Law firms push into professional services

More Australian law firms are marching into the realm of professional services amid rapidly growing competition between the two sectors for clients and market share.

While many multi-disciplinary professional services outfits, like large accounting firms, offer legal services, law firms are hitting back by expanding offerings to areas such as risk and compliance, environmental, social and governance strategy, and business advisory.

The focus is usually on the big end of town, which has recently seen major law firms make most of an easing professional services market by headhunting senior staff. But smaller firms are also making inroads into fields spanning strategy, technology, financial and risk.

Nich Burch, founder of Burch&Co, a law firm that works with ASX-listed companies and startups, says more firms offering non-legal services is an “exciting shift” in the market.

Burch says his firm, which has pushed into areas like risk and compliance advisory using specialists in cybersecurity and sustainability, as well as helping clients with internal change projects, branched out in response to market demands.

“We’ve seen a big shift in how clients view what is reasonable to accept from law firms,” he says. “These days, it’s not just about legal advice. Clients are coming to us for help with broader business challenges.”

“It’s a response to what clients are asking for: more holistic, integrated support that goes beyond the courtroom or contract,” the founder explains.

“It’s not just about law anymore, it’s about being a true partner. It also provides a far more meaningful existence for our team.”

In Burch’s view, law firms, irrespective of size, are well placed to step into professional services given the close relationships lawyers forge with legal clients.

When clients need advice on things like risk, strategy, or compliance, he says it feels natural to ask their retained law firm for help. A key factor is that firms already have deep knowledge of how client businesses operate, leading to savings on time and costs.

Even so, Burch cautions that moving into professional services comes with risks.

“One of the biggest hurdles is making sure we stay on the right side of the rules,” he says.

“When we start offering non-legal services like consulting or advisory work, we need to be crystal clear about what counts as legal advice and what doesn’t. It’s easy for those lines to blur, and that can get complicated.”

Other challenges are to keep brand identity and culture intact, he says. Clients understand what a law firm does which can makes offering a whole range of new services confusing or “diluting” for a firm when it comes to its positioning in the market.

On potential issues with culture, he says rolling out new services means bringing in people with different backgrounds, like finance, tech, or HR. “That can be a bit of a cultural shift, but when done well, it’s incredibly rewarding and adds real depth to the team.”

Lawnch, a fast-growing Queensland-based legal advisory firm, is another upstart offering more than just traditional legal services.

The firm, launched in 2023, pitches itself as an alternative to a typical professional services firm that it characterises as slow to respond to clients, poor on service and communication and provides documents “you don’t understand and hence can’t implement”.

One of Lawnch’s founders, Tammi McDermott, says clients have always wanted a wider range of services from smaller law firms “but haven’t known where to turn to receive it”. Accounting firms of all sizes have moved into advisory, but small to mid-sized law firms haven’t, this space has typically been reserved for top tier firms that have dedicated advisory teams,” she says. “Unless a business is turning over $15 million or more, they typically don’t have access to the top tiers.”

In Australia, MinterEllison are said to have the largest consulting offering, followed by Ashurst, while fellow top-tier law firms Clayton Utz and King & Wood Mallesons also operate consultancies.

The slow creep by legal firms into consulting has taken place over many years, while at the same time several large consultants have retreated from offering their own full-service law arms – a backdown blamed on an underestimation of Australia’s complex legal market.

The market moves echo shifts in the United States. There, Harvard Law School’s Center on the Legal Profession also points to large firms expanding into the consulting services spaces.

It notes that such pioneering firms, like their counterparts in Australia, “are at different phases of progress in answering myriad questions” on how to work in the space.

These include figuring what types of consulting services to offer, who the right professionals are to hire, and how new consulting practices will interact with existing legal practices.

In Lawnch’s case, legal work sits side by side with financial services, McDermott says.

The firm often work alongside brokers who put together deals and hold financial services licenses given “a natural synergy between corporate legal advice and financial services”.

“A great example that comes to mind is when a client asks for help issuing shares to a new investor, a typical firm might just provide the agreement,” McDermott explains.

“ We go further and think broader. We ask strategic questions to understand the bigger picture and broader commercial intent behind the request rather than just responding to the immediate legal need. This ensures that value is maximised for the client outcome. “

McDermott points to “stickier” clients as an upside of Lawnch’s multiple services.

That’s because, she says, clients see the firm as proactive and strategic due to the nature of much advisory work, which involves sitting down with clients, understanding their needs in depth, then identifying opportunities or alternative approaches.

“It’s about commercial problem-solving, not just legal documentation,” she says.

