There has been much reported of late about a renewed assault which has seen accounting firms expanding rapidly into legal services, but as Australasian Lawyer reveals, two can play that game.
Peter Bobbin, the managing principal of Rockwell Olivier’s Sydney office, predicts that there will be a growing trend of law firms expanding into the accounting sector.
He spoke to Australasian Lawyer
and responded to comments
made by the Big Four accounting firms - KPMG, Deloitte, PricewaterhouseCoopers (PwC) and Ernst & Young – about their plan of attack on the legal arena.
Last week the heads of legal services at PwC and Ernst and Young told us that a ‘highly integrated offering’ is what will differentiate the legal services provided by accounting firms in an already crowded market.
But Bobbin says he can’t see the bid being successful unless the firms learn from their past mistakes, which include failed attempts to expand into full-service legal firms.
“They cannot create a full-service legal firm, not without making compromises in the way they run their audit, tax, corporate and business services accounting functions. If they accept that they can only offer a limited, sort of ‘standard servicing’, it can work,” he says. “In my view the current moves reflect the usual business cycle, it is a reflection of the new national managing partners looking to develop new business angles and believing that they will do it right this time.”
However, some the Big Four are already acknowledging this fact.
KPMG’s head of tax law, Jeremy Geale, told Australasian Lawyer
that KPMG’s growth forecast was now solely focussed on providing legal services on issues surrounding taxation.
“We are not a full service law firm and we don’t intend to become one,” Geale said.
If all of the Big Four take on this same attitude, legal firms may face a real and “permanent” threat, says Bobbin.
And this is not only a threat to market share, but more importantly a threat to the already limited talent pool, especially within the mid to larger-tier firms.
“I think their limited talent pool will be the first place the major accounting firms will hunt for talent. The larger law firms also rely on the large corporate dollar. It’s the large corporate dollar that the accountants are targeting,” he says. “Often the large corporate dollar will have a corporate accounting relationship, so consequently if your major accounting firm is referring the legal work back, you’ve got a problem.”
But never fear, all is not lost.
Bobbin says he’s fairly confident that other law firms, like the accounting firms, will be looking at new business opportunities and a chance to throw the ball back into the other court.
It’s seen his firm, Rockwell Olivier, reverse the assault and take a step into the accounting realm.
A couple of months ago the firm started a tax agent company, RO International Tax Services Pty Limited, that offers international commercial clients an independent tax agent service.
Bobbin says in some respects it’s a challenge to the accounting firms’ assault.
“We’re saying to our international network ‘you don’t need to go to one of these major accounting firms. We can do the legal work and we can actually do your tax compliance administration as well’. One of the reasons we can do it is that we have very strong tax knowledge.”
But he says it’s important not to lose sight of the fact that lawyers and accountants are each other’s yin and yang.
Because they speak differently languages and think differently, they can so often be complementary.
But the only way they will be able to work together side-by-side is by creating and environment of common language and common thinking.
“In my view generally speaking if a law firm is embedded in with the accountants, the accountants will seek to dominate the relationship both with the client and over the lawyer, and I think this is why it hasn’t succeeded in the past,” says Bobbin. “It’s not out of any intention to dominate; it’s just that they think differently. If you’re a law firm sitting inside an accounting firm the majority of them are accountants… It’s like me going and being a Nepalese Sherpa, I just think and approach things differently. I don’t speak Nepalese; I don’t have the same cultural background.”