Mr Rubenstein, the Sydney managing partner for Arnold Bloch Leibler, explains that while lawyers were once their clients' 'go-to' advisers, firms have increasingly ceded ground to management consultants, accountants and other advisory experts.
In a competitive marketplace, he believes lawyers can add value by providing a more holistic view of a client's issue – but only if they can bring a touch of creativity to the table.
Our host and acting editor, Stefanie Garber, chats with Mr Rubenstein about the development of the lawyer/client relationship, finding a competitive edge and re-imagining the lawyer's role.
Intro : Welcome to the Lawyers Weekly Podcast. For an in-depth look at issues facing the legal profession. This is your host Stefanie Garber.
Stefanie Garber: Hello and welcome to the Lawyers weekly show. I'm your host Stefanie Garber and today we'll be looking at the evolution of lawyers, from technical experts to all around business advisors. I'm joined by Paul Rubenstein, the Sydney managing partner of Arnold Bloch Leibler. Welcome Paul.
Paul Rubenstein: Thanks very much.
Stefanie Garber: Paul, in the current environment there is a lot of competition for clients, and there is a lot of changes coming into the legal sector. Both in terms of the players and also in terms of legal practice. In that environment how do you see the role of the lawyer changing in terms of their clients?
Paul Rubenstein: It's an interesting question and in many ways I think you have to look back before you look forward. And if you do look back, probably a few decades ago, you'll see that lawyers often played the role of kind of trusted advisor. They were often the first point of call, and in other jurisdictions such as the United States I think that lawyers have managed to preserve that roll. And in Australia, in many ways, law firms ceded a bit of that role to accountants, to management consultants, to investment bankers, and so a lot of the big firms, as you say, they became premium execution firms. They become very good at that.
Our firm has always held onto a slice of that. So in many ways I don't see it as a huge change, but in terms of the overall profession I think it is a change because I think lawyers are seeing, and especially bigger firms, are seeing that they need to go where the value is and where the value is where the creativity is, and the creativity is around being more than just someone who can execute transactions or litigations, it's about providing creative solutions, about being a sounding board, about providing advice, generally understanding where a client is at, their strategic aims, goals, etc.
So, that's the sort of piece that is back on the agenda of law firms. It’s the creativity value piece, and that's what fits with this.
Stefanie Garber: I think the use of the word creativity is quite interesting. I think it's a stereotype that lawyers aren't particularly creative, that what they do is fairly dry. When you say creativity what do you mean by that? How do you see that playing out in practice?
Paul Rubenstein: Effectively it's about problem solving. So, it's about taking very difficult, complex, circumstances, whether that's in the context of a dispute or in the context of, in a non-contentious context, and it's helping a client through that problem. It could be a very, very broad problem, like how do I, if I'm a billionaire, head of a family, how do I cede my assets to the next generation, how the hell do I go about that? To, I've got this transaction that I need to execute and I could go one way or I could go the other way, to a piece of litigation that could be reasonably simple with a few choices to massively complicated. But, all of those contexts are where you need a lot of creativity. So, you need to be able to, in a human way, emphasizing kind of EQ skills as well as intellectual problem solving skills, help get to the right sort of answer. I think that, that's kind of what I mean by creativity.
Stefanie Garber: Sure, it adds that broader context and is looking beyond just the facts and figures in front of you with the problem. You mentioned before that you feel like Australian firms, in certain cases, have ceded ground in terms of advisory. Do you have any thoughts on why that might have happened, or alternatively why it's now swinging back?
Paul Rubenstein: I think that legal profession is inherently conservative. And I think, just from my own experiences, having spent time with US firms and some of the premium firms in New York, you have firms which take on the role of lawyer and advisor and they always have sort of done that. I think it's because they’re perhaps more adventurous with the clients and a lot more emphasis on the relationships with the clients rather than on the professional sort of skill side of it. I'm not exactly sure of the reason for that in Australia, I think it's probably got to do with conservationism, but also to do with the model of taking instructions rather than being actively involved in helping clients make decisions.
We don't take decisions for clients, but we like to get more involved in that process and we're often asked to do that as a result of previous experiences. Because you pick up a lot of commercial nous along the way. I suppose that I don't have a real explanation for it, but that is probably why and other intermediaries like bankers, like management consultants, the rise of those professions has seen people who I think otherwise in past days might have been lawyers go into those areas; that's probably resulted in a bit of a move away from the legal profession towards those areas.
