Written by Dominique Graham, Partner at Signium United Kingdom

Panel members listed at the end of the article.

 

Rescuing the relationship

Are lawyers in danger of losing their coveted “trusted adviser” status and what can they do about it?

Viewed from a decade ago, the legal landscape today looks much more familiar than many at the time expected. The Legal Services Act 2010 (LSA) was set to transform the ownership and structure of law firms, the accountants were expected to renew their multi-disciplinary efforts as the regulations relaxed, the boundary between the Bar and solicitors’ professions was expected to dissolve and access to legal information provided through the internet, it was predicted by some, was set to undermine the position of legal professionals.

While the importance (and size) of in-house legal teams has grown and the LSA has brought fresh thinking and investment to some sectors, by and large the partnership-based law firm model cruises on, battered but unbowed.

“Change there has been, but it has been evolutionary,” said Stephen Williams, general counsel of the Unilever, who chaired the session. “Even if some of the circumstances outlined threatened revolution, it has not happened.  Most of us have changed our behaviours enough to stay ahead of the curve, but have we changed them enough to stay ahead of the new curves?”

“Some of the challenges are truly existential, coming from changes in how societies operate; how people who operate in those societies expect other firms to operate; circumstances we cannot control anymore and we will have to adapt to. The futurologists and big thinkers are challenging the nature of our service delivery, particularly our key USP as lawyers: our role as the trusted adviser.”

What are lawyers for?

One of the reasons that the status quo has survived for so long is that the role of the lawyer as a “trusted adviser” has arguably become more important in recent years as the business world has changed. The decade since the credit crunch of the late 2000s has proved perilous for many businesses and the need for informed, reliable and impartial advice is greater than ever.

Clients need someone who is indefatigably on their side and the conflicts of interest that larger organisational structures can create militates against too much consolidation or external capital.

However, it was noted by some at the session that many law firms fall short of trusted adviser status and suggested that those in this category face an uncertain future. Where once law firms could survive on their status as the repositories of legal information and knowhow, this advantage is rapidly eroding in the internet age as the raw material of legal knowledge is widely available online.

Charles Martin, senior partner of Macfarlanes, suggested that, for the upper echelons of private practice, gaining and retaining trusted adviser status would be crucial for their future prosperity and that law firms may need to make some radical changes if they are to retain it.

“We will not be able to simply claim trusted adviser status, as we have in the past,” he said. “We will have to do things that genuinely justify it.”

 

Building trust

So what are the qualities required to become, and remain, a trusted adviser? For Norton Rose partner Jeffrey Barratt, experience is key. “With increasingly difficult regulations and other things affecting clients, the client will want people that he or she can talk to, to get a view on: ‘Is this a sensible thing to do?” he said. “The huge plus that the experienced private practitioner can provide is that you have been there before. “

In addition to past experience, understanding of both the client’s business and the sector that they operate in are also essential requirements for the “trusted adviser”, while from a more technical point of view, the protection provided by legal professional privilege is an important (if increasingly endangered) advantage enjoyed by lawyers in the lawyer-client relationship.

A further attribute identified by the roundtable participants is the ability to be able to provide advice and guidance without conflict of interest or commercial pressures limiting the scope of the lawyer to act in the client’s best interests at all times.

On a personal level, being able to communicate effectively with the client is also key as is the way that his or her advice is presented. As well as understanding the needs of the client to ensure that the advice is relevant, the trusted adviser needs to deliver that advice in a way the client can use.

Dr Tracy Long, founder of the consultancy Boardroom Review which advises on effectiveness of boards and committees, told the session that this is an area where many advisers legal fall short. “What is the board trying to do?  It is trying to make decisions. I see many expert counsel coming in and giving presentations and what I observe is they often do not help directors make decisions.  They are talking about background and the legality, but they are not actually giving a roadmap for the board to help it make a decision. If lawyers thought a little bit harder about trying to help individuals and collective groups make decisions that would be very helpful.”

In some of these respects, however, it was acknowledged by private practice and in-house delegates alike that recent developments are compromising private practice lawyers’ ability to perform the trusted adviser role.

The growth of legal panels and other procurement processes has also in many cases diluted the relationship between lawyer and client from a close personal one to a more transactional arrangement. Moreover, it was noted, the rapid increase in the size of law firms – whether organically or through merger – is damaging client relationships in a number of ways, whether that be through the need to cross-sell other parts of the firm or to institutionalise clients at the expense of personal relationships.

