Advocatie column - the future of the legal profession
LawyerlinQ founder, Marijn Rooijmans, writes in his Advocatie column this month about external investors as shareholders in the legal profession and why this might be the solution to the challenges many law firms are facing.
It’s a recurring discussion: shouldn’t we, in the Netherlands, allow external investors to participate in law firms, just like in the UK?
This question is not only being debated here but also in Germany. Over there, a law firm has come into conflict with the local bar association over precisely this issue. The dispute has escalated to the point where preliminary questions have been submitted to the European Court of Justice. Just before the summer, the AG issued his opinion. For Mr. Magazine, this was reason enough to survey the market to see what people in the Dutch legal profession think about this issue.
The takeaway: the Dutch legal profession is not keen on external shareholders. In short, they believe it threatens the core values of the profession, and having external shareholders could harm the firm’s reputation.
But is that really true?
Of course, the core values of the legal profession must be safeguarded, but can’t this also be done with an external shareholder? In 2023, the WODC commissioned Erasmus University to conduct research on ‘alternative business structures’ for lawyers, such as allowing non-lawyers to invest in law firms. The findings suggest that the concern that this would threaten core values doesn’t hold water. It may be tempting to think that non-lawyers are such money-hungry wolves that they would sacrifice clients to make more profit, but there is no evidence to support this.
reputation
So, the ‘core values argument’ doesn’t stand. What about the other objection? That a law firm would be foolish to engage with external shareholders because it would ruin its reputation and become middle of the road?
Do you believe that? I do, honestly. The only question is, how relevant is that? Because, to stay in English for a moment, who are we kidding? How many truly top-tier law firms are there in the Netherlands? Isn’t the rest, outside the real top, by definition middle of the road? And by the way, how bad is it really not to be playing in the Champions League? If you’re delivering good work and your clients are happy with it, does it really matter who your shareholders are?
As you can tell, I’m optimistic. I actually think that a large part of the Dutch legal profession and its clients could benefit from external shareholders. Partly because of the professionalization that external capital brings, but mostly because it’s time for a wave of consolidation. The partnership model is under pressure, the sector is working hopelessly inefficiently, and we’re facing significant technological challenges and investments. Scaling up is the logical answer. It goes faster when professional external shareholders make the decisions than when you have to get a large group of partners (and their wallets) on the same page.
future sustainability
The profitability and future sustainability of many firms could be significantly improved by managing them more professionally, by bundling operational processes on the back end, and by combining workforces. By creating centers of expertise and making better use of available data and internal know-how, the quality of services becomes less dependent on individual employees. This gives employees the space to focus on the work that truly suits them. The logical result is that you can offer your clients the same or even better quality at the same or lower cost. So, both the client and the firm benefit.
When you look at it this way, allowing external shareholders in the legal profession is good news, not only for clients but also for lawyers who don’t necessarily need to see their name on the office door.
Yes, yes, I hear you thinking. It’s not that simple. And you’re right, of course. There’s much to learn from what’s happening in accountancy. The same goes for developments in general medical practices.
Caution is therefore necessary, but the legal market is ripe for new ideas and models. The entry of external shareholders is so logical that the last word on this has certainly not been spoken.
What do you think?
