One of the major threats to law firms in recent years has come from accounting firms, particularly the Big Four, encroaching into the legal services space. But what if law firms could take a page out of their book by offering multidisciplinary services themselves? The experiences of two Southeast Asian law firms might show the way.
In early January, global accountancy firm Deloitte announced that it was making further inroads into the UK legal market. Apart from expanding its “managed services” (primarily automated document review and document management) and “consulting services” (advising in-house legal teams on how to be more efficient, and use technology better), Deloitte said it would also apply for an Alternative Business Structure (ABS) licence, which would allow it to offer legal advice without operating as a law firm, or being owned or managed by lawyers.
If it receives this licence, Deloitte will be the last of the Big Four to do so in the UK, as PwC, KPMG and EY already possess ABS licences. And the UK is not alone among jurisdictions in the world in which accounting firms have begun to establish a presence in the legal sector. Big Four firms today have close to 9,000 lawyers in more than 70 countries; the largest, PwC, has 3,500 legal professionals, placing it in about the same league as, say, Clifford Chance. And they are continuing to grow; each month – and sometimes each week – appears to bring news of a law firm launch, a formal alliance with a legal practice or the addition of a law firm to a burgeoning network.
The allure for these firms is access to the legal industry, which was estimated at $600 billion in 2016, according to research by ALM Intelligence; this dwarfed both accounting ($450 billion) and consulting ($271 billion). But accounting firms aren’t really chasing the big-ticket legal work yet – you won’t find them much in banking and finance or corporate litigation. Instead, their legal offering complements the work they already do for corporations, which could range from corporate advisory and tax to projects, regulatory, employment and immigration. So while the likes of Clifford Chance might not be nervously looking back over their shoulders at the rise of the Big Four, you can’t blame the small- to medium-sized outfits for being more than a little bit worried as their bread-and-butter work comes under threat.
But if accounting firms can encroach into the legal space, can’t law firms repay the favour by providing their own version of multidisciplinary services? The answer is “yes” for two firms in Southeast Asia that began as providers of legal services. One of them, Malaysia’s Zaid Ibrahim & Co., started out life “above a bicycle shop in Kuala Lumpur,” according to the firm’s own biography, in 1987. Three decades later, it has spawned ZICO Law, a network of law firms in all 10 countries in the Association of Southeast Asian Nations (ASEAN), and ZICO Holdings, an “integrated provider of multidisciplinary professional services” that is listed on the Catalist board of the Singapore Stock Exchange.
Among the services that ZICO Holdings offers today are asset management, corporate advisory and online legal documentation for small and medium-sized enterprises (SMEs); the germ of the idea came about more than two decades ago. “In the mid-1990s, many of our clients asked whether we could provide additional services beyond legal, assuming more of a role of their trusted business advisor,” says Chew Seng Kok, who serves as both chairman of ZICO Law and managing director of ZICO Holdings.
“At the same time, they also asked whether we could assist them as they expanded regionally. In short, they were looking for us to provide an integrated range of services under a multidisciplinary platform, similar to the Big Four accounting firms. This valuable feedback and the developments in the services sector towards a more integrated offering led us to expand beyond legal and kick-started our regional expansion into ASEAN,” adds Chew. He says that the experience of joining the Andersen Legal network in 1998 also provided vital experience when it came to multidisciplinary service offerings.
The other firm, Singapore’s RHTLaw Taylor Wessing (RHT TW), was established in 2011. Shortly after, RHT Corporate Advisory and RHT Capital were established, while RHT Holdings was set up in 2014 as the holding company to bring together nonlegal professional service offerings. Today, companies under RHT Holdings provide services ranging from capital market advisory and compliance solutions to communications and investor relations.
“The founders of the law firm decided from the very start that there are other non-law services our clients require to supplement and/or complement the legal solutions provided,” say Tan Chong Huat, managing partner of RHTLaw Taylor Wessing and Jayaprakash Jagateesan, CEO of RHT Holdings. “This was the genesis of providing a ‘one-stop’ solution to our clients. More importantly, we wanted to provide value-added quality advice to our clients by providing services beyond law.”
So has this approach worked? “This business model has been a successful one for RHT,” say Tan and Jagateesan. Chew says that since ZICO Holdings listed in November 2014, corporate services, share registry and advisory services have expanded rapidly to overtake the contribution from the ZICO Law Network. “When compared to the challenging environment of law firm business models, nonlegal services operate by using a far more ‘predictable’ business model that in turn contributes toward their more robust growth,” he notes. Additionally, from a financial perspective, client convergence programmes and cross-selling opportunities are able to generate additional streams of revenue with enhanced profitability.
The clients are also benefiting. “From our clients’ perspective, we provide tremendous opportunities for combining and customizing services to meet their requirements and address their complex business issues,” says Chew. “Our clients benefit from having all of these services streamlined into one comprehensive service provider. We have deepened and broadened our relationship with clients by offering them new points of entry to provide services to them through the entire business life cycle.”
As an example, he cites AirAsia, one of the region’s foremost low-cost airlines, and client of ZICO. “In light of AirAsia’s recent diverse strategic needs and notably its need to distinguish aircraft leasing from AirAsia’s other businesses, the client engaged ZICO Corporate to provide incorporation and other secretarial services for establishment of a new company,” says Chew. “ZICO Trust provided trustee services for these transactions. We also acted as the trust company for the AirAsia Foundation, the airline’s philanthropic arm.”
Tan and Jagateesan agree. “Clients benefit as they do not have to brief different advisors. This results in a more hassle-free and effective arrangement that saves the clients precious time and resources, especially in the midst of an M&A transaction or a crisis situation,” they say. “For example, a client in the oil and gas sector has been working with our law firm over the years but needed a full suite of corporate services such as corporate advisory and communications and investor relations. The client found the one-stop service model to be highly efficient and saved them a lot of time.”
Finally, the multidisciplinary offerings are also attractive when it comes to luring potential hires. “This ecosystem has also created a world of opportunities for our teams – geographical relocations, change of career path, regional business skills, to name a few – enhancing our employability potential and talent-retaining power,” says Chew. “Our regional footprint and hybrid ecosystem also allow us to address the needs of today’s millennial workforce, which values geographical diversity and challenges. By maintaining a dynamic secondment policy across our offices and business, we are able to provide a platform for our workforce to develop further.”