firms that pay a wage that’s much more closely correlated to performance,” he said.

Webster added that there were also concerns about the partnership model’s risk-sharing nature after a series of major auditing scandals and subsequent regulatory fines.

Webster said his sister, a PwC partner in Australia, had seen her bonus get “absolutely crushed” in the fallout from the firm’s 2024 tax scandal involving work with the Australian government.

But Paton, the former PwC partner, disagreed with the notion that juniors aren’t looking to become partners.

Paton said that it was still “super aspirational” to be a partner at a Big Four firm and that it was viewed as a “tremendously prestigious job to have.”

He did say, however, that while aspirational, the role was no longer as achievable. Partner status is likely to be changed further by the impact of AI on professional services, he added.

“I think people realize that, even if that’s something they aspire to, it may be something that won’t actually exist in the future,” he said.

EY declined to comment when contacted by BI. KPMG and Deloitte didn’t respond to requests for comment.

Have a tip? Contact this reporter via email at pthompson@businessinsider.com or Signal at Polly_Thompson.89. Use a personal email address and a nonwork device; here’s our guide to sharing information securely.

Read the original article on Business Insider