Lawyers will not be the owners of future law firms – but they could fulfil their dreams

dreams

The Law Society has spent some time looking at The Future of Legal Services, but has missed some of the most important changes that are happening now and will continue to have impact for the next decade.

Here I want to cover the issues and tensions that we see law firms struggling with now and offer a few thoughts on the impact of these.

1. Lawyers are not the leaders of the future

Law firms have been through unprecedented change in the recession.  Partners struggled to cope with loss of profits and drawings and many sank into deep trouble.  Back in 2012, I remember hearing David Thurkettle of PwC give a thought provoking analysis of trends in law firms from PwC’s Law firms’ survey 2012.

He said there was a growing trend for law firms to merge to sort out profitability.  But as he eloquently put it, if you have a pile of s..t in one firm and a pile of s..t in another, bringing them together is just going to produce a bigger pile, not a more profitable new firm.

That didn’t necessarily stop the mergers, but lawyers did start recognising they may not have the skills to run a business.

And that is a significant change.

The assumption has always been that a lawyer joins a firm, works their way up to partner if they are good and could be managing partner one day.  Most expect to be a partner with a stake in their firm and taking a pretty good profit share.

That is an assumption that will disappear – yet the Law Society does not touch on this.

2. Lawyers’ income will fall

income-will-fall

There is nothing new about salaried partners, but in the future all lawyers will be either salaried or self-employed as per a franchise model.  Senior lawyers will still have a high value but the concept of profit sharing will disappear, except as a profit-sharing scheme for all employees.  Lawyers will be paid as any employee in a business is and, as in any other commercial business, the real financial rewards will follow the risk and flow to those who truly invest.

3. The changeover is causing tension

Many firms are well on the way in this process.  They have brought in financial and professional managers to run the business and the power base is starting to swing away from legal partners.  For many of the older generation of lawyers in traditional firms, it is extremely uncomfortable.

4. New business models are emerging

The Law Society does touch on competition and changing business structures, but it does not go far enough.

We are seeing entrepreneurial lawyers building new business models from scratch, buying up smaller high street firms that have no future.  The whole business model has changed in these:  junior lawyers are now employees with no prospect of ownership.

New models of law firms are focused on differentiating themselves and focused on niche markets – the death of the one-stop, multi-disciplinary shop is coming.  This has in itself created new opportunities: small, highly specialised niche firms are offering their services to a wide number of the larger, commercial firms.  As examples, private client work or intellectual property.

Another model is also evolving.  Examples of this are Keystone Law and Carbon Law.

Keystone’s website says: “Keystone is presented to clients as a cutting-edge law firm which leverages technology and modern working practices to provide an attentive, high-quality service…. the firm makes available all the usual facilities, infrastructure and resources typically found in a medium-sized London law firm, but combines those benefits with unrivalled flexibility and support… lawyers have the freedom to work from our central office in London, their own office, a client’s office or any combination thereof. In addition to office space and hot desks, our central office houses 25 employed individuals who together handle the firm’s administration, compliance, invoicing, banking and marketing, and generally provide cohesion to the firm’s operations.”

So Keystone provides all the central services and lawyers then work on a flexible, individual basis – it is almost a franchise model.

Carbon Law is similar:  “Carbon Law Partners aims to free up the way businesses buy legal advice….. we don’t ‘own’ our lawyers – or their ambitions or relationships. We simply provide a means for them to do better business with their clients….. a like-minded team of entrepreneurial lawyers looking to succeed by doing things differently.”

These firms offer centralised services, saying to their lawyers, “don’t worry about billing or credit control, we’ll do all that.  You concentrate on the law”.

So is this fulfilling or killing the dream of lawyers?  A client once commented to me that most lawyers go to university with a dream of defending the vulnerable, righting the wrong – and end up on a treadmill of targets and winning work.

But the dream has usually disappeared by the time they are doing articles – the long slog is all worth it for the dream at the end.  Partnership and big fee income.

law

These new models allow lawyers to get back to looking after clients and focusing on the law.

The Law Society fails to address this seismic change in the profession and whether lawyers need to rethink their dreams.

Law Firm Practice Management System and Business Intelligence expert. Managing Director of Katchr.

If you’d like to discuss how large or small law firm software and legal financial reporting systems could help you run your practice more profitably, please give me a call on 0845 6806 843.