External investment and MDPs 'could be salvation' of smaller commercial firms

BUSINESS ETHOS: solicitors must adapt in order to survive, warns Law Society Vice-President

The structure and internal business ethos of law firms in England and Wales is set to change dramatically during the next five years, forcing medium-sized commercial practices to adapt or die, the Law Society Vice-President forecast this week.

Addressing the Commonwealth Lawyers Association conference in Melbourne, Peter Williamson told delegates that a need to modernise systems and keep up to pace with IT would be one of the major drivers pushing firms towards outside investment for finance.

Currently, solicitors are banned from having non-lawyer investors and from forming multi-disciplinary partnerships.

However, the Law Society Council is actively considering a wide-ranging regulatory reform package that would allow solicitors much more flexibility in the way they fund their practices.

'Many firms will need outside investment to enable them to buy the necessary IT to develop their businesses successfully,' predicted Mr Williamson.

'Firms will have to decide where their future lies, for example, whether to maintain their status as predominantly legal practices, or whether their prospects could be improved by becoming legal-led multi-disciplinary practices.'

He highlighted small to medium-sized commercial law firms as being particularly vulnerable.

'International expansion or relocation...

may prove to be a viable and attractive proposition for medium and smaller-sized firms,' said Mr Williamson.

Law firms would also have to become much more cost-conscious, focusing more on profitability than on turnover.

Successful law firms will have to 'readjust their traditional attitudes to keep pace with...

competitors if they want to continue to recruit their share of the best lawyers,' he warned.

The brightest young lawyers are increasingly becoming aware of 'work-life' issues and only those practices that are prepared to address issues such as flexi-time hours would attract the best recruits.

That view was backed by Peter Hay, the chief executive office of Freehills, one of Australia's largest commercial practices.

'One of the main issues for law firms is the retention of key staff,' he said.

Mr Williamson couched his predictions with a caveat.

While firms would have to evolve, they would also have to retain the core values of the solicitors' profession, if for no other reason than those values - of integrity and confidentiality - provided the profession with a competitive advantage over other providers of legal services.

Mr Williamson added that it was crucial that the profession retained self-regulation.

Jonathan Ames