At last the pressure is starting to tell, and the Law Society is to the laws on multi-disciplinary practices, writes Jonah Bloom. re-considering its prohibitive rules on multi-disciplinary practices – the one-stop professional services shop is coming to a high street near you.
The news that the Law Society council has met privately to discuss MDPs is unlikely to cause a huge stir. And if, as expected, the society produces a consultation paper on the subject this summer, most accountants will be saying ‘it’s about time’, rather than spluttering into their cornflakes or reaching for their phones.
There has long been a feeling the Law Society is doing a bit of anachronistic foot-dragging on this issue, and the Office of Fair Trading has been working formally and informally for several years to convince the Law Society to change its practice rules.
The OFT considers the Law Society’s Rule 7 – solicitors may not share profits with non-solicitors – to be anti-competitive because it inhibits the provision of legal advice of any kind unless it is controlled by solicitors.
Margaret Bloom, the OFT’s director of competition policy, said: ‘If we come across practices which prevent a new entrant into a market or the provision of a new type of service – and one has to see an MDP in such terms – we automatically ask why these should exist.’
Bloom has been trying to persuade the legal profession to abandon its protectionist stance. She noted that a recent Law Society survey showed around 70% of its members in favour of MDPs, so sooner or later it looks as if Rule 7 will be consigned to the history books.
Before that can happen both the Law Society and the accountancy institutes will have to be satisfied the new mixed practices are properly regulated. ‘We would want proper client protection,’ said a society spokesman. ‘We wouldn’t want a client getting in trouble, if we could do nothing about it.’
Giles Wintle, head of business law at the English ICA, said: ‘We’ve always been in favour of MDPs, and we’re glad to see this development. Of course it will need some serious working-out in terms of regulation, but I’m sure it can be done if everyone is prepared to get behind the idea.’
ACCA acknowledged it was in favour of MDPs too. A spokesman said: ‘We have no regulation worries. The only rule is that they can only call themselves chartered certified accountants if more than 51% of the partners are chartered certified accountants.’
Of course the headline-making implication of all this is the potential for the professional services equivalent to banking’s Merrill Lynch. Imagine a post-merger Big Four firm acquiring one of the larger international law firms.
It’s an awesome prospect, but it is unlikely in the near future. Not only would it be a manoeuvre of enormous complexity and risk, but it would be subjected to rigorous scrutiny by the competition authorities.
Christopher Honeyman Brown, who put together the merger of law firms Dibb Lupton Broomhead and Alsop Wilkinson and recently took charge of practice management at Horwath Clark Whitehill, said he thought it would be hard for the majority of the Big Six firms to attract and keep top lawyers.
‘They are two very different sets of people. Accountants are much more aware of the need for a common approach to business objectives – they will do what is good for a partnership – whereas many lawyers fail to recognise collective interests, they want to do it their way. And, if they can’t do it their way, they can always find a more attractive offer at another firm,’ said Honeyman Brown.
He also pointed out the majority of partners in big accountancy firms get paid less than partners in law firms, making it unlikely there will be mega-mergers between the two.
In addition the Big Six have all found ways to compete in the legal market by expanding their internal legal services departments or working with an associated law firm. In many cases they have already established a strong foothold in international legal services.
Andrew Daws, the consultant recruited from solicitors Denton Hall by Ernst & Young to expand the legal side of the business, said: ‘I think we might want to be an MDP, although we’ll have to wait on the outcome of the merger. I can’t speak for those (Big Six firms) that have associated law firms. I’d imagine they might want to stay independent, there are some advantages in terms of independence of audit.’
Equally, the Group A firms might not take the MDP route. Mark Lee, professional practices partner at BDO Stoy Hayward, said: ‘MDPs are irrelevant for us. We are committed to remaining independent.
‘It is understandable that high-street guys should want MDPs, and from a growth point of view it could benefit the Big Six, but we get a lot of referrals from a lot of different lawyers, and it would be crazy to upset them by linking up with a law firm.
‘Plus the fact there aren’t enough big accountancy firms to go round the big law firms, and no-one outside the Big Six could satisfy the hunger for work at the big law firms,’ Lee added.
But everyone agreed the high street practice would benefit. ‘It’s perfect for the market town firms and their clients,’ said the English ICA’s Wintle.
‘People should have the choice of a one-stop shop, and there will probably be some cost benefits to the customer, as well as some savings for the firms.’
A change which will benefit the smaller operation – who can criticise that?
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