We are surprised not to have seen more of the news arising from India recently in our legal press. Although this lack of interest may be understandable, due to the number of ‘false dawns’ of the liberalisation of the Indian legal market, if news from India is to be believed (and our sources on the ground believe it is) the dawn of Indian legal market liberalisation is just about to break.
In July, Indian Prime Minister Narendra Modi and his law minister Ravi Shankar Prasad called for the liberalisation of the legal market in India, specifically opening the market to international law firms. Whilst our contacts in Mumbai feel that there is more to these recent developments than there ever have been in previous liberalisation discussions, some from outside India still greet this news with a hint of sceptisim given that this is not the first time the matter has been raised.
Nevertheless, with executive committee member of the Indian National Bar Association Salman Waris telling the India Business Law Journal this week that the government are looking at a timeline of three to four months to liberalise the sector, there seems to be a growing consensus view within India, if not outside it, that this change is coming and it is coming soon.
Those we have spoken with on the ground in India have made it clear that for Prime Minister Modi, the liberalisation of the legal sector is a key step on his path to a more open and liberal country, and an ‘easy win’ compared to other sectors.
The first phase of the liberalisation programme is likely to be allowing international firms to set up offices in Special Economic Zones ‘where their lawyers could advise domestic and foreign clients on non-Indian laws’. If this does take place, it is highly likely that we will see a significant change in the approach and strategy of international law firms to the world’s 7th largest economy and what is a potentially powerful legal market.
An example of the activity that could follow in India is seen in the expansion of the South Korean legal market, which since liberalising in 2011/12 has had 28 foreign law firms open up offices there. With many firms already working with clients in India, wanting to invest in the region more or having India desks in different countries, it is highly likely that there will be a surge of international firms hungry to get their feet on the ground in Mumbai or wherever they are permitted.
With many international firms looking for their version of global domination, a new and enticing market such as India offers further opportunity to offer clients the desired geographical coverage and crudely adds another pin in their global map. For the Indian market however there is more at stake, with the move being welcomed by local firms and lawyers as progress within the market, offering the potential to open up the Indian economy further to international investors.
There will likely be failures by some overzealous international firms wanting to ‘land grab’, and it is expected that those who take a more considered and strategic approach to the market will fare better.
For the time being, whilst these events unfold, we will have to keep a close eye on the developments coming from the legal ministry in India, and how international firms greet this news. As part of our continued interest in these developments, we will be writing a more in depth piece on the Indian legal market including the outlook from clients and those on the ground to keep our readers up to date with what could be an exciting event later this year.
Tom Spence is a Director at Fides Search. If you have any questions or would like to discuss the issue further, please contact him at tspence@fidesearch.com
This week we feature a blog by guest commentator Richard Martin, head of mental health awareness training at Byrne Dean. Following a 20 year employment law career, Richard discusses the mental health risks associated with the sector, and how this can be better understood and addressed by individuals and firms.
Please share to further the conversation and tweet us @Fides_Search to let us know your thoughts.
We hope that you enjoy!
Lawyers and Mental Health Problems – are too many heads in the sand?
The increasing attention given to mental health and illness over recent years means we are getting familiar with the statistics around mental illness – 1 in 6 of the adult population at any one time likely to be suffering from a diagnosable mental disorder, 1 in 4 during the course of a year. They are rightly sobering figures. But they are for the population at large. What about lawyers?
Unfortunately we do not have UK specific data. Research from the US and Australia would indicate that lawyers in those countries suffer problems associated with anxiety, depression and substance abuse at rates much higher than the general population. There seems no reason to believe that the situation in the UK would be any different. We really ought to be finding out, and at a time when the biggest law firms are announcing another round of increased PEP figures, there would appear to be the resource there to do it, but is there the will?
Mental illness must surely be the biggest health and safety risk facing law firms. Anecdotally we know the problem is significant. Why are we shying away from finding out the scale, what is causing it and how best to address it? Other industries identify their major safety risks, investigate them, and work to eliminate them. Why not lawyers? Risk is, after all, our currency. Hopefully the reason the work has not been done to date is not about wanting the problem to remain hidden.
There are a number of reasons why lawyers might be at an increased risk of problems. Some are specific to the profession and some are not. Some obvious causes for stress include:
There are possibly other factors at play which demand more research and attention. Professor Martin Seligman of the University of Pennsylvania is a world guru on positive psychology – not trying to make us all superficially happy, but promoting positive mental health as opposed to simply focusing on illness. His team researched the correlation between optimism and success in one’s career. Apparently optimism goes hand in hand with success in most professions around the world, apart from lawyers, where a negative outlook on the world is more likely to be an indicator of success. That does not have to lead to mental illness but would certainly be a risk factor for depression. And of course it makes sense when you consider that so much of what a lawyer does is looking at risk, at what can go wrong.
