Category Archives: Dispersed Law Firms

Dispersed Law Firms

Warren Kalinko, CEO, Keypoint Law

Our lawyers have the freedom to decide what type of practice they want to design for themselves, which matters they want to work on, what clients they want to work with, how they want to work with those clients, and how to price our services. Those are decisions that lawyers want to be in control of.

UK-based ABS Keystone Law and Australia-based ILP Keypoint Law are “dispersed” full service law firms, with senior solicitors working from satellite offices, supported by a central office. Private equity firm Root Capital holds a 35% share of Keystone; Keypoint Law’s shareholders include Keystone Law.

Keypoint is a law firm for talented senior lawyers who are expert in their respective practice areas and love the practice of law, but they do not want to do it within the constraints of the traditional law firm model. Our lawyers earn 70% of the fees that they bill, in a structure that is very low overhead and allows them the freedom to tailor their pricing in a way that appeals to their clients. Our firm gives lawyers a style of legal practice which combines the best features of sole practice with all the benefits of a firm.

Our lawyers have the freedom to decide what type of practice they want to design for themselves, which matters they want to work on, what clients they want to work with, how they want to work with those clients, and how to price our services. Those are decisions that lawyers want to be in control of. They do not want those decisions to be dictated to them by a management board or a partnership or a bureaucracy. They don’t want the firm dictating to them how many hours to work, who to work for or how to bill. Lawyers want to own and control the business decisions that affect their practice.

At the same time, lawyers want to be able to benefit from the resources of a large firm — IT systems, secretarial assistance, professional indemnity insurance, colleagues in complementary practice areas, legal research tools, access to interns, continuing legal education, collegial events.

We have only senior lawyers (average 20+ years’ experience), and they have all the autonomy they want to make business decisions about their practices and not be answerable to anyone on those decisions.

Keypoint is an incorporated legal practice. We provide a range of services to our lawyers — secretarial support, meetings rooms, teleconferencing facilities, professional indemnity insurance, IT systems, invoicing and accounting, file archiving, collegial activities. This is funded from the 30% of the client fees that we retain (the remaining 70% is paid to the lawyer).

Keypoint was launched in May 2014. Today we have about fifteen senior lawyers.

There are four distinct profiles of lawyers who are attracted to the Keypoint model. One of those profiles is women with children, who are looking to enjoy legal practice, but without the need to bill 60 or 70 hours a week and with complete flexibility with respect to where they work. In this regard, they are free to work from their own satellite office or from the firm’s offices if they prefer.

A second profile is people who have been partners in firms, but are no longer enjoying the experience. They want to have more autonomy, but do not want to go into sole practice because it is isolating and does not offer the infrastructure or support (IT, billing) of a firm.

A third profile is sole practitioners. They can find it difficult to win business as a sole practitioner, notably if they are pitching to large businesses who are seeking a holistic service across disciplines. With us, they can offer a holistic service.

The fourth profile is lawyers who are increasingly concerned with the large overhead of law firms. We had one lawyer come to us and say that all they need is a computer, a cell phone and a subscription for research tools. They no longer wanted to be saddled with things they see as unnecessary and as reducing their earnings. Our model offers them the opportunity to earn more money.

Our lawyers do need to come to us with a strong client following. That being said, someone with the capability to build a client following could do that with us.

One of the ways that we support our lawyers is with marketing. We run marketing events, we produce marketing material, we work on tenders. We recently successfully applied for registration on the Australian government’s list of eligible law firms — with that registration, our lawyers can provide services to Commonwealth government agencies.

Keystone Law (UK) has a major shareholding in Keypoint Law. James Knight, the Managing Partner of Keystone Law, is on the Board of Keypoint Law. Keystone provides us with a lot of support — know-how, guidance, systems, documents, marketing materials. We benefit enormously from their proven success with our model over many years in the UK.

In addition to Keystone Law, Keypoint Law has four additional shareholders. Two of those shareholders are companies which have directors or nominees who provide services to Keypoint, and two are purely financial investors.

