Law Firms' Big Financial Gains Can't Mask Other Challenges: The Morning Minute

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WHAT WE'RE WATCHING

CATCHING UP - As we wrote in our most recent Law.com Trendspotter column, law firms are still riding the wave of unprecedented legal demand, but a wipeout could be imminent. To their credit, however, some firm leaders seem to be cognizant of this and, as Law.com's Andrew Maloney reports, are trying to avoid becoming victims of their own success. "[Success] could easily mask underlying challenges and weaknesses, and I think an honest study of the profession continues to reveal there are those challenges," said Pat Whalen, chair of Spencer Fane. "My concern about bottom-line growth is it can mask those challenges, so we want to be super vigilant about those challenges only continuing to escalate, to make sure our strategy not only takes that into account but actually benefits from that disruption." Similarly, Chase Simmons, chair of Polsinelli, said the start of the pandemic is still fresh in leaders' minds and remains a clear example of how tenuous things can become overnight, even as revenue and profits are soaring. "Because we know ultimately there will be a slowdown or some kind of a change in the market," Simmons said. "We've been growing quickly. But we want to be cognizant that it won't be like this forever. That's for sure."

AUDITORY HALLUCINATIONS - The Big Four accounting firms seem perpetually mired in allegations of botched, biased or influenced audits. But if you think that's somehow going to lessen the threat they pose to law firms, you're dreaming. "Even though they're still nominally called audit firms, the audit divisions long ago became peripheral to what the Big Four offer," Tomek Jankowski, director of the Pacesetter Research team at ALM Intelligence, told Law.com's Bruce Love. Providing legal services, while not central to any of the Big Four's offerings, is nonetheless seen as an important value add to their businesses, said Jankowski. "Law firm managing partners are probably correct that the Big Four will never go head-to-head with them on litigation or legal advice," said Jankowski. "But they are still an existential threat to law firms." He explained that the Big Four use their legal service offerings as a way to become stickier with their clients. "They approach clients when the client has a key event, such as M&A restructuring, an IPO, change management, or digital transformation projects," said Jankowski. "Being able to provide the legal services for these events is central to a law firm, but it's a value add to an accounting or consulting firm."