There is also a growing awareness of the dangers of emotional burnout or compassion fatigue. It is a phenomenon more readily associated with health professionals than lawyers. It is most easily understood in two ways.
We are familiar with the risk of post traumatic stress disorder when we have experienced a personal trauma of some kind. The same risk can exist when we are exposed to the trauma of other people – their injuries or disease in the case of medics but you do not have to think hard to realise the harrowing cases many lawyers deal with on a regular, daily basis, whether in abuse, crime, relationship breakdown, personal injury and much more. Problems can develop from just one such instance.
The other common form is where the constant exposure to people’s problems and the professional responsibility for seeking to resolve them, eventually becomes overwhelming, resulting in a form of burnout. Every issue that every lawyer deals with will have significant emotional importance for the client. For that client it is a one off event. Lawyers are dealing with them all the time.
These are just some suggestions as to why lawyers may be at greater risk of mental health problems. It seems obvious that there are risks. We might find that in fact the prevalence of illness is no greater than the general public in which case perhaps we are finding ways to address those risks. But surely we owe it to ourselves, as well as those we employ and encourage in to the profession, to establish whether there is a major problem, what might be causing it and how we can learn what helps reduce the risk, so we can make the profession as safe as possible.
Richard Martin is an advisor at workplace training and consultancy firm Byrne Dean.
With International Women’s Day celebrated across the globe on Wednesday, the legal press has been awash with articles, interviews and opinion pieces about how gender equality can be increased in law.
The majority of these profiled the women who had made it to the top, as practice area leaders or managing partners, but did not address the things that are currently being done to move the needle on gender diversity.
Consistent with this year’s IWD theme, being Bold for Change, we consider how clients are making a stand for greater equality in the legal sector, and the actions they are taking to truly drive the greatest change for women – and other minority groups – in the firms that they instruct.
Legal supplier diversity: The approaches of Microsoft, HP and PayPal
Leading the charge in this respect is Microsoft with its Law Firm Diversity Program. Launched in 2008, the program allows Microsoft’s panel firms the opportunity to earn an annual bonus if they reach a quantifiable diversity goal in relation to the firm’s leadership.
This works by allotting ‘points’ to partner firms for progress in getting women or minority groups into law firm management, leading the firm’s relationship with Microsoft or leading work on Microsoft’s legal matters, and equate to a bonus of 0.5% to 2% on the work the firm had completed that year.
To date, this program has been a resounding success, with over 80% of the participating law firms earning their bonuses annually. Since the program was launched, the percentage of hours worked by diverse lawyers on Microsoft matters has increased from 33.6 percent to 48.2 percent, with Microsoft’s own legal department becoming more diverse over this time period.
There is also circumstantial proof that such an increase in supplier diversity has strengthened Microsoft’s track record, with its litigation teams winning 89 cases and losing only six in the past three years, reducing the corporation’s settlement costs and legal fees substantially.
On the other hand, HP has taken a different approach, announcing in February that it would withhold 10% of invoiced fees from firms who fail to meet or exceed diversity requirements.
The policy states that firms must field “at least one diverse firm relationship partner, regularly engaged with HP on billing and staffing issues” or “at least one woman and one racially/ethnically diverse attorney, each performing or managing at least 10% of the billable hours worked on HP matters”. This applies to all US-based law firms which HP works with, and is to be implemented from 2019 to give partner firms sufficient time to implement the necessary changes.
Finally, PayPal has conducted a wholescale review of the law firms it uses to gather information on the diversity of their workforce, with a particular focus on whether they are supporting up-and-coming female and minority lawyers.
Firms that are unable to show evidence of “meaningful progress in a reasonable time” will not be used by PayPal in future, according to General Counsel Louise Pentland, with the organisation committing to favour work with law firms who genuinely support and advocate diversity.
For PayPal, this review acts as a starting point in gauging whether their partner firms are willing to make changes, especially in ensuring a succession pipeline of women and people of different ethnicities.
What does this tell us?
From the above examples, there are a number of factors that remain consistent. Each policy looks to increase the representation of women within leadership and/or at relationship partner level, to create a sustainable pipeline of change within the law firms with which they operate.
