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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