A sudden revaluation of the Swiss franc has led to a focus on fees, says Joanne Harris
Switzerland has always had an aura of luxury and expense, but during the early months of this year that aura carried extra weight as the value of the Swiss franc soared.
By 5 September the franc was worth just e1.10 (£1.26), compared with e1.31 a year earlier, and even that rate was significantly higher than five years previously, particularly compared with sterling.
On 6 September the Swiss National Bank took drastic action, pegging the minimum exchange rate against the euro at e1.20.
“The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development,” the bank said in a statement.
For lawyers, the move has meant an acceleration in the price pressure from clients that had already become – as in so many other places – a feature of the Swiss market. A number of firms report clients returning to renegotiate fees – for example, having agreed a sum in francs six months ago, but now wanting to pay the same dollar or sterling amount – which presently means considerably fewer francs.
The revaluation is likely to cause firms to pay attention to their costs and margins, says Walder Wyss banking partner Enrico Friz.
“Now we aren’t competitive at all compared with German or UK firms, and we haven’t been for a couple of years compared with US firms,” Friz notes.
“Four to five years ago our rates compared favourably. Now a client will negotiate – what do you say to such a client?” adds Lalive partner Alexander Troller.
Lawyers are confident clients will still pay what is required for the most complicated transactions, but believe they will want to try to get lower prices for more day-to-day work.
On a day-to-day basis, as prices adjust, life should become a little easier for everyone in Switzerland. Many there had become used to crossing the border into France or Germany, or using the internet to buy cheaper goods outside the country.
The prospect of associate salaries dropping is raised by Friz, but dismissed by the majority of the market. Some international firms have adjusted the pay of their partners and staff to achieve parity with the salaries paid in the firms’ home jurisdictions as a result of the revalution, but domestic firms think that reducing salaries due to lower fees would make them unattractive for hiring purposes.
This is a crucial point in a highly competitive market for associates, although firms across the board report that things have improved in recent months. This is partially due to less pressure from the in-house sector for jobs, as fewer banks and other financial institutions are hiring.
Battle for talent
Efforts invested in improving training and recruitment for lawyers are also seen to be paying off. Schellenberg Wittmer has recently hired an HR manager to focus on improving the quality of its recruitment, in addition to its academy programme that trains associates in a variety of areas.
Bär & Karrer has also launched a training programme that sees lawyers working towards an MBA at the Bär & Karrer College, which is run in association with the University of St Gallen.
Schellenberg Wittmer managing partner Vincent Jeanneret believes such initiatives will help firms retain talent, setting them up for the future.
“The battle is going to be about who’s in the top tier in the next five years,” he says.
Niederer Kraft & Frey partner Philippe Weber agrees.
“Our strategy is to be at eye level with the big international firms,” he says. “That process starts with the training of young lawyers and then, of course, by playing a part on the important transactions. It’s essential that our firm has a strong brand, but in the end this is still a people business.”
More consolidation among Switzerland’s smaller firms in response to the competition for top-end work is likely, as is the selective poaching of lawyers from mid-sized firms by the bigger players.
“I wouldn’t be surprised if some of the tier two or three firms have a hard time keeping all their rainmakers or good lawyers,” says Friz, who adds that Walder Wyss has deliberately been trying to position itself as a tier one firm in the past few years through aggressive recruitment.
“Mid-tier firms have invested a lot of time and money but in the end if they don’t have the tier one work it’ll become very difficult for them. I have the impression that they’re consolidating. Clearly, there’s a critical mass you need to have because clients expect you to be specialised.”
Here are our Swiss Firms from The Lawyer Firm Directory.