Given the imbalance of diversity within law firm leadership ranks, compared with the composition of firms as a whole, these clients have recognised that change is unlikely to be homegrown and have endeavoured to incentivise it.
Although the success of the policies cannot be compared directly, with the initiatives at HP and PayPal still very much in their infancy, the overriding factor in the success at Microsoft can be attributed to time and commitment: policies such as these, very much like internal law firm diversity and inclusion initiatives, need time to take hold and be constantly monitored and reviewed to produce results.
Law firms ‘success’ in adhering to these policies also relies critically on measurement, and the ability for them to accurately measure the diversity demographics of their own staff. Encouragingly, the polices at Microsoft and PayPal look to assess firms relatively, and award firms for making improvements from a predetermined starting point, rather than set standard for everyone. This equally awards both firms with established D&I policies, as well as those more recently embarking out on them.
Conclusion
In short, it is imperative that law firms match the qualities and values of the clients that they are representing. In a competitive legal market, both in the US and UK, with no shortage of talent, when faced with two teams that produce equal quality of work, why wouldn’t GC’s choose to work with teams they feel represent them better and have been shown by research to be more effective?
With large corporate clients pushing the need for action, the gauntlet now lies with law firm management to be bold and ensure greater gender equality within their firms.
To learn more about our gender initiative at Fides Search, and receive a copy of our report A Path to Parity: Reassessing Gender Balance within UK Law Firms, please contact eclews@fidessearch.com.
Law firms traditionally operated a simple quid pro quo dynamic whereby young lawyers were expected to devote years of their professional life in exchange for the estimable carrot of partnership. Trainees joined prestigious firms following a rigorous selection process which conditioned their mind-set from the very beginning – “I am and will continue to be part of an elite”. Their performance and sacrifices would in time lead to significant kudos and financial reward.
However, the impact on law firm profitability from economic and macro conditions over the past few years has placed this equation under severe strain, and frankly it no longer holds true for most law firms.
The traditional model was predicated on a principal tenet that what is good for the partners is good for the firm as a whole; that the pursuit of profitability which drove the partners would likewise motivate the associates, trainees etc. Inclement markets on a global scale, coupled with the fact that law firms had expanded so drastically pre-2008, have meant that the numbers no longer stack up: there are not enough partner slots to meet the aspirations of talented young lawyers and in many cases the financial upside is not even close to as compelling as it used to be.
As firms grapple with PEP erosion, the issue of career progression has gathered momentum, as associates have woken up to the fact that the risk reward analysis of yesteryear is a myth, and that firms can only deliver partnership to a minuscule proportion of their intake. Accordingly private practice lawyers are re-evaluating what career progression means to them, and indeed more so than ever, whether partnership is worth aspiring to anymore.
In the past associates worked hard to put themselves into a position of contention, with the ‘risk’ that one might not get promoted being mitigated by the idea that you could ultimately move to another firm, potentially into direct partnership, relocate overseas or move into a coveted in-house position. The current reality is that many are opting out of the partnership track altogether, adopting a far more pragmatic stance around work life balance. Associates are no longer willing to work around the clock only to be told by firms that there are 7 to 10 people ahead of them in the queue.
More and more lawyers we speak to say they would rather a more modest but consistent remuneration over a longer period of time, which reflects individual performance and value-add whilst also enabling a better quality of life and a more sustainable working dynamic. Accordingly, decision makers within law firms have to a greater or lesser degree rallied around to find ways to retain talent by providing palatable alternatives to the partnership track while making people feel valued.
This includes increased stratification within the associate lockstep, with the introduction of gateways such as Managing Associate, Senior Legal Advisor and Counsel. There has also been a trend of segmenting the partner lockstep, making it more meritocratic and setting milestones to achieve. These are all moves which strive to balance out the need to retain people through progression and financial incentive while remaining financially viable.
Moving in-house remains a very attractive transition for those who want to move out of private practice completely, however it is no longer a panacea as it used to be, being both risky and less highly remunerated. It is also often perceived as a dead end due to the lack of liquidity of roles we have witnessed over the course of the double/triple dip recession.
