Take the financial challenge
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Past president of the Law Society Tony Holland has accused the society of "fiddling while Rome burned" (The Lawyer 19 March). He says it has failed to respond to the challenge posed by accountants undertaking legal work. Unless steps are taken soon, he adds, firms who have "diversified into commercial work...[will] see their hard effort plundered by a local accountancy practice".
The Law Society Council has considered the matter of accountants moving into areas of legal practice but no formal policy has been forthcoming.
At the moment, lawyers hands are bound by the tight rules preventing them from working in multidisciplinary practices (MDPs). However, the Labour Party has said it is committed to referring such restrictive rules to a revamped Monopoly and Mergers Commission. Within the next two years, the rules are likely to collapse because the pressure for change has become so great. But by then it may be too late for many solicitors.
Accountants are clearly gearing up to embrace MDPs when they are permitted and law firms ought to be doing the same. Accountants are being very aggressive in poaching lawyer's traditional work. Solicitors, on the other hand, are seeing their work going to accountants, but are doing little themselves to muscle in on tax or financial advice work.
Lawyers could move in on the work undertaken by accountants in a number of key areas. These include the audit, financing and acquisitions work currently undertaken by the Big Six accountancy firms, advising small to medium-sized businesses, and advising on personal taxation.
Alison Crawley, head of policy at the Law Society, is surprised by the reluctance of law firms to develop niche tax and financial practices. "If lawyers are going to compete with accountants they ought to be employing accountants," she says.
"I am surprised that solicitors have not picked up on the new self-assessment regulations. High street and commercial solicitors traditionally have large client base of small businesses. Why don't the solicitors get themselves an accountant, a computer and a software package and offer tax advice?"
Ronnie Fox, of City firm Fox Williams, concedes that lawyers are reluctant to change. "I have not heard of English lawyers employing accountants and offering financial and audit advice," he says.
"There are a number of difficulties. Lawyers are resistant to change. They always ask: 'Have we done this before?'"
Fox thinks a move into accountancy work will offer lawyers new career prospects. "Accountancy is a good career move for lawyers," he says. "Lawyers who work for accountants seem to be doing very well and are sometimes envied by the colleagues they have left behind."
A recent survey of six leading solicitors highlighted their caution over diversifying into accountancy work. John Heller senior partner of Hammond Suddards, says: "I am not going to lose sleep about it. Providing a legal service is the main business. How many lawyers want to be part of the subsidiary of an accounting business?"
Solicitors argue that accountants are moving into legal work because they want more profitable work than audits. Accountants want to sell audit clients extra, 'added value' services. Law firms do not understand why they should poach audit and related work if it is unprofitable for accountants.
Many lawyers also think that the advantages of the one-stop shop approach to providing combined legal and accountancy advice are overplayed. They believe clients still value independent advice.
"Clients are not buying groceries from a supermarket," says the managing partner of one top 10 firm. "They value the approach to problems provided by an independent law firm which tends to balance the accountants' view."
There are indications that some firms are beginning to move into the tax advice field. City firm Freshfields now has 15 partners in its tax division and a few of the other big firms are looking at providing tax advice as a core service.
The different approaches of the respective professions are said to militate against solicitors undertaking accountancy work. Solicitors are instructed to achieve a specific result on a case-by-case basis, whereas
accountants tend to work on a more strategic and long-term year-on-year basis.
But the two philosophies are not incompatible, and there is no reason why a law firm cannot give corporate tax and finance advice on a strategic basis.