Today’s Wills and Probate recently spoke to Adrian Jaggard, CEO of Taylor Rose MW, one of the top four firms in the UK currently operating the consultancy model, about how consultancy works and how much of an impact this new breed of firm might have on the industry.
A report published last year by Arden Partners predicts that the legal consultant business model will become the dominant model for the consolidation of high street and mid-market law firms, stimulated by the success of remote working during the pandemic and the benefit of significant investment in IT and back office infrastructure.
The report also estimates that approximately a third of all UK lawyers could be working under the legal consultants’ banner in just five years’ time, marking significant disruption in the legal sector.
With over 350 consultant lawyers at present, the number of consultants working within Taylor Rose MW’s practice is currently increasing by 15-20 per month, alongside a more traditional practice arm which currently houses 500 of its employees. This momentum, the firm says, has been helped by the impact of Covid-19, such as an increased acceptance of home working, with consultancy revenues in its latest financial year more than quadrupling compared to pre-pandemic.
Commenting on the increasing industry shift to a consultancy-based model Jaggard said:
“The past year has marked a step-change in the growth of our consultancy division, which has become one of the key drivers of our continued expansion. Our integrated growth strategy, where the development of our traditional practice through M&A continues alongside the growth of the consultancy division, is paying dividends as it enables our consultants to benefit from referrals and increased marketing and business development capability, enabling us to attract bigger contracts and attract and retain talent more effectively.”
When asked what prompted the launch of a consultancy to begin with, Jaggard said that the business was simply approached by a team of property and private client lawyers who wanted to leave their current firm, “but they needed the infrastructure” he said, which Taylor Rose MW was able to provide.
The legal consultant business model offers lawyers a central service platform, brand and management infrastructure from which to operate, in return for a percentage of the lawyer’s revenue. The lawyers themselves are self-employed consultants, who retain an average of 70% of their earnings, with the remainder taken by the consultancy firm.
Taylor Rose MW says its consultants enjoy multiple benefits, including a referral network, marketing support, a recognised brand, sophisticated IT support and systems, professional indemnity insurance and SRA supervision, as well as the lower operating costs of home working.
For consultancy lawyers themselves, Jaggard draws comparisons between the partner model, citing consultancy as a “similar proposition”, except with consultancy, lawyers have the added benefits of “improved technology”, less in the way of politics that can occur in smaller firms, and is a “viable way of upping income”.
“Consultancy has become an attractive and viable alternative way of working for experienced lawyers that offers increased earnings and a better work/life balance. We’ve worked hard to develop a platform and processes that give our consultants the best possible experience and which is now really paying off”, said Jaggard.
Added to this, a rise in professional indemnity insurance (PII) premiums is thought to be driving independent legal practitioners to become consultants for larger firms in increasing numbers. PII has risen by an average of 30% amongst SME firms, with two-thirds of respondents to a recent Lexis-Nexis report saying the cost of PII was placing additional pressures on smaller firms and sole practitioners, and was one of the biggest threats to their firm. Further research from Mazars suggested that closures of law firms over failures to obtain insurance have increased sixfold in five years.
Insurers are becoming more risk-averse in areas such as conveyancing and have been pushing up premiums to cover potentially high payouts. The increased number of solicitors working from home since Covid has also increased risk for insurers, particularly for those working in smaller firms without well-established risk, compliance and quality control processes. So much so that the number of sole practitioners regulated by the SRA has dropped by 5% in the past 6 months alone.
“Increasing PII premiums have particularly impacted smaller firms and sole practitioners and it is having a marked impact on their appetite to keep operating independently. We are seeing a lot of experienced solicitors who no longer want the responsibilities of compliance and increasing operating costs, and instead are seeking the relative security and freedom of operating as consultants. This is certainly a contributing factor to the fast growth of our consultancy division.”
Reflecting on the future and what lies ahead for the consultancy model, Jaggard commented that he sees it as an industry very much at the beginning of its journey, and one that could provoke a “seismic shift” in the way lawyers work.