Where does this leave us? Law firms have created so many barriers to partnership and career progression that ultimately they have fuelled an alternative market for lawyers outside of the partnership model. Lawyers are having to ‘think outside the box’ more than ever, especially now that the in-house market has contracted and they can no longer default to moving into standard in-house legal roles. We have, and continue to witness, a recalibration of lawyers’ career trajectory with increased diversification into areas like Compliance, Risk Advisory and Investigations. We have also seen greater appetite for entrepreneurial opportunities; where traditionally risk averse lawyers would have shyed away from start-ups, many are willing to take a gamble for fulfilling and interesting roles which may be riskier but potentially offer a more compelling upside. The demographics are evolving such that many of the preconceptions and stereotypes which have infused the legal community for decades are being challenged.
Written by Edward Parker and Shirin Stanley, founding Directors of Fides Search.
I’m almost at the end of my work experience at Fides Search, and after a week I have developed a detailed insight into the UK legal market. Currently in the process of applying to university to study Law, naturally I had to look into the trends associated with this year’s partner promotion rounds to have an idea of what awaits me in the future.
1. Social Mobility in the Magic Circle
April saw the completion of partnership promotion rounds in the magic circle, with Allen & Overy, Clifford Chance, Freshfields, Linklaters and Slaughter and May all publicising who had joined the upper echelons of their firms in 2016. With 40 new partners revealed, despite now being “at the top” of their profession, where did these lawyers start out? The most recognizable names on the list were University of Cambridge and University of Oxford, with almost half (19 out of 40) of the new partners graduating from these institutions. Other institutions commonly drawn from include the University of Edinburgh, University of York and University of Leeds with a number of new partners having also studied overseas.
Nevertheless, despite working hard to improve social mobility within the sector, we can still see some firms performing better than others in terms of the educational backgrounds represented in their promotions. Allen & Overy seem to achieve the best representation in making up only one new partner from Oxbridge. Slaughter and May and Clifford Chance have the least amount of variation in the backgrounds of their partners. Over half of the new partners from Slaughter and May (6 out of 10) graduated from either Cambridge or Oxford, whilst the figure was 5 out 8 at Clifford Chance.
2. Gender Diversity in legal partner promotions
With 60% of new solicitor admissions being women, law firms continue to struggle in transitioning this representation into partner promotions and senior positions. This issue can be clearly seen in the number of the major law firms in the UK, as female partnership numbers stand at 17% in the top 10 law firms.
For example, although the overall representation of gender at Slaughter and May a is balanced with 52.2% of employees being women, Diversity and Inclusion Statistics from 2015 show a clear disproportionality between men and women in partnership. Almost three quarters of new partners are men, with only one women being promoted to partnership in 2016 out of an 11-strong promotions round, an example typical of many other UK firms.
Nevertheless, there are signs that progress is being made with White & Case performing exceptionally well in their promotion of women compared to other legal firms this year. Globally, 40% of the firm’s promotion round were women which included four out of the eight partners made up in London. This 50/50 split in partnership promotions shows other firms the potential of developing female lawyers internally.
3. Partnership promotions across the Globe: Linklaters Case Study
The promotion of partners in different jurisdictions, as well as the practice areas of the lawyers made up, reveals an awful lot about market conditions and individual law firm strategy. In taking Linklaters as an example, the firm promoted 24 new partners worldwide this year following a fluctuation in partnership promotions in 2010 and again in 2014. Noticeable trends include the lack of investment in South Africa since 2010 and no promotions in the Middle East since 2014. The number of partner promotions has decreased in most locations including Europe, USA, South America and Middle East. Only the number of promotions in London and Asia have increased since 2010, which coincides with the expansion of these offices.
Linklaters has seen the majority of its partner promotions in the London office, with over 60 partners made up between 2008 and 2016. The second most popular office, is Hong Kong with only 18 promotions. Therefore there is a massive difference between first and second place, which coincides with the global strategy of many law firms in the City to consolidate their London base. Moreover, promotions at other offices – such as Paris, Brussels, Moscow and New York – only range between 5 and 15.
Conclusion
Through the analysis of partner promotions, key trends can be seen into the legal market regarding a firm’s progress on the social mobility and gender diversity of its workforce, alongside insight into its international strategy and future plans. Despite this, the consistency of partner promotions across the sector indicates a healthy and competitive market and an exciting prospect for those planning on entering the profession.
Written by Sandra Mikosinska, Economics, Psychology and English Language & Literature Student at Westminster Kingsway College
Support. We all need it, one way or another, but within Compliance it is one of the key requirements we hear most often. Sometimes there is a lack of it, but in recent times and especially now as we face an uncertain “de-coupling” from the European Union the benefits of support hold great significance and power. We feel a solid support structure underpins a successful workforce, allowing how we as individuals and as an industry can maximise the opportunities available, affect change within an organisation and ultimately be successful.