We are structured in a manner very similar to Keystone. We have a central office that provides a wide range of services and support to our lawyers. In that central office, we currently have four FTE (full time equivalent) employees: me, another of our directors, a practice manager, a graduate lawyer, and some part-time resources. We also utilize a host of third-party consultants to provide services to the firm where they can be delivered by those parties more cost-effectively (like IT). We expect our Central Office team to grow as Keypoint grows (Keystone has about 25 people in its Central Office now). Like Keystone, our lawyers are self-employed.

I am the Legal Practitioner Director. It is my responsibility to ensure that we have appropriate management systems in place. It is my job to provide supervision and oversight of the practice, to ensure that our Principals are happy and getting the support that they need, and to attract new lawyers to the firm.

We have regular meetings with representatives of our investors to inform them on how the firm is progressing, as you would with any group of shareholders. The people we meet with are successful business people who have experience in a number of different fields; and they are well placed to advise us on how to grow and improve the firm.

For example, it was through discussions with our investors that we decided to change our model to offer office space to lawyers who would like to license it, at cost from the firm. Our investors provided valuable input into that process.

In Australia, if anyone in an incorporated legal practice engages in professional misconduct, the firm’s Legal Practice Director can be considered responsible for that misconduct unless it can be shown that all reasonable steps have been taken to prevent it. That places a significant responsibility on legal practitioner directors. In order to meet the requirements of the legislation, legal practitioner directors need to ensure that the firm has appropriate management systems in place which are operating properly. In Australia, if lawyers do not conform to the legislative requirements and solicitor conduct rules, they could lose their right to practice. There is a very strong regulatory context in which law firms operate. For that reason, the view in Australia is that there should be no obstacle to nonlawyer shareholders because there is a sound regulatory framework in place to ensure the correct behaviors.

At any rate, there are many companies that provide services that have profound implications on our lives — child care services, nursing services — their shareholding is open to people from all walks of life, and no one thinks that the shareholdings of those organizations should be restricted to child care professionals, nurses etc. We have laws that establish duties on Directors of companies, and this provides a good level of protection against undesirable conduct on the part of directors.

If you do not have business people involved in law firms, then this limits how legal services can innovate and evolve. Outside investment and business expertise, together with regulation, is a very good combination. You don’t need to ‘throw the baby out with the bathwater’ by precluding nonlawyer investors from becoming shareholders; you simply structure the regulations so that they set the standards of conduct you wish to achieve.

Like every industry, the legal industry is evolving. It is evolving in two ways — both how clients want to receive legal services, and how lawyers want to provide them. Our regulations in Australia support a diversity of shareholdings and this in turn supports innovation in the way legal services are delivered.

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Dispersed Law Firms

William Robins, Operations Director, Keystone Law

We say that...work can be done differently: that just one senior lawyer can be involved, and that the repetitive tasks of the junior lawyers can be replaced in whole or in part by technology and by the work of nonlawyers. And we say that the result of this process will be higher-quality work done by the senior lawyer that the client trusts, and a better relationship with the client.

UK-based ABS Keystone Law and Australia-based ILP Keypoint Law are “dispersed” full service law firms, with senior solicitors working from satellite offices, supported by a central office. Private equity firm Root Capital holds a 35% share of Keystone; Keypoint Law’s shareholders include Keystone Law.

Keystone Law was established in 2002. One of Keystone’s founders had been working in Hong Kong at that time, and from there realized the opportunities that technology offered to replace overhead, to improve client service and to improve quality of life of lawyers. Keystone was born from the idea that it is possible to offer clients everything they expect from their traditional law firm, but without the problems that plague traditional law firms.

Those problems include not just high overheads, but also the problems of work being pushed down to the least qualified and the duplication that involves. In a traditional partnership, senior lawyers instruct midlevel lawyers who in turn instruct junior lawyers. While the rates of the junior lawyers are lower, this reduces quality and increases the room for error — any cost savings are taken up by supervision and rendered wholly irrelevant if the senior lawyers can themselves offer rates comparable to junior lawyers at the bigger firms. We say that this work can be done differently: that just one senior lawyer can be involved, and that the repetitive tasks of the junior lawyers can be replaced in whole or in part by technology and by the work of nonlawyers. And we say that the result of this process will be higher-quality work done by the senior lawyer that the client trusts, and a better relationship with the client.

