The re-entry of the global accounting firms into the legal sector is one of the more eye-catching predictions in professor Richard Susskind’s latest book, published today, ‘Tomorrow’s Lawyers: an introduction to your future’.
I recall the impact the accountants had the last time they took aim at the legal sector. It was widely assumed that being both bigger than commercial law firms, and closer to the client through ongoing audit and consulting activities, the accountants were a huge threat. The ‘arrival’ of US law firms in London got similar attention – not least because the higher rates they were willing to pay newly qualified lawyers set the market.
Andersen-linked Garretts was the most successful, and some of the lawyers who were at the helm of Garretts are numbered among the lawyers I most respect. The firm had an international proposition which at the time was different – as ex-Garretts Julia Chain reflected in the Gazette last year.
Of course Garretts unraveled for reasons well beyond its lawyers’ control.
But are the accountants about to have another go? Does it matter if they do? (PwC Legal LLP’s 80-plus solicitors will of course be interested to hear they are planning to re-enter the legal sector.)
A lot has changed since the last time the accountants had a go in any significant way. UK law firms who were almost wrong-footed last time, are now among the most successful of the new breed of international law firms. And of course the fallout from Andersen’s collapse has limited what each accountant can do for each client.
Offering ‘legal services’ these days makes most sense in those lines of advice where accountants market what their business clients would term ‘products’ – tax or investment vehicles – and also human resources support and, to a degree, the sort of investigations work that follows charges of bribery and corruption.
I think we will see a bit more of that. PwC Legal’s head of global immigration, lawyer Julia Onslow-Cole, was on Newsnight this week, and I think you’ll see her on it again.
But a few things argue against widespread displacement of existing legal services by the ‘re-entry’ of accountants to the legal market.
First, clients’ purchasing patterns are changing. Within legal services sophisticated corporate clients are on a steady move away from monolithic ‘one-stop shops’. Prompted by a hard economy, they have become much better at ‘unbundling’ their legal advice needs – even using different firms for different parts of transactions in preference to one-stop shops, demanding the firms they instruct become adept at collaborating. For the same reason they are using the bar direct, and looking, off a low starting base, at using legal process outsourcers more.
Secondly, the world of ‘products’ mentioned above is under some pressure. As the UK furor over corporate tax arrangements of household-name companies showed at the end of 2012, the creation of the vehicles that enable tax avoidance are under close political scrutiny.
Anyone professional services firm poised to make a major investment here must be hesitating. Banks are currently facing the expensive and commercially damaging fallout from the potential mis-sale of interest rate swaps products. That rather underlines the message on products.
Thirdly, large legal teams are a huge overhead. Many commercial law firms saw their income fall by a quarter in the aftermath of Lehman’s collapse. I suspect the accountants will ‘do the math’ and work out that the unenviable task of managing the fallout of such fluctuations is a distraction and expense they’d rather be well clear of.
Accountants are also less confident-looking entities than when last they had a go. The dependence on large government consulting contracts looks over-heavy. In the UK, this potentially vulnerable work source masks in some cases a decline in other work.
Are the accountants coming? In some areas, they probably are. But the window they had to revolutionise the legal sector has surely passed.
Eduardo Reyes is Gazette features editor
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