But how does that feeling of support become such a tangible commodity? Prior to the 2008 financial crash, it’s fair to say that the role of a Compliance Officer and its relevance within an organisation received insufficient support and purely existed as a necessary evil. As the industry became embattled in market turmoil, significant breaches of wrongdoing and the huge swathes of regulatory reform were rolled out, that same compliance function became a vital asset, there to guide and support the business and protect its integrity.
For a compliance function, or in fact any function of a global business to be successful in driving change, support must begin at the very top. The Chairman and Board of Directors set a tone and culture that permeates through the business and which for an effective compliance function is imperative. An institution could have the most capable and experienced compliance team in the market but without the support to drive change, culture and strategy, in accordance with an increasingly severe policing by the FCA, its efforts are useless.
But there are two sides to every coin and a Compliance Officer shouldn’t and indeed in most cases doesn’t rely solely on senior management to set the tone – the compliance function is also responsible for driving the risk appetite and its culture. In some cases, educating senior leading figures in the necessary direction of its risk governance framework to remain on the right side of the law is necessary. The Compliance Officer 2.0 is a forward thinking, commercial, collaborative individual who understands the business front to back, its stakeholders and how best to train and educate them in an inclusive way. This ethos will breed a collegiate and supportive culture and break down traditional barriers and reticence to engage.
An unstable macro market and heavy regulation has meant that the bull market trading days and free reign front office we’re accustomed to have been confined to the history books. This has created a trend of business side individuals transitioning in to compliance, turning from poacher to game-keeper and further establishing and strengthening this “bridging the gap” between the business and its compliance workforce. We see this cross-pollination from other teams such as audit, risk, and legal further enhancing and supporting the overall aim of the compliance team.
As change has now become the new norm, constant support is necessary as the volume and pace of regulatory change remains substantial, the demands of internal compliance resource will be stretched and over-worked. With a dearth of talent and numbers in the hiring market, support of the current team is essential in allowing all areas of any institution to be effective. At Fides Search we are constantly asking ourselves how we can support our clients and each other within the business as we work in uncertain times, but also times of new growth and opportunity.
We would be delighted to hear your comments and thoughts around this topic – if you would like to discuss further, please contact author Barrie Lee at blee@fidessearch.com.
‘‘Cooperative arrangement in which two or more parties work jointly towards a common goal.” – Definition of collaboration, Business Dictionary website
The need for successful collaboration in the delivery of legal services is crucial. Whether this is relating to collaboration between peers, within differing layers of a firm’s hierarchy or between lawyers and non-lawyers, those who are able to work together successfully will be ahead of the pack.
Despite the above definition appearing to have collaboration at its core, law firms in particular are known to put less of an emphasis on the collective. Is this driven by the concept of the billable hour? Or perhaps the move away from the traditional lockstep model which has put more emphasis on individual performance rather than collective strength? Whatever the driver, it seems that genuine collaboration between individual lawyers, non-fee earning members and the firm’s global network can lack consistency in the eyes of lawyers and clients alike.
The competitive nature of the current legal landscape has put pressure on law firms to deliver cost effective solutions, often with a cross-border element. The successful delivery of these services is now under greater scrutiny and collaboration will play a central part of this process. Project management, business development and in-house technology teams have become essential additions to law firm infrastructure, shaping how the delivery of legal services is received by clients. For that reason, developing the relationships amongst these teams and lawyers will greatly affect the quality of legal services a firms can provide.
Individual mind-sets limit the extent to which lawyers are able to collaborate and provide integrated, streamlined services to their clients. Lawyers are naturally competitive and aren’t accustomed to working in collaboration or sharing information with peers. Typical remuneration models further block these efforts, as sometimes does the partnership model, and when assessing cross-border working methods, different cultural attitudes and behaviour will also affect how open a law firm is to the idea of collaboration. There is no doubt that the culture of law firms and their partnerships has changed in recent decades and with this, their business model has changed. As the need to continue evolving and progressing is constant, law firms must ensure underlying cultural support for this change.
As the market seems to be demanding better collaboration of its lawyers, the challenge remains as to how individuals within firm’s best do so. Whilst technology is pushing the industry into a new era and the size and scale of international firms continues to expand, there remains a basic necessity for interpersonal collaboration to bring all these things together. This fundamental need for personal collaboration might be the greatest challenge expanding firms face, but it could also represent the greatest opportunity for these firms to differentiate themselves in the market.
