Nothing new under the sun

When I was an apprentice (a long, long time ago, in a distant universe, before traineeships and Diplomas were invented), the firm I worked for was not restricted to carrying out legal work. They also had a small department which prepared accounts for local businesses, in competition with the local chartered accountant. The department was badly staffed and poorly run and was undoubtedly loss-making, but the senior partner considered that the service was necessary to retain the legal work which these clients also provided.

He was wrong, of course, but that didn’t prevent him providing non-legal services, and there is still no rule which prevents that. Many of us have been multi-disciplinary practices (MDPs) for as long as we care to remember, providing estate agency services for instance. I have even occasionally prepared profit and loss accounts for self-employed clients to help them obtain mortgages.

Nevertheless, the arguments for and against MDPs have been dragging on for more than a decade, without any proper conclusion having been reached. And now, thanks to Which? and the Office of Fair Trading (OFT), the Society is having to come up with plans which will permit their existence. In this respect, the bone of contention is the ownership of the MDP. Basically, how do you regulate a firm owned by a mixture of accountants and lawyers or a law firm owned by Tesco?

Despite some uncomfortable previous experiences, it would appear that what many large firms now want is to merge with English law firms or multinational accountancy firms, or to take on non-lawyers as partners. For the large majority of law firms in Scotland, such proposals seem to be irrelevant.

Once again (as with the training of new solicitors) the intentions and expectations of small firms seem to bear no relation at all to what the large firms want. Take on tax experts and investment managers as partners? For most small firms, the problem is getting anyone to join them, never mind non-lawyers. The Succession Problem is far more troublesome than the Services Problem.

However, for some small firms, there are opportunities here which may not have been considered. For instance, if the regulation problem can be solved (and of course it can be), there may even be solutions to the Succession Problem.

Law firms are proud of their independence, but this independence can lead to a desperate scramble to find a purchaser once all the partners have passed their 60th birthdays, or the firm simply closing its doors. What if, having adopted limited company status, law firms were to purchase interests in other local law firms, allowing them to remain independent, but providing an automatic successor when the older partners retire? The same thing could be achieved within partnership models or LLP models, with careful wording of the partnership agreements.

This could lead to chains of inter-related (but independent) firms covering wide geographic areas, a concept which could be more attractive to young lawyers who, at present, are so reluctant to leave the city lights for a career in the country.

There are also possible savings in costs by firms grouping together in this way, sharing cashrooms, marketing projects, websites and staff for instance, or ordering supplies in larger quantities.

While that concept is already possible (although I am not aware of anyone putting it into practice), a change in the rules could allow the same system to be extended to allow chartered accountants or other parties to become involved, spreading the eventual ownership of the firms among a wider base.

MDPs could allow law firms to accept estate agency managers, paralegals and other important employees as partners in their firms, which should discourage “poaching” by other firms, and encourage the entrepreneurial instincts which are often missing in lawyers. For many law firms, the estate agency department may well be the most profitable part of the firm, but, paradoxically, is often run by non-lawyer employees.

New regulations could also allow lawyers to accept chartered accountants (CAs) or financial advisers as partners, enabling each part of the firm to cross-sell services to the clients of the other part. CAs, of course, have been able to do that for years, although again I am not aware of too many lawyers who are partners of small CA firms.

MDPs are coming, whether we want them or not. No-one is going to be forced to make anyone else a partner in the firm, but we should all be aware of the possibilities which MDPs will offer us.