We have designed our process so they do not rely upon physical office space. We’ve designed our processes around technology and our IT infrastructure. At first only our central administrative team was in an office and all the lawyers worked on a dispersed basis and our use of premises for lawyers was confined to the hire of flexible, but high end, meeting rooms. As we have grown, we have moved to having office space for our lawyers as well as well as to house further administrative staff and our own dedicated meetings rooms.

Our lawyers are currently geographically dispersed around England, with a few being overseas. This will change as the firm expands internationally.

We have a marketing team that works with our lawyers by helping them to grow their client base, and we also help our lawyers refer work to each other.

Our business model is that we invoice our clients for the work, and the amount collected is apportioned between the lawyers and the firm, with the lawyer keeping a high percentage of the fees.

We are profitable because we keep our overhead low and flexible. We have the scale required to afford the sorts of tools lawyers need such as document management systems, IT support, logistics, accounts, client on boarding, bespoke intranet etc. It has taken a great deal of time, money and expertise to build and acquire these resources and systems. There are many firms which can and do copy the model, but to do so with sophistication is quite a challenge.

Our lawyers are not employees, they are independent contractors. They do not receive a salary therefore it would be wrong if they were subject to billing targets and generally beholden to the firm. For many senior lawyers this is an ideal arrangement — they can work as they choose; when they work a lot, they are paid a lot. When they are not working, our overhead stays low because we are not paying them, but of course we choose to work with lawyers with busy practices in order to avoid fallow periods.

We have a different way of thinking and of approaching the work. We don’t impose minimum hourly or billing targets. We don’t use statistics to decide if our lawyers are working hard enough and to argue that some need to work harder. Instead, we work with our lawyers to recognize opportunities and help them secure them. We use our management and administrative staff to support our lawyers, in many ways the lawyers can be seen as the clients of our central office.

There is a strong culture of cross referral. Teams of lawyers are formed to work on projects, and then disbanded and re-formed as projects are completed and new ones begin.

While we turn away many applicants every week if they can’t demonstrate that they meet our strict admissions criteria, our growth remains strong. This is driven by push and pull factors. The push factors from other law firms are wide spread; a great many are unhappy in traditional partnerships. They may not like how their particular partnership functions, they may have more management duties than they want to have, they may have too little control over their work, they may have to put their house on the line to respond to a capital call, they may be obliged to spend all their time doing training. These are all manifestations of the same issue: their current firm does not support them and their clients properly. At the same time, these lawyers are coming to understand the possibility that technology offers for better, more flexible and more enjoyable working. As a result of those factors, we are able to attract entrepreneurial, free-thinking lawyers who would like to work in a structure like ours.

We decided to become an ABS because of the flexibility and the opportunities it offered to us: to bring in nonlawyer expertise, to bring in outside capital, to launch a new business line. We wanted to have the best platform for pursuing and growing our business.

Our senior management is made up of three lawyers — a managing director, an operations director (myself) and a business development director — and two nonlawyers — an IT director and a finance director. Because we could offer them senior management positions together with equity, we were able to recruit very good people who are now helping us to shape our business.

In 2011, at the time the regulatory changes in the UK were taking effect, many potential investors contacted us. They saw the legal services industry as virgin territory, akin to a land grab, with opportunities to invest that until then had been closed to them. And they saw our business model in particular as an attractive one. The traditional partnership model is not an investable model: the value of a traditional business is in the partners who can leave and there are high overheads (mainly salaries and offices). The value in Keystone rests with the infrastructure of the firm and it collaborative culture. In essence lawyers are coming together and using what Keystone offers to do more with less. Our model deliberately is based upon variable expenses.

We met Root Capital right about the time when we were beginning to understand how we could use external funding, and their investment with us was finalized in October 2014.

We have or will use the investment in a number of ways: to cash out one of our retiring founders, to make key hires, notably for IT and finance roles, to invest in new technology, and to search for and recruit more lawyers.

We are actively searching and recruiting now. Many lawyers find us on their own, but many lawyers don’t yet know that they are looking for us, so we have to find them. We have launched a significant marketing campaign we call “Set Law Free” (www.lawsetfree.com), for lawyers located not only in the UK but also in other countries. We are already operating in Australia, under the name Keypoint Law. It was easy for us to set up their because of the similar regulatory regime that permits nonlawyer ownership.