We have witnessed an increase in commercial mindedness across Legal & Compliance in recent years which we believe is a by-product of wider market conditions within the financial services sector and generally heightened risk awareness in the industry. The impetus has been thrust upon control functions to improve awareness of risk across all product areas, while at the same time, Legal & Compliance practitioners have had to step up their understanding of the businesses they support. In the following paragraphs, we will explore how Compliance functions have improved their commercial mindedness while Legal functions have sought to enhance their awareness of risk.
The transition and trends from a pre-crash compliance officer to today’s more business-aligned demographic has meant that commercial awareness has become an essential prerequisite for anyone looking to get ahead in these so called ‘middle-office’ functions. Gone are the days of ‘box ticking’ and simply going through the motions of adhering to the rules. Now there is a flow of former business professionals making the transition from transactional teams into regulation and compliance, where we are seeing traders moving into surveillance and sales professionals into risk advisory. However the transition manifests itself, it is normally driven by an awakening to the fact that control functions need to be infused with an in-depth and thorough understanding of the commercial rationale and drivers behind the transactions being undertaken by financial institutions.
“The role of in-house lawyer has morphed significantly from facilitator and ‘deal doer’ to advisor and protector”
Conversely, in Legal we have witnessed a seismic shift of emphasis from the business led transactional side to the more risk aware litigation and regulatory functions within the in-house sector. The impact of this shift is reflected by law firm demand as they have strived to adjust to their clients’ needs. The role of in-house lawyer has morphed significantly from facilitator and ‘deal doer’ to advisor and protector (even sometime ‘whistleblower’) with an emphasis on reputation, risk profile and standing with the regulator. Whilst individual front line teams within banks and funds may still comprise of lawyers, they ultimately defer to authority and sign off of with an independent legal function which is most likely be headed up by a GC whose principal focus will be on regulation and risk.
In parallel with the gravitation of legal counsel away from commercial mindedness towards risk awareness, we have seen law firms in turn apply commercial mindedness in their own way, namely seeking to capitalise on the opportunities which have sprung up from banks needing to tighten compliance and risk measures and those systems underpinning their control functions. This accounts for the rise in law firms setting up consultancies and risk advisory businesses to meet client demand, and the call for additional support in tackling the mammoth task of regulation and risk compliance.
Noting where we are in the cycle and the extent to which financial institutions have stepped up control functions and systems to meet their obligations and industry standards, while regulatory change is likely to continue to be a hot topic, we sense the pace of change is beginning to slow down as markets start to turn a corner. While we are unlikely to return to the heady days witnessed during the first decade of this century, there will need to be a further adjustment of the balance of power between risk awareness and commercial mindedness. With lessons learnt, greed banished and pre-emptive measures in place, we ask ourselves whether it is conceivable that an equilibrium be struck between “risk” and “reward”.
If you would like to more information on this topic, please contact authors Director Shirin Stanley or Consultant Max Alfano.
High Frequency Traders (HFT) have largely lived in the underbelly of Financial Services, operating in a rare and often complicated world performing trades at speeds the human brain will never match. Regulators and governing bodies have not had the capability or the resource to fully understand and grasp these complex business models, which includes Hedge Funds and dark pools, leaving them to operate within looser parameters compared to the heavily regulated Investment Banking sector.
In November 2010 the ‘Flash Crash’ – where a trillion dollars was wiped off the U.S stock market in minutes only for it to rebound just as rapidly – made the global regulatory world take note as it sent shock waves throughout the market. Following this seismic event, it became clear that HFT’s operate in a digital age technologically but are largely governed by “Depression era-legislation”and there has been a significant reaction from regulatory bodies across the globe.
Since 2012 a wave of new rules have been implemented, including the revision of MiFID II adapted to ultimately de-risk the sector and the approach of HFT’s, although there still remains a stigma that these firms are not ultimately market makers. Significant banking institutions who essentially provide the market places for HFT’s to trade have never fully accepted their standing within the market, and coupled with their high risk gung-ho approach has led to a strained relationship. So much so, that banks are now turning their back on HFT firms, regardless of their profitability and platform, purely because of the risk attained with dealing with these institutions.