Stefanie Garber: That's interesting. It almost seems to come down to who the client is compelled to call when a problem pops up. You know whose front of mind and who do they immediately turn to.
Paul Rubenstein: I think that's right.
Stefanie Garber: And maybe lawyers have lost that position in some cases. You mentioned that ABL has historically done things differently, and has always held onto that advisory piece. Can you talk me through what that looks like in practice? What does that mean in terms of the type of advice you give, or even an example of how you've gone beyond that scope.
Paul Rubenstein: So I think what that means at ABL is that we work very hard on the relationship, and so being the trusted advisor for us means that you're a person who inherently the client has a strong degree of trust, not only in a basic sense of can they trust you to do the right thing, but in the judgement and judgments that you offer, the experience that you bring. Examples of that, we act for a lot of high net worth individuals and their businesses and so over the past decade we've been involved very closely in advising families, inter vivos, so before somebody passes away on how to effectively divide up an empire. How to give one branch of the family a business, how to give others some cash, how to give others some property. To try and really help people through that process. It's holding their hands, making them understand how it is they could go about that process, the types of decisions that they need to make, the considerations that they need to weigh up. All those things are really not legal, that would be one really kind of classic thing that we do.
Another for example, we do a lot of structuring of transactions and we're often brought in very early in the process. So, for example, I'm involved in at the moment in advising a very long term client in a whole strategy around how they're going to raise capital. That's just not documenting a financing facility, that's who should they be speaking to, where in the market are they going to find that sort of capital, and tap into it, is it debt, is it equity, should they be selling assets, should they not be selling assets? Which advisor should we be engaging along with us? And you don't really find that many lawyers who would be so front-running that whole type of a process. There obviously are lawyers that people turn to, but I think that's the kind of signature thing about ABL. We're very often involved in that process and often times partners of the firm are on an advisory board for the family, whether that's formal, wether that’s informal, and so there's a very strong involvement in strategic questions, direction, that's I think our distinguishing feature.
Stefanie Garber: Sure, that's really interesting. So it goes far beyond, ‘this is your legal problem, here is your legal solution’.
Paul Rubenstein: Yeah.
Stefanie Garber: To take an alternative view, some people might argue that management consultants or bankers or people in those purely advisory rules have carved out a niche because they do have expertise that lawyers might not have. Why do you think lawyers are well placed to take more of an advisory view point or to go beyond into that strategic realm?
Paul Rubenstein: I suppose I should back up and say that not every lawyer is suited to doing this. I'm not suggesting that. I think that many lawyers are never really going to be of that mould. Many lawyers are black and white and their excellent at that. A lot of them are premium in transactional, they're very good at executing in litigation, they have very particular legal skills and they really shouldn't be involved in broader questions or strategy and they're not suited to it. But I think that the lawyers who do, do this effectively, they manage to combine the IQ skills with the EQ skills. So the IQ skills are very lawyerly skills, big picture, but coupled with very fine appreciation of detail, technical expertise in the particular area or areas of law they're involved in.
So they know how transactions get affected, so they have a very good view about how these things actually do play out, through many years of experience, whether it's in a transactional sense or a litigation context. So they bring that into the equation, but if they combine that with the EQ type of skills, by which I mean relationship skills, empathy skills, communication skills, when you bring that together you kind of have an unbeatable combination I think. And you find those types of people, and they're rare, but you do find lawyers like that. You obviously find investment bankers like that and you do find some consultants like that, but finding a good lawyer who can do that is a valuable commodity.
Stefanie Garber: And what is the value for clients? When you say it's a valuable commodity, what do clients get out of having a lawyer who brings of all of that to the table?
Paul Rubenstein: It's about creating possibilities and helping clients see what they can and can't do. As I said it's about technical expertise, it's about judgment, it's about relationships with other people, it's about understanding process. When you bring all of those things together they are things that clients value and I think the proof is in the pudding, which is they are the things in the current environment which clients are willing to pay for, and they're willing to pay premium value for that. That's where we see the high-end of the legal services profession heading. That's probably the best measure of all, is that people are willing to pay for that. People are increasingly less prepared to pay for something which, even if it's a premium type of execution work, can be done by a whole lot of people. That's becoming more and more commoditized. It's bringing all those things together as a unique kind of proposition. That's kind of what I mean by the value creation.