Keypoint is a joint venture with Keystone and investors and the template for our international expansion. We are actively looking for more joint venture partners in other jurisdictions keen to start, run and part own a cutting edge law firm within the Keystone Law Group. Such lawyers will be highly entrepreneurial, share our vision and recognize the value or our IP and access to capital.

In my experience, it is only lawyers who criticize nonlawyer ownership and management of law firms. In my opinion, the only people who are threatened by this are conservative, inward looking lawyers. They are not able to see nonlawyer ownership and management as the fantastic advantage that it is. Outward and forward looking lawyers welcome this with open arms. They understand that there is a massive unmet need for legal services, and that ABSs together with technology, offer a way to address that need. Traditional private practice law firms just don’t do very well in addressing the unmet need.

The monopoly that lawyers had in the UK and that they continue to have in other countries, such as the US, is holding back the legal services industry. It is limiting the clients that can be served, it is limiting the way that lawyers can work to serve those clients, and it is limiting income and profits.

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Dispersed Law Firms

Ken Jagger, Chief Executive Officer, AdventBalance

Companies today are so conscious of their law firms’ costs that they give them very small pieces of information, and ask them to work on very discreet tasks. In contrast, our lawyers are able to get to know the client and understand its objectives in a way that an external lawyer never could.

AdventBalance provides “insourced” lawyers to corporate clients on a fixed fee basis. In February, 2016 (subsequent to this interview), AdventBalance announced it would merge with UK-based Lawyers On Demand.

My background is as a partner with one of the larger firms in Australia, Freehills, which is now Herbert Smith Freehills. When I was with Freehills, it occurred to me that there are many lawyers who enjoyed working more flexibly. Also, we sent a lot of lawyers on secondment — where our lawyers went to work in the premises of our clients’ business. Our lawyers learned a lot and the clients loved it as they got switched on people who really understood their business. The only people who didn’t enjoy it were us, the partners of the law firm. We felt we were losing money as we couldn’t charge as much for the seconded lawyers and there was a significant risk that the lawyers that we had trained, would take up permanent employment with our clients.

I realized that there was a business opportunity with this type of arrangement, but that it needed to be done from a different structure. It couldn’t be done from a traditional partnership structure where it was all about the hourly rates. This could succeed only if it were done in a totally different way.

This is what makes our regulations in Australia important. It allows us to set up a corporate structure and not a partnership, and to run it on corporate principles.

What is great about what we do is that it allows the new generation of lawyers to work differently. They no longer are obliged to go to a law firm, where they work for many years 10, 12, 14 hours a day, seven days a week, with the holy grail of partnership at the end of it. We allow lawyers to work in a different way, and also give clients what they want.

There are a variety of reasons why our clients can need a lawyer on a temporary basis — to fill a gap when a member of the legal department needs to focus on a specific project or is on leave of absence, to meet an increase in workload due to specific projects, to provide special expertise for a specific project, or when a company simply needs a more flexible labor force and isn’t ready to hire a lawyer for a permanent position.

The reason it works is because we keep our overheads very low. In our offices, we have just a small number of management and administrative staff. Our lawyers work at our clients’ premises. By keeping our overheads low, we are able to pay our lawyers what they would have earned if they had stayed with a traditional law firm.

We have a Board of six people, including the Chair. We run Advent Balance as a company, not as a partnership.

We have 13 shareholders — just five are involved in the operation of the business.

All of our shareholders are individuals. Some of them are lawyers, but many of them are not. Those that are not have some connection to law, for example they studied law but now work in other fields. The fact that they have a connection of some kind to law has helped them to understand the business, and to be comfortable as in investor in it. They have also been encouraged by the success of other legal companies, like Slater and Gordon, and Axiom in the US, and they’ve seen a lot of potential for investment in the legal sector.

Technology is of course very important to us. This business could not exist without it. Because our lawyers are spread out across different locations, we need technology to stay in touch, to keep them as part of the family. That being said, we do not use any special or proprietary technology — just the same things that everyone else uses.

