Recently, 66% of law firm leaders responding to a survey said they were “very concerned” about alternative legal services providers and accounting firms encroaching on their business, according to ALM Intelligence.
If that survey were taken today, odds are the number would be higher.
On September 20, PricewaterhouseCoopers said it would be opening a law firm, called ILC legal, in Washington, D.C. The firm will not offer clients U.S. legal advice, but it intends to help U.S. clients with international issues. It will also serve as a marketing operation to help drive business to PwC’s legal services network.
ILC legal will be headed by Richard Edmundson, PwC’s leader in international business reorganizations and a London-based solicitor who will relocate to Washington, D.C. Edmundson told The New York Times there will be five international lawyers in addition to himself to launch the new law firm. “We won’t be a traditional law firm, where legal services are offered in isolation, but one part of a broader offering,” Edmundson told The Times.
Most U.S. jurisdictions don’t allow non-lawyers to own law firms, or share fees with lawyers. Washington, D.C. is the rare exception.
“I think in the short term, PwC is doing a little market testing,” says Bruce MacEwen, President of Adam Smith Esq., a strategic consulting firm that works exclusively with law firms. But in the long term, the Big Four — as the largest accounting firms are known — have “incredible resources in terms of capital, thousands of high-powered professionals, brand equity, and entrée into every Fortune 1000 board room,” says McEwen. “If the Big Four want to come at Big Law, they can. And they will be pretty successful.”
The opening of ILC legal is yet another sign of accounting firms’ increasing commitment to legal services. Each of the Big Four now employs more than 2,000 lawyers. PwC has more than 2,500 lawyers in its network. By that measure, it’s the sixth-largest legal services provider in the world, according to Law.com.
“[PwC has] incredible resources in terms of capital, thousands of high-powered professionals, brand equity, and entrée into every Fortune 1000 board room. If the Big Four want to come at Big Law, they can. And they will be pretty successful.”
EY’s law firm revenue has grown by double digits for 10 consecutive years; Deloitte’s legal services operation has had six years of double-digit growth. That’s in spite of the fact that more matters are being handled in-house, and that overall demand for legal services is flat. “Accounting firms can do a lot of things that law firms don’t, in terms of business process optimization and running things more efficiently,” says Janet Stanton, partner at Adam Smith Esq. “They’re doing stuff that law firms don’t want to do, but increasingly, it’s what clients want.”
Such success will only encourage the Big Four in their efforts to become trusted legal partners to blue-chip companies. Rather than offering legal services in isolation, they want to offer legal services as part of a suite of professional services. In general, the Big Four are much more embedded in their clients’ businesses than lawyers are. They speak the language of the CEO, and use that to offer strategic advice that goes well beyond accounting. And of course, they speak the language of the CFO, or they wouldn’t be able to support their core offering.
Most lawyers, unfortunately, are good at neither of these. Any general counsel will tell you that the reasons to use in-house staff on legal matters often go well beyond cost. The best in-house attorneys are business partners to their clients, and understand the business challenges and competitive landscape as well as they do. Few outside law firms can claim the same — but a Big Four accounting firm, with a good client relationship, absolutely can… and sound credible while doing so.
Big Four firms also have extremely powerful brands, allowing them to challenge traditional law firms in a way that few others can. The clients of the Big Four may or may not be happy with the level of service they’re receiving from their firm, but they do believe that the staff at the firm knows what they’re doing. Just as the big law firms do, the Big Four can hire the best and brightest out of school, put them through a grueling apprenticeship program that lasts years, and then claim that their staff has what it takes to advise clients on their most complex issues. The upshot is that when PwC tells a client they’re going to be offering an expanded range of legal services, there’s no good reason for the client to doubt them.
Of course, in the U.S., there are regulations that make it very difficult for the Big Four to directly challenge Big Law. Accounting firms generally aren’t allowed to offer legal services to companies that they audit; non-lawyers can’t generally own or operate a law firm or share fees with those who do. But MacEwen isn’t at all certain those regulations would sustain a legal challenge.
“The question that is interesting is that if someone challenged those rules on anti-trust grounds, who would win?” he asks.