Stefanie Garber: Sure, so it gives the lawyer a competitive edge in a marketplace and possibly singles them out above those lawyers who, you identified, have those purely technical focus.
Paul Rubenstein: It's kind of like if you're in a bet the farm context where you just have to win this dispute, you have to sort out this issue with the tax office, you have to get this transaction settled, so you just have to get it done, and you turn to someone who is going to give you the best chance of that happening, who are you going to pick? You're going to pick the person you think is going to be able to bring all of that together. That gives you the edge. If you've got that reputation, if you've got that ability, if you can organize yourself around all of those things quickly as a person, as a lawyer, as a firm, then you're going to have a better chance at operating in the space.
Stefanie Garber: Yeah, sure that's quite a threat. You mentioned that you see the legal profession moving more in this direction, do you think that means that lawyers will increasingly be put in competition with those other professions that offer advisory services?
Paul Rubenstein: Yeah, and in that sense probably that's... I won't say it's unchanged, because you're right. I mean, I think that lawyers...I think there is a point of competition there. Don't get me wrong, there are things that those other professions do that we can't do and we never will really be able to do well, it may be that some firms try to combine them. So, for example, I mean if I was providing advice to a client on running a process to raise some capital, I'm not going to profess to being able to build a financial model for them. We could engage someone to do that, but we probably would always work with somebody who can do that. So there is room for multiple players in these equations and generally we do team-up with people.
I suppose the question is really, who is taking the lead in that equation. To an increasing degree we probably will start competing with each other a bit. Already the accounting firms are setting up law firms, so they're trying to compete with lawyers and investment banks, they have taken charge of a lot of the relationship bit around engaging with clients in matters. So, yes there is competition for the ear of the client I suppose, but that's probably not a big change because that's been that way for a while and I think, what I suppose is a change, is that lawyers are beginning to butt into that a bit more. Or at least the ones that want to preserve and create value for themselves in increasingly kind of changing environment.
It's being driven by this necessity rather than anything else, the legal profession. I mean we touched on that before, that the legal professional services environment is changing, so you have to make yourself relevant and do something worthwhile, move away from commoditized work, even if that's premium commoditized work. Increasingly firms are going to be changing their profile and moving away from those types of models and so the obvious thing is there is going to be some head butting with other professions. I think there is plenty of room for all of us, at least in the short to medium term. Let's see what happens in the long term.
Stefanie Garber: Yeah, I mean I don't think anyone can deny that it's a pretty exciting time for the legal sector with the number of challenges that we did touch on before. On a final note, what do you see as the future for a full-service legal firm? What does the model look like and what does the relationship with the client look like?
Paul Rubenstein: I suppose the answer to that is probably bringing together or summarizing some of these things that I've sort of said in the interview. I think the future for law firms is increasingly becoming oriented toward where the creativity and the value is. And the creativity and value is about being able to bring together strong relationships together with very strong relationship type skills and relationships with strong technical excellence.
And I think that, law firms are going to be, ultimately, smaller. I think more of the commodity type stuff is either going to be disrupted by advances in artificial intelligence, by in-house capacity, and there will be some firms who do it albeit at a reduced margin. They will be sort of high volume, low margin businesses, and there will be some law firms who succeed in doing that. So there will be a bit of a bifurcation I suppose between high volume, low margin law firms, high value, low leverage smaller type firms and ABL is sort of by accident, or good planning, hopefully the latter, we're sort of going that direction.
So, high value, low leverage, very strong partner involvement. The people with the experience are the ones that are really engaged in the matter. That's where I think it is and it will be an increasingly shrinking model. I think that it will still be around for a while, how long will really depend on advances in artificial intelligence, will probably dictate that. May take five or ten years it may take decades, but it will come.
Stefanie Garber: That's an interesting take Paul. Today we've been speaking to Paul Rubenstein from Arnold Bloch Leibler around the changing role of lawyer and how lawyers are increasingly moving into an advisory capacity. Thanks again for coming in Paul.
Paul Rubenstein: That's very much for having me.
Stefanie Garber: And thanks to our listeners.
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