5 minute read
Law firm leaders: what's on your agenda?
Law firm leaders: what's on your agenda?
The legal sector has undergone significant transformation since the first The Evelyn Partners’ Annual Law Firm Survey was launched in in 1994, influenced by economic shifts, regulatory changes, technological advancements and evolving client demands.
Although in its 30th year, our survey, in conjunction with The Lawyer, demonstrates that many of the key themes are as relevant today as they were then, including the recruitment and retention of talent and financial performance. Whereas implementing developing AI and the financial wellbeing of partners and staff reflect today’s modern law firms.
This year’s survey included a range of questions on technology, with law firms traditionally having been hesitant to adopt tech. Perhaps unsurprisingly 67% of respondents think the legal market has lagged behind other industries in technological advancement with several reasons given, including a reluctance to deviate from traditional, time-tested methods, resistance to change and lack of understanding or expertise in emerging technologies.
Despite that, the level of engagement from law firms over the past 18-24 months on leveraging AI has been consistently increasing. From an advisor’s perspective, we’ve seen firms move from having AI-curiosity to a realisation that there’s a huge need for investment – more than two-thirds of respondents believe that AI is the leading opportunity for growth. The question then becomes whether the UK LLP model remains the optimum vehicle or whether alternative structures may provide for more tax efficient investment.
It's clear that key strategies crucial for creating an environment that supports innovation and technology uptake include fostering a mindset of continuous learning and adaptation to tech advancements. Equally important is developing a clear roadmap for technology integration and digital transformation; and encouragingly we’re observing increased cross-functional collaboration between legal and tech teams.
With its people being a law firm’s greatest asset, financial wellbeing continues to be high on many leaders’ agendas with this now extending from traditional employee benefits across to their fellow partners. While 52% of respondents, most of whom were senior partners, reported positive income stability and lifestyle management, there are major concerns around savings and retirement planning. Over half of respondents say they use financial planners or wealth managers, but only 41% have actioned a financial plan for retirement. Only one-third of respondents rate their personal savings as either ‘excellent’ or ‘very good’. Somewhat alarmingly, 28% say they haven’t done anything on retirement
planning, have no planned steps or don’t feel prepared for retirement. With only approximately half of firms having a mandatory partner retirement age, where partners aren’t financially ready for retirement, succession challenges could occur.
Our survey also underscores the benefits of employee support programs. The data indicates that financial issues, extended work days, restricted choices for saving for retirement and stress from living expenses greatly affect a person's financial wellbeing. There is a strong need for full-range benefits packages, such as private health coverage, protection against loss of income and life insurance. Offering these benefits could greatly help lawyers’ financial stability, and result in firms maintaining and attracting the best people. Whilst many firms will offer much of these as standard, it remains important for benefits propositions to evolve in line with the workforces’ needs and requirements.
Looking to financial performance, lock-up remains a high-priority issue and lock-up targets improved across the board in 2024 with 46% of respondents saying their firm has a lock-up target of up to 75 days, compared to 31% in 2023. However, whilst targets are hugely important, the reality was more mixed. While 45% of firms say lock-up improved in the last 12 months, an almost equal amount of 43% say it deteriorated. Where there has been positive change, this has been largely driven by enhanced credit control functions, quicker billing, and training to educate partners and fee earners about the importance of sound lock-up management.
Despite mixed views to date, overall, there is a sense of optimism. Only 9% of respondents think lock-up will deteriorate over the next 12 months, compared to 43% who believe it will improve. A sentiment perhaps driven by HMRC’s basis period reform and an acceleration of tax for many firms without a 31 March year-end. With interest rates remaining high, it’s not a surprise that unlocking the firm’s own cash is considered a better option than obtaining external funding.
Whilst law firms in 2024 inevitably look different to those operating in 1994, many key agenda items remain the same and the question therefore becomes; what will the future hold? Tech has been referred to as the key disruptor for some time now, but should firms end up using similar technology to enhance and deliver services, the key differentiator could be the quality of the people they employ who will be responsible for delivering the enhanced service. So what was hugely important to firms 30 years ago, may be just as important in 30 years’ time. ■
Katie Illman
Tax Director, Evelyn Partners LLP
Whilst law firms in 2024 inevitably look different to those operating in 1994, many key agenda items remain the same and the question therefore becomes; what will the future hold?
