This week we are exploring the current lawyer/client relationship. In our first installment we explored the drive towards a risk sharing relationship by clients. Clients are demanding changes in fee structures, increasing transparency and increasing efficiency. However, this begs the question. Where is this likely to push the lawyer client relationship in coming years? In light of a changing power balance, will clients look elsewhere for advice? Or will they make increasing demands of their lawyers? Well, by looking at some new behaviors exhibited by some of the legal profession’s biggest clients (read: banks) we may have an answer.
Deutsche Bank and the rise of client demands
Clearly clients push their lawyers for more transparency and innovation within the services offered. This determination combined with outdated practice is producing a potentially damaging new trend. Deutsche Bank recently heralded that they would no longer pay for work done by their law firms’ Junior Associates. The failure to innovate and become more efficient unfortunately means that clients push for cuts themselves. Not to mention widening the void between lawyers and their clients. As the ever witty Roll on Friday puts it:
“What’s great is working until 4am for clients who regard me as worthless.” Roll on Friday
Clients will learn to build their own in-house technology solutions for expensive services like due diligence. Alternatively, they will hire junior lawyers themselves at a lower cost than the billed value of their lawyers. Thus, failure to innovate could cripple those less specialised within firms who have not yet had the opportunity to learn enough to provide unique value. In turn, the cost of specialised legal services is likely to increase dramatically to supplement this loss. It is a trend we are seeing already, as the ‘Remaking Law Firms’ blog has noted:
“In the absence of demand for legal services increasing, this suggests that profitability has been propped up by increased [cost of services]. Again….fees can only be pushed so far, and in a hyper-competitive market there will likely be push-back on fee levels from clients.” Remaking Law Firms
By cutting fees for trainees, the legal industry as a whole will have to rethink itself. Since most in-house counsel were trained by (and started as a trainee at) law firms, where will new in-house counsel come from? This is a serious issue to be addressed by the legal community as a whole. Indeed, it may mean a serious restructuring of legal education.
How to avoid disaster?
Clearly, then, a failure to act now and meet client demand could be ruinous for the legal services industry. However, it is possible to take simple steps to avoid disaster. In our next blog we will be speaking with Arnold Birkhoff about the unique approach adopted by Kneppelhout to increasing client satisfaction. In our final blog we will be looking at some of the innovations General Counsel would like to see their firms taking on board.