An expanded offering is even more important in the context of fast-emerging artificial intelligence technology sweeping the legal sector, according to the founder.

In this context, she says  law firms just “regurgitating” template contracts are not giving clients value and so will fast become redundant.

“Value comes from lawyers who understand the law in detail, but also know how to think commercially, strategically, and practically – and knowing how to guide clients as to what a win might look like in their situation. That’s value. And that’s non-legal services advice.”

Belinda Coniglio,  founder of boutique consulting agency Ideas and Impact, says lawyers may historically have been used for their technical ability, but possess broader skills.

According to Perth-based Coniglio, it’s these softer skills – such as being good at identifying risk –  that can be harnessed in roles that go beyond legal.

“Commercial practitioners also have strong legal acumen – particularly if they have operated a business – whether it is legal or other. This makes us highly skilled and regarded consultants,” says Coniglio, a lawyer whose business fuses expertise in law, politics, marketing and international relations.

Lawyers also have a very keen eye for identifying risk, she says. “Although I would say that as a consultant this needs to be weighed with the opportunities such as not too much risk adversity as otherwise there will be no cut through to actually drive change.”

The consultant traces the trend of law firms pushing into professional services back around a decade ago at the same time as several top tier law firms started using pools of freelance legal consultants to work on project-by-project engagements.

“Then they started adding consulting as a professional service,” she says.

In Coniglio’s opinion, smaller law firms wanting to expand their services into non-legal areas may be in a good position to carve out a niche at a lower price point than top-tier firms.

However, she warns that competition remains fierce for a slice of the action.

“I think the main challenge is competition at the top end of town with the top tier consulting firms and also accounting firms like EY that also started to play in this space almost 10 years ago,” she says.

Competition from big players is something Coniglio’s consultancy has come up against in what she describes as “a tight market particularly where the federal government has cut back significantly on engaging consultants in recent years.”

“You find yourself competing against very senior practitioners with big firm experience. The market risks being flooded unless there is some level of specialisation by the firm.”

When it comes to getting the service-mix right, Burch&Co says some service areas are a natural fit for law firms. A big one, according to founder Burch, is risk and compliance.

As he explains: “clients already rely on us for legal risk, so it makes sense to help with broader compliance issues too.”

“Governance and EST is another growing area where we can support boards and leadership teams with sustainability goals and reporting,” he says.

“Workplace and HR advisory is also a smooth extension, especially when we’re already involved in employment law matters.”

Another growth area is privacy and cybersecurity given the increasing need for clients to manage data risks and respond to cyber incidents. Combining legal advice with technical expertise “is a powerful offering”, he says.

Legal operations, technology consulting, government relations, regulatory strategy, dispute advisory and investigations are other services law firms can look to bolt on, he says.

Caroline Voaden, of Queensland-based public relations and communications consultancy Story Copywriting, adds communication services to the list.

She says more Australian firms are developing an in-house communications speciality in order to offer clients a “one-two punch” of legal and issues management advice.

It is a solution becoming especially popular in firms with larger litigation, employment, education and cybersecurity practices, she says.

“When instructed on a client issue or crisis, having a team member that can guide the strategic communications approach quickly and under privilege is a bonus for the firm,” Voaden says.

“With billable rates facing scrutiny and clients demanding more value, firms see communications as additional revenue they’d otherwise lose to external consultants. Plus it strengthens client relationships by being a one-stop shop.”

The main risk in going down this route is that a law firm without an external PR representative can ends up missing a valuable outside view on sensitive PR matters.

“The danger lies in losing an external voice who is willing to challenge senior lawyers if required, Voaden says. “If your in-house expertise is a trained lawyer, or is used to taking instruction from the partner, you risk constructive dissent being stifled by internal politics, billing pressures or deference to seniority.”

“The value of someone who can push back on legal thinking when it conflicts with reputation management or public perception shouldn’t be underestimated,” she adds.

Irrespective of exactly which additional services are offered, law firms are coming under pressure to assume a “more holistic view” of what they can offer clients, according to Oliver Morrisey, owner of Sydney-based Empower Wills & Estate Lawyers.

Morrisey says delivering clients with things like end-to-end compliance models and risk management plans enables law firms to diversify their revenue streams.

“Clients are no longer simply looking to receive traditional legal services, but they are looking to receive integrated solutions that would allow them to treat their estate and compliance issues under one umbrella,” he says.

“Those companies that will be successful in this area will be those who can show that they are capable of integrating a legal intellectual ability with a wider knowledge of the operational requirements of a business.”