As we approach the end of another year, we examine what key industry trends shaped the legal sector in 2015 and what we can expect in the year to come.
The year 2015 has seen the pace of the legal industry continue to accelerate, with increased use of technology and alternative business models in response to client demand for more value for money. In turn, competition has been stirred up and firms have clambered to differentiate themselves in the market.
Both the forces that drove change and the products of those changes have become dominant forces in our industry in 2015, and they suggest an interesting road map for the next year.
Trends of 2015
1. Practising rules head toward national uniform framework
Legislative change brought us one step closer to achieving a national uniform regulatory scheme for Australian lawyers, with New South Wales and Victoria unified under a homogeneous framework of practising rules. The new rules saw prohibitions on legal advertising abolished, client disclosure requirements reduced, better protections instituted for firms against consumer claims and consumer dispute resolution procedures enhanced.
2. Price certainty is on the up
The State of the Legal Market whitepaper shows that firms responded to the demand for price certainty by offering a variety of alternative fee arrangements (AFAs) in 2015 in addition to hourly billing. Also, there appears to be commitment to broadened AFA offerings, as we saw firms invest in legal project management and pricing education to enable their senior practitioners to more accurately estimate project costs.
3. Clients are making deals not war
The anticipated increase in front-end property work, including leasing, commercial transactions, finance structuring and property development projects was realised this year. As the whitepaper shows, the demand for merger and acquisition work went up 2.1 per cent while litigation work slowed by 5.8 per cent. Low interest rates, increased market certainty and the fall of the Australian dollar all made Australia an attractive place to invest, enabling front-end to make a comeback in 2015.
4. Firm productivity is improving
Two major movements converged to boost the productivity of lawyers this year. Firms responded to the need to reduce costs and increase profitability by reducing numbers of professional staff. Secondly, the use of time-saving technology in firms increased. Therefore, despite workflow facing a slight downturn, lawyers (particularly those from larger firms) ended up working longer hours.
5. Non-conformers are holding ground
Unconventional law firms made serious inroads into the market this year. In fact, they are now perceived as a legitimate threat by their traditional counterparts as they start to pilfer a healthy share of legal work. This reflects the changing mindsets of both practitioners and consumers toward novel business models in the legal sector.
6. Lawyers are loving social media
Australian lawyers increased their use of social networking sites, such as LinkedIn and Twitter, as a medium to promote their brand, disseminate information and network with clients and colleagues. This reflects the extent to which technology is permeating the industry as a whole, and shows practitioners are adapting to the use of online mediums for professional networking and marketing.
7. The rise of corporate counsel
An emphasis on risk and liability management and a push to tighten their legal spend has seen a shift in the way in-house legal teams are utilised. Companies are performing increasing amounts of commercial work internally and corporate counsel have become key consultants within companies, not just on legal issues but also major business decisions. As a result, the type of work farmed out to private firms has changed and budgets have tightened.
So what can we expect in 2016?
Industry experts predict that the general steady decline in demand for legal work we saw in 2015 will continue into the new year, further intensifying the already competitive climate. Firms will need to continue to stand out, and there will be no room for below-standard legal services. They will also face increased pressure from clients to contain pricing and provide more for less, requiring practices to maintain a tight rein on their operating budget in order to remain profitable.
What we’ve seen in 2015 demonstrates that the majority of firm principals recognise that the legal profession is moving on from the days of antiquated systems, traditions and boys’ clubs into an exciting era of new technologies, business models and delivery methods.
As we move into 2016, firms wanting to stand out must stay on top of developing trends and ensure they remain at the forefront of market changes.