Banks and Hedge Funds have also made a strategic decision to focus on developing their own trading systems to be faster, with the use of algorithms, encroaching on the pure HFT houses such as Getco, Hudson River and Jump Trading. This has created a technological arms race with the biggest firms spending millions to find that nanosecond of time and be ahead of their competitors. This has separated the ‘haves’ from the ‘have-nots’, as smaller trading firms have been forced to think laterally and to have a more sophisticated strategy and business to remain profitable. Investment banks have to be more commercial with their capital to enable it to stretch across its complex and diverse business areas, and are renowned for having antiquated technology not able to compete with HFT’s. This adaptive strategy has meant that the smaller trading houses have had to learn how to execute their strategy over a relatively longer period, which would perhaps not classify them as HFTs at all.
Regulators have struggled to keep up with this pace of development, to ensure that the new technology models are capable of delivering to the stricter regulation imposed on HFTs. Technology vendors such as Fidessa are not regulated themselves, and it is a question of whether they should be when they provide the technology to regulated entities.
It has now become increasingly difficult for firms to operate with Banks, Exchanges and Regulators clamping down on the marketplace in which HFTs operate. However, it does not seem to have slowed profits as they continue to develop ingenious ways to better their competitors. It is only recently that plans to build a tower taller than The Shard were submitted to transmit trades within one-millionth of a second to Europe’s markets and stock exchanges. Even with these increased regulatory challenges, the focus of High Frequency Traders to stay at the forefront of change is apparent, as remaining to be seen as approved market participants is integral for global footprint.
By Barrie Lee and Max Alfano, Consultants at Fides Search.
Adapt to survive.
Adapting and embracing change is essential to remain competitive and survive in the legal services provider marketplace.
With greater expectation from clients for ‘value added services’, alternative pricing structures and wider competition in the market from other law firms, the Big four and agile legal service providers, law firms must adapt to this change, with the failure to react fast enough not only impacting on profitability, but their very survival.
Increased expectation from clients and competition within the market has led to greater innovation in law, with firms challenging established working methods to achieve better service delivery whilst maintaining or reducing costs. The concept of law firms themselves have been redefined as beyond that of just legal service providers and the solvers of complex problems, to organisations who partner with their clients, better understand their market challenges, and provide flexible pricing and billing alongside greater efficiency and support.
In today’s world, law firms and their lawyers need to do and be more for their clients. In this blog we look at how law firms have adapted their infrastructure to embrace change within what is now a more competitive marketplace than ever before.
Legal Project Management
Legal project management (LPM), the effective use of technology, people and processes to lower costs, whilst boosting (or at least maintaining) law firm profitability has exploded over the last few years. Whist each firm differs individually, the role of a legal project manager is to look after the operational side of transactions to allow partners to focus on the legal technicalities of the work. By bringing cohesion to complex mandates, they help achieve greater efficiency and cost certainty for clients and firms across a range of matters
Used correctly, project managers can manage both internal communications on a project and some external relations with clients, including anything from scoping the resource requirements before the project starts to collecting and processing client feedback after completion. Some firms involve their project managers more directly with clients on pitches and cost negotiations, as a show of commitment to the project in hand.
Although not a new phenomenon (Baker & McKenzie have been using non-legal project managers on deals since 2010), Hogan Lovells, Herbert Smith Freehills and Linklaters have all made moves to expand their use of project managers in the past 12 months. This demand is also seen in the market, with Herbert Smith hiring a four-strong non-legal project management team from Berwin Leighton Paisner in October.
By offering greater efficiency and certainty on costs, and freeing up billable hours for partners, the better integration and utilisation of legal project managers on deals is a trend only set to grow over time.
Knowledge Management (KM)
The provision of knowledge, information and documentation assistance by law firms to their clients is of growing importance. Since helping one of our financial institution clients recruit their Global Head of Knowledge Management in 2014 and financial institutions and corporates alike looking to improve their own efficiencies and legal infrastructure in this area, the need for law firms to advance their own KM structures is imperative.
Knowledge Management, whether the production of learning and training materials or the internal management of firm documentation, is essential for clients to gain a quality service. Due to the time limitations placed on in-house counsel, from a client’s perspective, a law firm who is continually looking to add value through their KM team and push this agenda will come out ahead of those who are seen as less active and innovative in this area. Furthermore, the ability to offer these services at an international level is a distinct advantage for law firms in gaining significant panel instructions from global businesses.
Beyond the use of KM for purely Business Development and brand promotion, it can also be revenue-generating with the creation of bespoke KM tools to track legal and regulatory developments, such as A&O’s Rulefinder and Navigator at Simmons & Simmons.
As such, Knowledge Management – if structured correctly – can be leveraged with clients to provide a service of better value, and differentiate the firm in a competitive market. Law firms need to develop an outward-facing KM team to work with Partners and Business Development teams, whilst delivering high-quality learning and training provisions for clients.
