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A road to somewhere

20 June 05

Opinion article perspective of a "high street" practitioner on predictions for the future of the profession

by Graeme McKinstry

Predicting the future composition of the profession and identifying the changes which will impact in particular on smaller firms in the post-Clementi era is like crystal ball- or stargazing. One thing however is certain: more changes are coming and they are likely to be even more widespread and radical than those we have seen in the past. The abolition of scale fees, the freedom to advertise, the possibility of limited liability, the advent of solicitor advocates and devolution issues will all fade into a limited if not remote significance when compared with the likely impact upon the profession in years to come post the Scottish version of Clementi. My own view is that the contours of the professional landscape in 10 to 20 years, never mind 30, will be virtually unrecognisable.

For the traditional small firm, whether in the cities (though nowadays in fewer numbers) or in the provincial towns and rural locations, the squeeze of present commercial pressures means that the principal motivation is survival – the most basic of all instincts.

The buoyant merger activity of recent years among smaller firms is largely if not primarily explained as being a negative and defensive reaction to a challenging market place.

Smaller firms, and for the purpose of this article I have arbitrarily selected those comprising six partners or fewer, face unprecedented challenges in uncharted waters.

Solicitors in the smaller firms (which still, in Scotland, comprise the majority of the profession) are living in a world where the big are becoming bigger and richer, while many of the smaller firms are competing for what is left of traditional markets like domestic conveyancing, which are now so seriously under pressure that they can no longer provide the returns previously enjoyed, which are simply not attainable.

The annual revenue expenditure by the big fish, for instance on aspects of the business like IT or marketing or human resource training alone, dwarfs the annual turnover of many smaller firms.

The Law Society of Scotland is struggling with the challenge of catering for, and being relevant to, an increasingly polarised profession. Self regulation is past praying for. The critics here have won the day; implementation of external regulation, at whatever cost and of doubtful pedigree, is about to be foisted on us – it is but a matter of time.

The ultimate impacts of whatever “McClementi” actually allows, once it has been thrust upon us are difficult to foretell, but certainly they will only accelerate and catalyse the already inordinate pressures of market forces on smaller firms.

The traditional model of the general practice is under threat. The move to convert to smaller and more specialised units, already a trend in both the cities and provincial towns, will continue inexorably and the traditional country practice of a general nature is already in several areas a thing of the past. Clearly those firms will not all be extinguished and there will be impressive exceptions. The number of traditional firms will however radically reduce and the quality, strength and reputation of the practice units are unlikely to be maintained.

Perhaps there is no ideological criticism of moving to smaller individual units. Why should it matter? The answer of course is that for many smaller firms the consequence of the move to becoming either a sole practitioner or a very small practice unit is that they will often then struggle to obtain that critical mass of business coming from only one or two practice areas. There are some exceptions to this, typically those in criminal legal aid; however in general clients simply may not be prepared to rub along with the new business model. There is sound evidence that many clients, typically those who traditionally were the lifeblood to general practice, still want a professional and business relationship rather than have to shop around.

Where there is no significant infrastructure within the smaller firms, the realities and consequences strike home for the older partners because it is going to become extraordinarily difficult for them to secure an exit route.

Where for example is the:

  • reinvestment?
  • pension? 
  • goodwill payment? 
  • capital to repay the bank ?
  • succession plan?
  • future of the business?

So the future is certainly interesting, challenging and dynamic. This is the time like never before for the smaller firms to set aside time for strategic thinking and action. Perhaps like Alice in Wonderland when she asked “Which road do I take from here?”, the answer is “It all depends where you want to go”!