The Multi Disciplinary Practice Returns
The MDP returns - as an ABS
Chris Bull has been lead advisor to a string of Alternative Business Structure (ABS) applicants, including three large new entrants from other professional markets. His conviction is that the emergence of Multi Disciplinary Practice (MDP) models offering legal services, although slow to build, is going to be a dominant feature of the legal landscape for the next few years.
Back in September 2012, the Legal Futures website reported on the minimal take-up of the new ABS model of legal service business by MDPs. Only one, the modestly sized Crabtree Law, had been established at that point – six months after the first ABS had been licensed. The website reported that “there is so far little evidence that alternative business structures (ABSs) will spawn large numbers of multi-disciplinary practices (MDPs)”.
Fast forward to February of this year. Accountants and Investment Managers, Smith & Williamson, had surveyed leading law firms and the headlines from their analysis focused on MDPs. Around 30% of their respondents from the UK’s top 100 law firms said that they: “..may seek to become an ABS and join with a non-solicitors practice”, including a number of the country’s largest firms.
Our work with leading accountants, corporate service providers and insurers and with many law firms about their future plans for the legal sector leaves me in no doubt:
We are going to see a dramatic transformation in the shape of the professional service market as MDP models of all kinds emerge.
The slow pace of MDP creation following legal services liberalisation should not mislead us. The complexity of these structures, regulator indecision and the inherently careful and cautious cultures of the professional firms involved, all contribute to a period of analysis and planning. Nobody really knew what the ABS era would bring with it and the initially slow pace of application processing and approval tended to justify the ‘wait and see’ approach both large law firms and potential new entrants took.
Our own work confirms other reports suggesting that both lawyers and accountants see tie-ups between these two professions as the most likely. There are already a set of ‘grey area’ services where both lawyers and accountants routinely advise and where the potential to instruct a single firm is seen as attractive to clients. In areas such as tax advice, employment and pensions, forensics and company formation work, lawyers and accountants are currently fighting over that single provider position. Many can see how a combination of both disciplines would be a trump card in this competitive arena.
The fraught question of Legal Professional Privilege (LPP) is a hot topic as MDPs are considered. The Ministry of Justice confirmed in January that it does not intend to extend LPP to non-lawyers.
However, lawyers in an MDP ABS regulated by the SRA would be likely to enjoy LPP. The appeal of a genuine MDP that blends the disciplines and – critically – has ABS status is obvious.
In our work exploring MDP options and advising on new venture strategies, applications and build-out we have identified a series of challenges and obstacles that have to be dealt with as MDPs that fuse lawyers and other professionals together are being designed. In a longer whitepaper we are co-authoring with our strategic partners at regulatory law firm Khiara Law (scheduled for summer 2013), we will be exploring the following issues in more detail:
- The scope and cost of dual regulation (SRA with ICAEW for example)
- Using an ‘MDP wrapper’ basis across the entire firm or selective ABS regulation of a defined subsidiary
- Confirming the application of Legal Professional Privilege
- Status of Practising Solicitor
- Separate business rules – structural, governance and reporting line changes due to the impact of having Prohibited Separate Business (e.g. litigation, trust and nominee services) in the existing non-legal business
- Data security and confidentiality and application of Chinese walls and IT system changes
- Differing professional rules on engagement, conflicts, complaints
- Introducing SRA Code/OFR compliance regime and roles of COLP, COFA
- Independence of the ABS within group structures
- The SRA’s stance that tax advice and other legislation-based professional work constitutes ‘legal advice’
- Potential damage to existing symbiotic and referral business relationships with law firms – especially around transactions in corporate &banking
- Client perception and market positioning of this new form of business
- Shared wariness of the last episode in MDP development when accounting firms acquired law firms lock, stock and barrel
- Career structure and ability to make Partner (or even be a Partner in a corporate MDP) and attractiveness of the MDP model to new hires