Stepping over the legal boundary

Accountants have been treading on the toes of law firms for years.

But KPMG’s recent decision to establish its own firm, KLegal, marks the start of a series of moves which could see law firms being seriously trampled over.

The Law Society, which regulates the UK legal profession, is this summer expected to lift a ban on solicitors sharing their profits with non-solicitors, opening up the prospect of legal professionals becoming partners in accountancy firms.

Similar moves are afoot in other parts of the world, which experts say will speed up the growing assault by the Big Five accountancy firms on law firms’ traditional territory.

The American Bar Association is this month expected to announce the findings of an investigation into the viability of multidisciplinary practices, which are forbidden in the US. It has described the issue as the most important to face the legal profession this century.

In the Netherlands, lawyers and accountants are awaiting the result of a long-running legal dispute between NOVA, the Dutch Bar Association, and two Big Five firms – Arthur Andersen and PricewaterhouseCoopers – which want to set up in-house law firms.

The legal profession is divided on the issue. On one side are proponents of the ‘one-stop shop’, who argue that restrictions on non-lawyer partnerships impede efficient delivery of reasonably priced services. Opponents of reform argue that restrictions are necessary to preserve a lawyer’s independent judgement and protect client rights of confidentiality and loyalty.

Malcolm Naylor, head of Arthur Andersen’s UK tax and legal practice, says regulators seem to be moving towards lifting restrictions on multidisciplinary practices because that is what customers want. Citing the expansion of accountancy firms into corporate finance and management consultancy, he says larger firms see an opportunity to build a worldwide legal network.

Andersens and PwC have already pioneered the concept of the ‘associated law firm’ in the UK. But Naylor is circumspect about whether accountants are trying to compete with the big London law firms.

‘What we can go head-to-head on is making an international network deliver services to clients, which includes our legal firms delivering services as part of an integrated service,’ he says.

Ian Barlow, head of tax and legal services at KPMG, is more forthright.

‘We want to be one of the major players,’ he says. KPMG’s entrance into the associated law firm arena this month has been aggressive – it has poached six partners from PwC’s law firm, Arnheim, Tite & Lewis – and has plans for expansion.

‘Our particular patch will be to bring legal services to bear in a multidisciplinary environment. But if we get standalone legal work, then great,’ says Barlow, who does not rule out a merger with a law firm. ‘The way we grow could be by a combination of organic growth and merging,’ he says.

Lifting a ban on multidisciplinary practices could see law firms encroaching on the territory of accountants in the same way that accountants have started invading the preserve of lawyers. But the Big Five have a head start, as they already employ hundreds of legal professionals.

For most solicitors, the trend will simply mean more career opportunities.

KLegal is about to launch a recruitment drive aimed at acquiring legal expertise at all levels. It is accountants who should perhaps be more concerned. New kids on the Big Five block, with their legal experience and qualifications, could be competing for their jobs.

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