In 2017, data from The Lawyer’s Workspace Trends report revealed the most expensive areas within the City of London for law firms to operate from. According to the report, firms with an EC3 postcode paid an average of £113.26 per sq ft for their property – the highest cost in the City last year. At the opposite end of the City, law firms in the WC2 district paid a whopping £90.57 per sq ft.
Now, you might be wondering what the cost of law firm office space has to do with you.
I’m glad you asked.
In 2016, partners at top City law firms were found to be charging clients more than £1,000 an hour.
The revealing report, published by the Centre for Policy Studies, highlighted the steep rates charged by firms like these and condemned them for restricting access to justice. Further to this, the report served to underline the lack of transparency on legal costs, stating that these firms effectively had the power to up their prices while staying under the radar since they didn’t publish their hourly rates online. While this failure has since been recognised by the Legal Services Board and steps have been taken to increase transparency across the industry, there’s one thing that still hasn’t changed:
The costs of running a traditional law firm
According to CBRE, the average rent per fee earner in London is £21,600. Of course, this is purely just the rental cost and does not factor in other office overheads such as service charges of which tend to add an extra 30% to the basic rental cost. By this measure, a London firm with 20 lawyers could have a rental cost of around £400,000 and a total property overhead of roughly £550,000 each year.
That’s a cost which the firm will have to recover through fee income charged to the firm’s clients. Now consider a firm with triple the lawyers and a pool of paralegal and junior staff to take care of admin duties. That’s a huge price to pay.
For the most part, firms see their overheads as non-negotiable; a fixed price that comes with running a law firm that can’t be changed – and there is some truth in this. On the one hand, a City firms ability to reduce their costs is limited due to Partners claiming a ‘lions’ share of profit from each year. In the UK, the take home pay for equity Partners before tax can range from £300,000 to over £3,000,000 for those in top law firms.
Regardless of whether these “rain-makers” deserve these rates, much of the profit will be claimed by the Tax Man: precisely £1,000,000 every year for a single top lawyer.
However, if business structures are the main issue holding firms back from offering competitive rates, there now exist various alternatives to the traditional law firm model. Today, hundreds of legal practices operate as ABS’ and Limited Companies, benefiting from a reduced tax burden and in turn, a more attractive (and realistic) cost for their clients.
Unfortunately, this isn’t the sole challenge for the traditional law firm.
Once fee income has covered the costs of tax, property and partner salaries, another fraction must go towards the cost of support staff. Factor in these overheads and it’s not difficult to understand why City law firms charge the high prices they do – there’s just one issue though – rather than being upfront in regards to their costly commitments, there is a tendency amongst traditional law firms to mystify their service areas, leaving clients to assume the price tag reflects the complexity of the task at hand and the quality of the lawyer who is looking after their case. Stumped by lines of legalese and wowed by prestigious firms with plush offices, consumers are paying a high price without really knowing what for. Understandably, the risk-adverse nature of employing law services creates a sense of security in this ‘traditional’ environment. Looking to alternatives is perceived as too precarious.
However, in the face of continued economic downturn, mysteriously steep legal costs have become increasingly harder to justify.
Low-cost, high-quality: a new dawn in the legal industry
Today, businesses are now demanding transparency for the price they’re paying – a normal expectation of a commercial entity. This was illustrated by a survey from the SRA in which participants were asked to pick between different legal providers. According to their findings, 62% selected the best option when prices were readily available on a website homepage. This reaffirms the importance of transparency regarding costs.
However, we know that cost isn’t the only influential factor in a purchasing decision of a business leader. Respondents to the survey also made it clear that quality and consumer protection are two of the key issues that plague the mind of the modern legal consumer when shopping around.
Today, many alternative legal service providers offer advice, assistance and support at a fraction of the price of traditional law firms, but this is often a cause for concern: after all, low cost generally means low quality, right?
For many, the path of least resistance will be to pay the premium for the service they’ve always received. Rather than risking the fear of inferior quality legal support, they’ll let the prestigious law firm deploy as many expensive bodies as they deem necessary. Before long, the fiscal reality of such an approach starts to bed in.
But it doesn’t have to be this way….
If they are to reduce the costs of legal support, businesses seeking high quality advice must be open to exploring new routes to the law.
Take the example of virtual law firms: without the financial burden of office space tying them down, the budget of these practitioners is drastically increased. As a result, the calibre of lawyers they can afford is raised significantly.
These cutting-edge firms tend to adopt innovative technologies such as those which rely on A.I. and machine learning to handle the mundane, admin-based tasks. In turn, they do away with the need for unnecessary support staff. Already, the client’s legal bill is brought down dramatically, though the quality of service has not been sacrificed.
An alternative route to the law
In the last few years, these technology-led practices have been making waves in the industry; rewriting the rules for what makes a law firm superior to its competitors.
While the calibre of lawyers in traditional high-street firms was never up for debate, the sky-high rates associated with them most certainly are. Thankfully, the legal technology revolution has paved the way for a new era in the profession: no longer are clients forced to pay twice the price to gain quality assurance.
Today, firms like ours are leading the charge in the fight for fair prices, disrupting the status quo by looking outside the box for solutions to historic problems that have prevented the profession from progressing.
By taking full advantage of new tools, systems and processes, we provide our clients with a first-class service for a reasonable cost: instead of hiring legions of support staff, we harness smart technology to take care of the grunt work. As a result, we’re able to focus our finances on sourcing and selecting the cream of the crop of specialist lawyers around the globe.
Truth be told, we’ve been changing the game since we entered the scene. As well as slashing the costs of overheads through operating as a virtual firm.
Our pricing models provide complete transparency regarding costs, allowing business leaders to plan without worrying about rising fees. For the risk-adverse, all our work is covered by a guaranteed SLA. While cost-savings certainly benefit the businesses who work with us, it’s the level of expertise, dedication and flexibility that really shines through. We recognise the importance of quality assurance when choosing a legal services provider, which is why our firm only comprises of well-renowned lawyers with at least five years’ experience in their chosen field.
“Client demands are shifting. Now, the extortionate fees charged by traditional firms are being called into question, as is the level of service received. In the next few years, we can expect to see the collapse of many mid-range city law firms who are still operating on the traditional model. The legal industry is ripe for change, and firms like ours encourage a fresh alternative in the procurement of legal services. I’m proud to be a part of this positive change.” Duncan Gillespie, Legal Counsel for Commercial Matters at 360 Law Group.
The technology revolution of today is welcoming in a new era of change to the Law Sector. Alternative law firms are taking full advantage of hi-tech innovation to ensure clients receive the best service and the best lawyers – for a realistic cost. These firms are disruptive, challenging excessive costs and putting the client at the forefront of their thoughts. They have integrity, passion and a belief in utilising technological innovation to create more fairness for all.