Firms seek specialist help in the battle with accountants
21 June 1999
If an emerging trend continues to grow, clients could soon be receiving advice from law firms - but not from lawyers.
Firms around the City are looking to set themselves apart from the competition by offering a little bit extra - advice from non-legal, in-house specialists.
Picking up on a practice that began in the US and with one eye on the potential explosion in the multidisciplinary departments of the big accountants, firms are recruiting specialist advisers to work directly with clients.
The advisers, claim enthusiasts, have direct experience of the clients' world that can be used to offer practical, specialist advice, and their presence also helps to reassure clients that their chosen firm is fully up to date with clients' business and markets.
Recent recruits include people from UK financial services, international trade, Indian politics and the Polish insurance market.
One new adviser at a City law firm says that for the client, using a law firm with an internal adviser was like an expectant mother dealing with a midwife who had actually had her own children.
The advisers have often built up successful careers in government departments or regulatory boards before moving into the law. Ashurst Morris Crisp has a former Indian government official to advise London-based clients on political matters on the sub-continent, while Cameron Mc- Kenna employs a former regulator of the Polish insurance market and Rowe & Maw employs a specialist on European and international trade.
Glenda Davies is only the latest of the new breed. Former director of regulatory policy at the Securities and Futures Authority (SFA), Davies has just started working for SJ Berwin to become, the firm claims, the first financial services adviser to be employed in-house by a law firm (The Lawyer, 14 June).
Changes are coming thick and fast, with e-commerce, electronic signatures, the euro and a new financial services regulatory regime, and SJ Berwin felt it needed experienced specialist help if it was to gain new clients.
Davies sees her role as an "everyman", grounding the specifically legal advice work of her colleagues.
"As a lay person, I will react in the same way as a client will react and see how things will affect their practical business world because I know how it works," she says.
"I have been a regulator and a lobbyist so something will often strike me that may not strike a lawyer."
The move raises the question of why such an adviser is needed in-house when many would argue it is part of a lawyer's job to keep him or herself up to speed with changes in the field.
Charles Abrams, head of SJ Berwin's financial services group, says lawyers may think they know everything but they should really stick to the law. The specialist's advice, he believes, puts the legal side in its proper context.
"New legislation that is coming out is very complicated and we as lawyers won't always understand the effect of the proposals on clients. We don't have the time to check for daily changes and watch what is happening on the internet," he says.
"It is not law, but it is very important for the client. It means advice from a law firm with such an adviser will not be so insular. This gives clients a more holistic view, covering all the angles."
A key aspect of the trend is that having a specialist adviser on board offers firms a new marketing opportunity. Abrams says: "Accountancy firms have been marketing the specialist side of their business, and now we can too. We can offer something that many other firms cannot."
Rowe & Maw recently recruited Cliff Stevenson from economics consultancy firm MGK International Trade Consultants to become its chief economist advising on European and international trade. The firm clearly sees this as a key appointment because it has allotted him an assistant in the shape of academic Jeremy Kempton.
Philip Ruttley, a partner at the firm, says: "We felt we needed an integrated service. We need an economist to justify, say, to the European Commission why a company de- serves an exemption, or to tell a company what a particular regulation involves."
For Rowe & Maw, such a specialist in-house resource is not just a useful tool but also a cost-effective way of getting advice. "This is very useful for clients because they need to know the economic aspects as well as the legal aspects. Having someone in-house is easier, cheaper and there is clearly the need," says Ruttley.
Abrams agrees: "We have crossed the Rubicon and I am sure other firms will join us. Ninety-nine per cent of law firms don't understand every detail. I believe that in about six months' time we will wonder how we got on without Glenda. In fact I hope it doesn't catch on, because we feel this gives us the edge."
Ruttley says it will change the face of firms in the future: "There will undoubtedly be more and more internal advisers in City firms. It is the only way if we are to seriously compete with the big US firms who have been doing this for a much longer time. We are emulating the US as a result of the increased globalisation of the markets."
From the client's point of view, BUPA's head of legal, Paul Newton, says that when clients are choosing a firm, the presence of relevant specialist internal advisers could swing the balance. BUPA particularly welcomes having Ashurst Morris Crisp's Indian adviser, Ashok Mubayi, on board. This has been invaluable for particular projects, says Newton.
"There is often little to differentiate between firms when it comes to technical legal advice, so clients are looking for practices that can offer that little bit extra to stand out from the competition," says Newton.
