Pagan Osborne man predicts the death of the partner

by David Black
© The Herald
Originally published: 05.03.2007
The age of the law firm partner is drawing to a close, and it is time Scotland's solicitors woke up to the changes in their professional landscape and started preparing their firms to operate in the 21st century.

That is the message from Alistair Morris, the Scottish chief executive of financial and property specialist lawyers, Pagan Osborne.

Speaking to The Herald in advance of the Law Society of Scotland's annual meeting, Morris says Scotland's law firms need to realise that post-Clementi, deregulation of the legal system north of the border is on the way.

He said: "We are about to move into a deregulated world, and the rules of engagement we have worked under for 300 years are about change. A lot.

"The future is that there will be many non-legally qualified competitors entering into our traditional marketplace.

"This will result in the driving down of profitability in many services and certainly all those that can be commoditised.

"To survive in that marketplace we need to either have added-value services that we can bring to our clients or alternative services which are not yet under the same profit margin squeeze.

"Legal firms need to innovate if they are to survive. The legal markets that we operate in are mature and ripe for consolidation and automation. We need to operate in a more efficient environment."

Until now, the partnership model has ruled. And under it, law firms have been operated entirely for the benefit of the partners.

But if venture capitalists come into the sector, they will start by buying up firms and amalgamating them to create economies of scale; subcontracting to bigger brands like Tesco and then selling their services at the supermarket till or website.

And venture capitalists won't be operating on behalf of partners. It will be the bottom line that will be the new master, says Morris.

"For example, take the property market", he adds. "The average estate agency fee in a firm is, say, 1.25-per cent of the value of the property. An average conveyancing fee of 0.2-per cent is charged by a lawyer.

"The conclusion: The ability to attract the highest price for a property is much more valuable than a lawyer's ability to be able to tie up a contract with the potential purchaser and to realise that value in the form of a cheque!

"If you read management guru David Maister's article, 'Are law firms manageable', he says, 'the ways of thinking and behaving that help lawyers excel in their profession may be the very things that limit what they can achieve as firms.'

"What Maister is pointing out, is it can be our ingrained culture that holds us back."

For Morris, post-Clementi, this means that the role and title of partner will disappear. Instead, law firms must look to a future where they will have shareholders who have an investment and contributing interest in the business.