MDPs do not hold a quick fix for firms
24 March 1998
Clive Parritt believes the advantages behind multidisciplinary practices are only short-term and will result in nothing more than a hike in consumer charges for less specialised advice. Clive Parritt is chairman of accountancy firm Baker Tilly.
The notion of solicitors and accountants practising together and sharing profits, offices and management continues to enthral the media. The idea of successfully combining professionals with different disciplines and cultures into a one-stop shop is perceived by some as a panacea.
The story goes that public, clients, professionals, firms' staff, the economy and so forth will benefit. But this is patently untrue. Buying packaged products from a supermarket is one thing but personal advice is something else.
How many of us believe that the quality or cost of banking services is better now than it was before all the bank managers started selling insurance, mortgages, business advice and trustee services?
According to supporters, merged practices are expected to benefit partners. It is said by accounting firms that their businesses are better-managed than their legal counterparts despite my suspicion that profits per partner generally are higher in legal firms.
But combining two firms into one business is always difficult. In every merger there is a dominant partner and if received wisdom is correct, lawyers will end up being managed by accountants a probable nightmare for lawyers.
The concept of multidisciplinary practices (MDPs) poses a number of troublesome questions. If both parties are going to benefit, how will the extra profitable business be generated? Why will the combined practice attract more fees in its merged format than the two units achieved separately? Will the skills of the professionals be improved so that more clients beat a path to their door?
This seems unlikely in the extreme. Perhaps reduced fees will attract clients but this leads to more work for less profit. Work might be won if a client buys legal advice from his accounting firm or vice-versa, but this is shortsighted. The client will want to pay less and, unless the firm has every conceivable skill available, this may not be the "best" advice for the client, who will eventually discover this. The extra fees will be illusory or temporary.
To make more money for the partners, cost-cutting will soon be required. Accountants and lawyers could become even more divorced from clients. To succeed, the one-stop shop will need to package services and restrict the access of professionals to clients only the "account executive partner" will see the client and all other partners will be relegated to the back room to be wheeled in and out as needed.
There are also questions of client interest, for how can MDPs benefit the client or the public? In some circumstances, the supermarket has improved the marketplace, but is the destruction of small specialist and local retailers really beneficial?
With professional services I cannot believe that the public interest is served by narrowing choice, and I doubt if the cost will be materially cheaper. It would be a gullible client who expected a group of professionals to band together for anything other than profit they are not seeking to lower prices.
The client seeks quality, relevant and timely advice delivered in a manner which matches his culture and expectation. Would you go to the same place (regardless of size or location) for advice on High Court litigation, personal tax returns, licensing rules, complex tax schemes, small shop conveyancing and auditing? Only occasionally will the legal wing of an accounting firm or the accountants in a legal firm be the very best people to use.
For the public an even bigger worry is whether a one-stop shop multidisciplinary partnership will really be able to give independent advice.
Let us consider how work is passed between solicitors and accountants at the moment. A solicitor, for example, will decide that he needs to recommend a firm of accountants to deal with some work for his client. Firstly he will review the expertise needed to do the job. And I believe that to retain their integrity all true professionals have to start at this point identifying the right expertise.
Next, he will review his list of contacts. The "I scratch your back, you scratch mine" syndrome is alive and kicking. A good networker will keep the work flowing around his pool of referees, noting what he gets in exchange. To work properly though, it is certainly not a fixed pool. Clients come and go. Skill requirements change, new tasks arise, new people are met. This is an exciting world of cross-fertilisation with plenty of opportunity for new challenges to arise. If you reduce this network to in-house lawyer or accountant where is the impetus? The reek of stagnation is already creeping in.
MDPs buck the trend. Conglomerates are being disbanded and even the UK is being regionalised. What do accountants and lawyers know that everyone else doesn't?