· UNIQUE RESEARCH REVEALS LIKELY LEGAL LANDSCAPE in 2018
· Clients say rises in legal fees are unsustainable without more added value
· hegemony of magic circle dented
· expert legal advice will not be commoditised, BUT LAWYERS WILL NEED TO QUESTION WHAT IS CONSIDERED A ‘PREMIUM’ SERVICE
· legal services act UNLIKELY TO bring change at top of profession
· partners believe work-life balance and excellent client service is a ‘contradiction in terms’
The legal profession is set for major change and the dominance of the ‘Magic Circle’ is set to erode, according to a major new study into the future of the legal market by international law firm, Eversheds. Senior partners of leading international law firms and their clients have delivered a unique insight into the likely trends and future landscape of the legal profession revealing contradictions in priorities for the decade ahead. The sector, worth an estimated £15bn in the UK alone and £217bn globally is approximately twice the size of the accountancy profession.
The ‘Law Firm of the 21st Century’ study, carried out by leading legal researcher, RSG Consulting on behalf of Eversheds, outlines the views of 50 partners of 25 top law firms as well as general counsel, legal and financial directors at 50 of the world’s most prominent companies. The report covers how the client/lawyer relationship is changing, the shape and structure of future law firms and trends in the way top clients are buying their legal services. In addition, it looks at what the impact of commoditisation and standardisation will be on top lawyers and clients, the perceived impact of the Legal Services Act and challenges associated with achieving a credible work-life balance.
The research also indicated a possible erosion of the dominance of Magic Circle firms, with a third of clients (34 percent), planning to buy legal services from firms outside the Magic Circle to get better value for money and better client service. Many felt there was little difference in the standard of legal advice between those firms inside or outside the Magic Circle.
David Gray, Chief Executive of Eversheds, comments:
“This piece of research paints a fascinating picture of the opportunities and challenges set to face the top legal firms and their clients over the next decade. What is clear is that the legal market will experience change over the next ten years, and there are a number of pivotal areas which need careful consideration by both law firms and clients if the legal sector is to continue to flourish.”
Rising fees and the cost of buying legal advice is the key concern among clients, with over half (55 percent) believing that the current growth in law firm fees was not sustainable. Controlling costs is a major concern for clients who are increasingly calling on their legal providers to justify fees and over half (53 percent) thought that lawyers needed to be more commercial and align themselves to their clients’ business. But many top law firm partners are out of sync with their clients, with only 21 percent of them mentioning the need to control costs or add value as a concern.
The study highlighted the ambivalence lawyers and their clients have to the hourly rate. While most partners (82%) and clients (86%) believe the hourly rate will be alive and well in ten years time, most acknowledged that it was not the most advantageous billing process for clients. A third of clients (32%), in turn, expressed their deep dislike for the billable hour.
Impact of the Legal Services Act and trend towards commoditisation
While the research revealed mixed views, the majority of partners (73 percent) did not believe the Act would result in significant changes to the partnership model and 72 percent of clients were similarly not very concerned about the impact of the Act. However, a significant minority of partners interviewed – 20 percent – did expect to see major changes, including incorporation, and 42 percent of partners did foresee law firms taking outside investment, but it is likely be limited to mid-tier firms.
A significant minority of clients (24 percent) were concerned about whether a ‘legal company’ would be able to offer them same level of service, loyalty and commitment as a partnership.
When asked about the reported trends of a move towards commoditisation of legal services, most partners and half of clients (53 percent) agreed that commoditisation and standardisation were significant trends in the legal market However, they were not expected to eradicate the existence of the expert, individual lawyer as some commentators have predicted. 70 percent of partners believed that the type of work they did would be immune to commoditisation and they actively wanted to avoid that trend in their practices. However, just over half the clients could see that commoditisation was a potential way for private practice lawyers to add value.
David Gray continues:
“The reality is that premium services become increasingly standardised and then commoditised as they become common. Partners in law firms need constantly to question whether what they are doing remains ‘premium’ and if, as is often the case, it is not, they need to do two things. First they need to move into another ‘premium’ area and secondly facilitate the commoditisation of the work which is no longer premium. Without such rigorous questioning, partners will be seeking to do non premium work at a premium price which is not sustainable.”
Achieving a work-life balance
In contrast to reports of unhappiness among assistant solicitors, the majority of partners interviewed (77 percent) believe that law firms are good places to work, with one third believing they had become better places to work over the past ten years.
However, partners were split about whether a credible work-life balance is possible, particularly among City firms. While nearly half (46 percent) felt that achieving a work-life balance should be a key goal for firms, others (48 percent) were more pessimistic, stating that 24/7 client demands meant it was unachievable.
Clients, on the other hand, did not feel responsible for the compromised work-life balance felt by City lawyers. Over half of them (52%) thought a credible work-life balance was achievable. However, the same proportion felt that this could only be realistically achieved if firms made significant changes to their approach and management.
The idea of flexible working also split the respondees on both the client and partner side, with 56 percent of partners and 45 percent of clients stating that flexible working did not offer a credible solution to work-life balance. However, similar numbers of clients (41 percent) and partners (38 percent) believed that offering flexible working should be a key business objective in order to retain the best employees.
In conclusion, David Gray comments:
“The report is interesting reading as it reveals both contradictions and agreements in opinion between clients and law firms, on how firms need to adapt to remain relevant in the future. Ten years is not that far away and it is clear that there are several key things that will affect both law firms and their clients, including legislative changes, an increase in the use of technology, a focus on value for money and achieving a work-life balance that does not impact on client service.”
A full copy of the report findings is available on request.