Dispersed firm model puts the heat on in-house counsel

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The founder and principal of Australia’s “first full service dispersed law firm” believes innovation should be a greater priority for Australian lawyers.

Marcus McCarthy founded Nexus Law Group in 2011, and says the flexibility and innovation of his firm’s model allows senior lawyers to provide advice at a lower cost and get paid 70% of the fees they generate.

He believes this provides direct competition to in-house counsel, an area which is growing rapidly and consolidating.

A “dispersed” firm model is relatively unique in the Australian market and sees its lawyers work under a hybrid structure that allows for the flexibility of sole practice, while giving the benefits of traditional firms.

Although lawyers work from their own offices for day-to-day work, they are supported by a central hub that meets back office demands like PI insurance and invoicing.

They are able to choose how much or how little they want to work and what they’d like to charge for their services.

McCarthy believes Nexus Law Group was the first of its kind in Australia, and is one of only two genuine dispersed firms currently in the Australian market – the other being Keypoint Law, a branch of successful UK dispersed firm Keystone Law.

“To me in order to call it a dispersed firm it has to have proper firm-like structure behind it – it’s a remote chamber practice,” he told Australasian Lawyer.

Opening such a firm has been a dream of McCarthy’s for a long time.

He has more than 18 years’ experience in advising clients across all facets of business and commercial law and litigation, with a particular focus on the construction/infrastructure, mining and transport sectors both in private practice and in and in-house capacity.

But throughout it all he had an idea that he’d like to launch his own firm that would be run under a more efficient and flexible structure.

“I came to the point in my career where I was offered equity and I thought, ‘well I had this other plan because it was interesting and my passion’. The question was do I go into a big firm and do what I really don’t want to do – so I decided no, I’m just going to set this up myself,” McCarthy says.

So far so good, and slowly but surely he’s built up a strong business up to the point that now has 17 members throughout the country.

Looking forward, he says it will be innovation that drives greater efficiency and cost-effectiveness in legal service delivery and new practice models are at the forefront of that race.

The recent growth of in-house counsel is an example of corporations looking to maximise the value of their legal costs.

But McCarthy says firms like his can provide a good alternative or even a supplement to such counsel.

“The trend of corporates to get lawyers out of firms and put them in-house is to save money, but they’re often more junior and have a very narrow focus and training background,” he says. “We can either support them, or place someone more senior in at the same cost on a contract basis – there are massive advantages.”

To explain how this works out financially for both senior lawyers and corporations, McCarthy uses the example of a lawyer who joined Nexus Law Group from an Australian top tier.

This lawyer contracts in-house and charges less than half hourly rate they did at their previous firm, yet now ends up with more in their pocket than before.

This is thanks to the significant cut they receive from the fees, which is possible because Nexus Law Group has low overheads.

“You wash out about one third of the overheads of a traditional firm, and you take 70% [of the fees]. That ratio just can’t be matched by a traditional firm,” he says. “[This model] has proven its success internationally, but I think Australia is far more conservative than other jurisdictions. We’ve been here three years and it’s taken a while because there is a lack of understanding in the market.”

McCarthy forsees a growing trend towards international dispersed firms starting to make moves into the Australian market. Now that Keystone Law has opened here, he predicts US firm Axiom could be the next.
“It’s a really good thing because the Australian market needs to get educated about this,” he says. “It will be an expanding trend.”