The Big Four: a bigger threat to law firms than technology
By Paul Bennett
Law firms like to have something to worry about, but I’m increasingly beginning to wonder if the focus on technology, artificial intelligence (AI) and robots as a perceived threat is a distraction from the real competitive challenge we face. The Big Four accountancy firms (PriceWaterhouseCoopers, Ernst & Young, KPMG and Deloitte) now employ around 10,000 lawyers worldwide, according to a recent report in the Financial Times. In England and Wales we are seeing the legal arms of these Big Four, and the top 30 or so accountancy firms with aspirations to join them, seeking to offer legal services to commercial clients – including law firms needing specialist services such as merger, insolvency or partnership advice. Professional services have long been relationship-driven and the Big Four benefit from a relationship and financial scale which no law firm can match.
Accountants typically offer integrated advice rather than solicitors’ transactional advice. Some are offering a specific client manager to handle all legal queries thus becoming a trusted advisor; and perhaps as a disruptor in legal services they offer a fresh approach. So why all the focus on technology? If you were an investor in software, AI or robotics you would sponsor events, undertake public relations and loudly promote your product and the benefits of it, wouldn’t you? The noise does not mean it merits the attention. Machine learning and AI tools can help with routine legal tasks; and the systems to do this are already emerging and being used. There is another angle of advantage to the accountants though. Thirty years ago accountants faced a technological threat when double-entry bookkeeping was revolutionised by the desktop computer and software. An accountant used to complete paper ledgers and records. Now they are far more likely to be advising on strategy and business issues. The business model is ideally suited to the trusted advisor. By contrast, solicitors are often only contacted when needed.
If we look at technology in law firms, already the drafting tools of some precedent banks help produce a better first draft, so the quality rises and the time required for the task diminishes. Charging for time in this context is a fool’s errand. In its recent report, the Competition and Markets Authority (CMA) put the handbrake on the accountants to a degree. Such is the influence of the Big Four they must split operationally the professional service element of their business (including legal) from the audit businesses they operate. This slowing pace of change among competitor accountants is additional time we could use to adapt to the emerging challenge.
The SRA has opened the market by granting waivers to the non-traditional legal offerings both of lawyers and non-lawyers. For example, KPMG has a waiver from the SRA linked to its Professional Indemnity Insurance which is for an insurer outside of the standard SRA scheme rules. It’s different – not better or worse. The Big Four are big supporters of adopting technology to develop new ways of working in legal and the wider professional services fields. Why does this matter to you and your law firm? We must show value for money to clients. Will the Big Four be the end of law firms? Not a chance. Will technology be the end of law firms? Not a chance. Advisory work, with a solicitor’s experience adding value, remains key. Just think how often we all suffer from frustration with call centres or online products. We do, however, need to adapt.
As Shrewsbury’s most famous son Charles Darwin observed: “Those that adapt and evolve, survive”. However, I prefer one of his lesser known observations: “I am not apt to follow blindly the lead of other men. I have steadily endeavoured to keep my mind free.” For solicitors as a profession, this means we can observe the technological goldrush, pick the smartphone with its builtin MP3 player and not adopt the mini-disc technology as it emerges – only for new technology to make it rapidly. We should observe the accountancy-linked legal offerings and learn lessons from them. Relationships are key, so let’s ensure our clients trust solicitors and not brands on legal tasks
Paul Bennett is a Solicitor who advises other lawyers on regulatory and compliance matters. Paul offers advice to in house and private practice legal teams on conflicts of interest, ethics and provides an external sense-check to senior lawyers. His latest book How to be a freelance solicitor was published in December 2019 by Law Brief Publishing, who also publish his A Practical Guide to the SRA Principles, Individual and Law Firm Codes of Conduct 2019 helping law firms comply with the SRA regime which is due to reach its second edition during 2020.