Business Development
The growth of law firms on an international scale through lateral recruitment, mergers and office openings has thrust the role played by Business Development (BD) into the spotlight both in London and internationally. Our work with clients to build their Business Development teams across jurisdictions has raised our awareness of the importance of having a specialist, integrated and proactive business development function and the investment that firms are making to build their capability in this area.
There have been great strides made in the last ten years by many firms with regards to Business Development and how it is viewed internally. With the continued advancement of the industry, Business Development functions have had to become more connected with the business and move from a back office to a front office advisory function. The expectation and demands of today’s business environment means that law firms are having to recruit more specialised Business Development professionals with industry knowledge to focus on specific sectors and clients. Firms that do not continue to drive the development in this sense will soon be left behind in the market.
For international law firms with growing businesses and complex clients spanning multiple jurisdictions, the role of a coordinated Business Development function can help a firm both continue to increase revenue streams whilst gaining exposure to new clients. As such, the investment made into this function should be seen by law firms as a valuable long term commitment to their clients and therefore their own business.
Client Relationship Management
The way in which law firms manage client relationships is evolving alongside the various advances being made in both Business Development and Knowledge Management. To complement the traditional role of the client relationship Partner, we are regularly hearing more about how law firms are allocating more resource and responsibility to dedicated Client Relationship Managers.
Similar to those in legal project management, these individuals are from a non-legal background and work alongside the relationship partner to add further depth and focus to service and support their clients. Fundamentally, clients of law firms know that whilst having a relationship partner is important, they are still a business generator that have to produce revenue for their firms. Therefore clients visibly see these two roles as complementary to each other, and with a heightened level of commercial and personal service when Client Relationship Managers are employed in tandem by their panel firms.
In-house counsel within our network have noted that firms who have employed dedicated relationship managers have a clear differentiator in the market, compared to those who just employ the client partner model. Having Client Relationship Managers who are dedicated to firm clients, and with a goal to develop, integrate and expand the relationship further, adds emphasis to a firm’s commitment to their clients and their needs both domestically and internationally.
Consulting
The final way in which we have seen law firms look beyond legal services as their main client offering is through the establishment of standalone consultancy arms. This trend turns the idea of bespoke legal advice on its head, as firms give advice to in-house legal teams on how best to manage their legal services and become more involved in the commercial aspects of their clients businesses.
With six such consultancy ventures set up since last year, and firms with more established consultancy services further expanding their offering, each firm has taken a different and distinct approach to building this part of the business to best service their client’s needs. This includes the ability to provide contract lawyers (a service that has ballooned within major law firms since BLP initiated Lawyers on Demand in 2007), to the implementation of more specific technology and IT change management projects (Bird & Bird’s Baseline and Denton’s NextLaw Labs) and even sector specific offerings as seen at RPC Consulting and DLA’s Noble Street.
However, the response of some firms such as Eversheds and Addleshaw Goddard has been to take a more full-service approach, offering wider legal efficiency advice centred on their clients businesses. This includes advice on legal spend, process analysis, legal risk analysis and panel management advice alongside themes already discussed such as legal project management, KM and Business Development.
The expansion of Eversheds Consulting, established in 2010 and which now runs four business lines (a financial services regulatory compliance service, Eversheds Ignite, a contract lawyer service, Eversheds Agile, and a separate flexi-lawyer offering for financial services regulatory compliance clients), is testament to how firms can offer greater service to their clients. With revenue climbing year on year, it pays for firms to be business solution providers and not just legal service providers.
Conclusion
Whilst much is being made currently of firms’ plans for expansion and lateral partner recruitment, it is important to assess the validity of a law firm’s business to support their growth plans. Lateral recruitment and growth can enable and provide increased revenues, yet it is the infrastructure of law firms that will underpin this growth or impede it if it is not fit for purpose.
In the ever changing environment that law firms work within, it is those who continually assess their internal capability and client delivery services that will thrive in this highly competitive global marketplace. Whilst firms continue to judge themselves on their annual PEP performance, there is the potential to remain blinded to the need to address change within their businesses. We understand that there is a fine balance between giving clients what they desire and the costs of running their businesses, however, those that continue to push the boundaries of innovation and client service will stand a better chance of seeing the client recognition that, in the long term, will provide them with a strong foothold to continue to deliver of their firm wide ambitions and revenue growth.
By Tom Spence, Director at Fides Search
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