UK law firm partnerships ready for non-lawyers post-Clementi

Survey reveals two-thirds of partnerships will welcome non-lawyer participation, but outside investment gets short shrift

Partnerships in the UK’s biggest law firms are likely to be swelled with non-lawyers when legislation is passed implementing Sir David Clementi’s recent recommendations on the regulation of the legal profession.

Nearly two-thirds (65 per cent) of managing partners plan to admit managers such as finance directors to partnerships when this is permitted, according to a survey carried out by legal management consultants Wheeler Associates and market researchers McCallum Layton.

However, the vast majority of firms do not expect to take up Clementi’s proposal of allowing outside investment, with only 20 per cent of respondents saying they expected this to happen. An even smaller minority (10 per cent) think their firm would be likely to seek flotation on the stock exchange.

The results of the survey come from interviews with managing partners from 51 of the top 100 firms in England and Wales – Scottish firms will not be subject to Clementi’s proposals. Twenty-seven per cent of the responses were from top 25 firms.

Clementi published the report of his regulatory review of the legal profession in December 2004. In it he recommended that barristers should be permitted to enter the partnerships in solicitors’ firms, as well as saying that law firm managers should be able to become partners. He also said that outside ownership of law firms should be allowed, but stopped short of recommending that non-legal professionals be allowed to practise in tandem with lawyers.

All 65 per cent of those managing partners who said they would make practice managers up to partner thought their finance directors would accept the offer of partnership. Additionally, 83 per cent of those respondents said they would consider making up marketing, business development and HR heads to partner. The most common potential benefit cited for making up managers to partner was that the divide between lawyers and non-lawyers would be removed, and the status of finance directors and those in other support functions would be increased. However, the biggest perceived drawback is that it could be difficult to get partners to accept the change.

The bad news for managers of support services is that, if they are made up to partner, there is likely to be no salary increase. More than half (58 per cent) of those who anticipate making managers up say there is not likely to be an attendant boost in remuneration.

Barristers are as likely to be made up as managers of support functions. Already, 59 per cent of the top 100 firms, and 93 per cent of the top 25, employ barristers within their practices. Two-thirds of respondents thought they would admit barristers to their partnerships, with most saying that this would increase a firm’s skills set and that the ‘one-stop shop’ approach would benefit clients.

Sonya Leydecker, head of litigation at Herbert Smith, which recently launched its own internal barristers’ chambers by hiring Murray Rosen QC and Ian Gatt QC, said she thought it was important for collegiality that the barristers became partners. Both Rosen and Gatt are due to requalify as solicitor-advocates and they will be admitted into Herbert Smith’s partnership later this year.

Leydecker said that if Clementi’s proposals had already been implemented, then both silks would be partners without the need for requalification.

“We see it as just being an administrative hurdle that has to be overcome,” she explained.

However, managing partners see no benefit in allowing outside investment in their firms. Only 2 per cent of those surveyed thought they would be “very likely” to seek it, with another 18 per cent rating the possibility as “quite likely”.

Managing partners see outside investment as a threat to a law firms’ independence and professionalism. One said: “This is consumerism gone mad; things are becoming too competitive. Issues have been overlooked – mainly that lawyers must be independent. The more you open up to competition, the less independent you get.”

Peter Martyr, Norton Rose‘s chief executive, said he was unsurprised at the results of the survey, but added that Clementi’s proposals might be skewed towards high street firms rather than City practices.

“We need to make sure that those who are designing the regulations take account of what effect this is going to have with foreign regulators,” Martyr said.

Likelihood of different practice managers being admitted to the partnership
Likely Not likely Already a partner Do not have one
Finance 100 0 0 0
Marketing/business development 82 12 3 3
HR 82 18 0 0
IT 67 33 0 0
Source: Wheeler Associates/McCallum Layton

Likelihood of admitting non-lawyer practice managers to the partnership
Very likely 10
Quite likely 55
Not very likely 33
Don’t know 2
Source: Wheeler Associates/McCallum Layton