“One of the key ingredients to being a trusted advisor is that you put the client’s interests ahead of yourself,” Slaughter and May’s senior corporate Nigel Boardman said. “If you do not do that, you are not going to be a trusted advisor. We saw, when I started my career, that the senior audit partner of the accounting firm was the trusted advisor, and then they started selling consultancy services and other services alongside it, and then they had Sarbanes Oxley, and they are no longer the trusted advisor because they took on too much cross selling, which benefited them and not the client.  The investment banks tried to step in to the role, but are selling, not advising, and lost it.

“I would say that, by and large, in private practice we have done the same thing,” he added. “We have started cross selling services even when we know they are not the best services.  We sell to a client our office in wherever it is, Timbuktu, when in fact there are much better offices in Timbuktu.  We tell them to use our litigation team and they are not the best litigation team to do the job.  We lose our trusted advisor status because we are putting our own interests ahead of the interests of the client. In 10 to 15 years, we will lose our trusted adviser status if we are not careful.”

So what can law firms do to defend their coveted trusted adviser status? One suggestion was to replace the focus on growth that has dominated in recent years with one on quality, using technology to deal with the bread and butter work at the price and speed that clients demand and investing in the technical and ‘soft’ skills required to perform the trusted adviser role.

“I think the opportunities are there for law firms to really gain huge measures of loyalty back from corporates, but they have to be prepared to invest,” said Andrew Garard, general counsel at ITV plc. “This means not only investing in technology and training, but they have to invest in people terms as well.  Client loyalty now is a person to person loyalty, it is not a corporate loyalty to a law firm. Things like secondments are not necessarily just a means for in house teams to fill gaps. They can be a vital learning experience for a lot of law firms.  They have to be prepared to invest in that if they want to survive into the next century.”

For Charles Martin at Macfarlanes, this process may lead to a smaller profession in future. “The days when growth was high up the agenda and the way in which we judge success are long past,” he said. “In a way, growth is a threat to the trusted advisor role, partly because it creates a less intense environment: an environment where it is more difficult to create the kind of culture that brings ‘trusted advisors’”.

Has the trusted adviser gone in-house?

The rise of these headwinds for private practice led the session to ask whether the role of the ‘trusted adviser’ was in the process of shifting in-house, from the experienced private practitioner to the seasoned general counsel. Many of the attributes of the trusted adviser outlined above are enjoyed by in-house lawyers, whose number and prominence have both clearly grown in recent years.

Perhaps surprisingly, one advocate of this view was Nigel Boardman. “By and large, with most corporates, the trusted advisor has moved in-house to be the in-house lawyer,” he said. “The in house lawyer who does not play politics internally, does not seek to go on the board and does not seek to expand their empire – in other words, does not put themselves ahead of their own client – is the person who has the ear of the organisation and has the ability to help and to advise.  When you look at the States, that has happened to a much greater degree than it has here, but it is happening here.  In 10-15 years’ time, we will not be trusted advisors.  We will be an audit firm, unless we are very careful.”

If this scenario does play out more widely, where does this leave law firms in the race to be the trusted adviser? “The growth of the general counsel’s status in corporations means that the practical ambition for most external lawyers is to be the trusted advisor to the GC rather than to vault over the GC and expect to have a relationship with the CEO,” suggested Stephen Williams.

While this proposition was not universally accepted by private practice participants at the session, DLA Piper’s Sir Nigel Knowles said that this role is something that law firms are well set up to do. “I think a partner in a law firm can be a good trusted advisor to the general counsel, who might want to talk about an aspect of life that they do not feel able to talk about to somebody who reports to them or kick it up and talk to the CEO about it,” he said. “What a general counsel does not want is a partner in a law firm going direct into the CEO unless invited to do so.”

And, as in-house teams get bigger, the opportunity for law firms to develop trusted adviser status further down the hierarchy will also be key, according to Nicholas Cline, partner in the London office of Latham & Watkins. “It is broader than just the relationship with the GC, he said. “You could be a trusted adviser to a contract lawyer within an organisation, just as you could have a trusted advisor loyal to the GC.

“It is important to focus in on what that means –  it is an understanding of the business, an understanding of client delivery and an investment in the relationship.  We can certainly talk about trusted advisors to the board, and that is first of all what comes to my mind, but I think as a law firm we need to develop trusted advisors at all levels and within our specialisms as well.”

Cracking the inner circle

While in-house lawyers enjoy some advantages over their private practice colleagues, both corporate counsel and external lawyers alike have a challenge in gaining the ear of chief