We serve clients in Australia, as well as in Singapore and Hong Kong. It is logical for us to be there, as well as in other places in Asia, as that is where our clients are.

We have about 140 lawyers. Being an AdventBalance lawyer isn’t for everyone though– our lawyers are put into new situations every three, six, nine months — it’s like starting a new job each time, and there is uncertainty. Some people like moving around and having new challenges like that, but some do not.

What our lawyers like is the flexibility. They can work on a project for those three, six, nine months, and then take time off without being afraid of losing their jobs or being set back in their careers. They also like the variety — for example, on one project they will work in a bank and then on the next one they will work in an oil and gas company.

While we have lawyers of all ages and lengths of experience, our typical lawyer is in their 30s and early 40s, with about 12 to 15 years’ experience. They will have worked at top tier law firms. They are at that stage of life where they want or need to work flexibly, and they do not want to work all hours of the day and night.

We give our clients a fixed price per day. But the day is not from 7 am to 10 pm – it is a sensible length — that is the deal we make with the client. Our lawyers can maintain a work life balance. That is what attracts lawyers in their 30s and 40s to us.

A fixed fee is very important to making sure that it is a sensible working day.

Our client list is a list that any law firm in town would be happy with. So not only can we offer our lawyers flexibility and variety, but also we can offer them top-end, interesting work.

Companies today are so conscious of their law firms’ costs that they give them very small pieces of information, and ask them to work on very discreet tasks. In contrast, our lawyers are able to get to know the client and understand its objectives in a way that an external lawyer never could.

To get the lawyers we want, we have to pay market salary. Lawyers want the flexibility, but they are not willing to sacrifice salary for it. By stripping out the overhead, we are able to charge the client less than what they would have paid to a traditional firm. But even more important for the client is the price certainty. Clients like that we charge them a fixed price, and that, unlike with hourly billing, there are no surprises when they receive our invoices.

Since we do not bill by the hour, we do not evaluate our lawyers based on the number of hours they bill. We evaluate our lawyers entirely based on the feedback we get from the client, and how happy the client was with the lawyer’s service. Our lawyers like this a lot — no timesheets, no worries about billing 2000 hours a year.

In Australia, the take-up of alternative structures is taking time. Yes, we have the first publicly listed law firms, but there has been a faster take-up in the UK. I suspect that is a function of larger markets and more economic opportunities there.

I think that alternative structures are good for the profession. They have given lawyers different opportunities. Until recently, as a lawyer your choices were working for a traditional law firm, working in-house, working in government, or leaving the law altogether. So many lawyers have been driven out of the profession, especially women. What a waste of a good education, and good experience. And it’s such a shame, given that most of the lawyers I know enjoy practicing law. They just don’t want to do it 20 hours a day, seven days a week, year after year.

Today, firms like ours offer lawyers other ways of practicing. This is good as we are losing far too many people from the profession, and notably far too many women. 70% of our lawyers at AdventBalance are women, and that is because our model suits them.

I think that lawyers in the US and Canada should be pressing for changes to the rules.

It used to be the case that if you worked hard and were a decent lawyer, that you would make partner. You had to work hard for it, and after you got it, you had to continue to work hard. But it was an attainable goal.

This is no longer the case. It is a saturated market, where firms squabble over diminishing market share. Partners are holding tightly onto partnership, so access to partnership is all but closed to other lawyers — you have to be both brilliant as well as lucky to make partner.

Without the regulatory change, lawyers don’t have options. With corporate structures, a lawyer does not need to be a partner anymore — they can be employed shareholders, just like any other company. With share incentive programs, they can become owners of the business without having to go through the partnership process. You can set up a remuneration structure that allows people to go away for a while and come back, that allows for women to go on maternity leave without setting their careers back, and yet still lets the go-getters flourish.

Without alternative structures, I see the profession failing. Partnership is a failed business model — it just hasn’t completely failed yet.

Law is a business, and it has been for quite some time.

The argument that alternative structures will result in unethical behavior makes no sense. We all have to conform to the ethical rules whether we are in a corporate or partnership structure — if we didn’t, we would be out of business very quickly. The argument that alternative structures will result in unethical behavior is the argument of a guild that is looking to protect its monopoly.

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