"The advice from the specialist can be more valuable than that from the lawyer because they might tell you something that could be critical to the success of a project, such as whether a thing will work in a particular environment."
Clients may well wonder if they are going to have to pay for the extra advice.
Abrams says SJ Berwin had not yet worked out how it will charge for Davies' advice, but says it will probably be on the same scale as a newly-qualified solicitor if Davies deals directly with the client, though there will probably be no charge for Davies giving advice to internal lawyers.
"I don't think clients would object to paying because of the value she will undoubtedly add," says Abrams.
In some areas, BUPA is looking at cutting its costs. For instance, it is instructing more regional firms, but Newton believes the specialist advice at the City firms is worth paying a little extra for.
"We would expect to pay for that kind of advice because it is so valuable, but many clients would not wear it if the bill showed you were paying extra because they think they are paying a fortune anyway. It depends how the bill is presented and what clients know," says Newton.
Firms that are providing extra specialist advice say it has caused no problems so far. Clients of Rowe & Maw receive an all-inclusive bill and there have been no complaints, according to Ruttley.
The trend to employ advisers is part of a broader strategy on the part of firms to take on the big accountants where multidisciplinary departments are common. Their access to so many in-house specialists threatens to take potential business away from "single skill" firms.
Arthur Andersen, for instance, has a contra-deal with lawyers at Garretts. "If we need specialist accountancy advice, we just ring up someone at Arthur Andersen," says Anne Groves, spokeswoman for Garretts.
The accountancy firms are not afraid to market themselves on this basis. "In insurance they market themselves on the fact that they have varied expertise," says Newton. "The accountants have the edge on this."
SJ Berwin happily admits that the firm took its model from the accountancy firms. "We thought: 'If accountants are doing it, why can't we?' " says Abrams.
Rowe & Maw, meanwhile, is confident that law firms can move ahead of their rivals. "I think law firms can offer more of a service than many accountants if they use in-house specialists," says Ruttley.
However, not every firm wishes to use specialist help. A spokeswoman for Freshfields says the firm is not currently interested in putting a non-lawyer in front of clients.
"We have some in-house specialists but at a lower level, who brief lawyers with the benefit of their experience but not directly interfacing with the client - we have lawyers who do that."
It is always possible that the competition between law and accountancy firms may mean that specialist advisers end up in short supply and therefore become more expensive.
Abrams certainly sees the recruitment of non-lawyer specialists spreading to other firms in the financial services sector, and also to specialists in tax. "For instance, someone who was not a lawyer but had, say, worked for the Inland Revenue would be extremely useful as an internal adviser on taxation," he says. "We feel we could give just as good a home to someone like that as an accountancy firm."
The new breed's curricula vitae
Glenda Davies (SJ Berwin)
Former regulator at the Stock Exchange from 1980, followed by four years as regulatory director at the Securities and Futures Association.
Most recent post was as director of securities and investments at the London Investment Banking Association (1992-97).
Took a year's career break before being appointed as financial services professional support at SJ Berwin.
Her current job is to brief lawyers and clients on the latest developments in financial services and advise how these might affect their businesses.
Verity Kidd (Cameron McKenna)
Tax consultant with Arthur Andersen (1993-96).
Worked at the Water Research Centre in Swindon (1997-98) after gaining a degree in environmental sciences. Also voluntary research assistant at Friends of the Earth and Greenpeace (1996-97).
Now one of two non-lawyer environmental information officers working with Cameron McKenna's environmental law group, which deals with issues relating to contaminated land and other environmental issues.
Her current job is to scan journals and inform staff at Cameron McKenna of changes to regulations in the UK and abroad.
Ashok Mubayi (Ashurst Morris Crisp)
Worked as a senior civil servant in India, undertaking a number of diplomatic assignments for the Indian government. He also worked on projects funded by the World Bank and represented India in a number of multi-lateral organisations.
Based in London since 1994 as adviser to Ashurst Morris Crisp's India practice group.
His current job is to examine the political aspects of potential projects, advising international clients on the most efficient and effective ways of dealing with Indian laws, regulations and procedures, as well as promoting understanding of the Indian cultural environment.
Cliff Stevenson (Rowe & Maw)
Former director of MGK International Trade Consultants representing companies involved in anti-dumping investigations and providing analysis in World Trade Organisation (WTO) disputes and training (1989-1998).
Senior economic assistant at the Department of Trade and Industry providing advice to ministers on trade policy as well as representing the UK at international meetings (1987-1989).
His current job involves advising on European and WTO trade regulations including anti-dumping, competition law and customs rules.
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