Big Four - Big Changes
There is an inevitable overlap between accounting and law, an overlap that is increasing over time. Although the fields have their own separate areas of practice, certain services fall under the purview of both which forms the foundations of the connection between law and accounting firms.
Beginning in the mid-20th century, competition existed regarding tax advisory services. Accounting firms won this battle for the most part, with some small boutique law firms specializing in the area as well.
By the 1980s, more and more accounting firms started to offer non-auditing consulting services leading to more intersection with law firms.
During the late 90s, five accounting firms, known as the "Big Five", captured the global market both for accounting and other services. It was during this time that accounting firms began to get more involved with legal services.
In many countries, the legal profession was quite fragmented. Lawyers focused almost completely on litigation and/or corporate, thus there was space, and little regulation, for accounting firms to come in with counseling services for business transaction.
This success spread across Continental Europe making the Big Five extremely well known and established a strong reputation for the companies. They slowly attempted to move more into the UK and US.
This initial movement was not necessarily as successful. After trying to infiltrate the US market, one of the Big Five, Arthur Andersen, got involved with a scandal that ended in bankruptcy and they were forced to close down. This led to the United States' implementation of SOX.
SOX created a Public Company Accounting Oversight Board in order to regulate companies offering auditing services, such as accounting firms. It also made certain types of non-auditing services, including legal services, off limits to accounting firms. Similar legislation was implemented worldwide.
It was assumed that this would be the downfall of alternative legal service providers, while in reality, it was just the beginning. The now "Big Four," continued to grow their services and scope. They offered a wider range of services in many countries, expanding into Asia-Pacific, Central and South America, and Africa.
In addition, a new tactic of integrating legal and accountancy practices grew the influence of these firms. Decades earlier, they had focused on keeping their law firms completely separate from the accounting services, but now chose to keep everything together in one bundle, creating a large network of services rather than very separate entities. This allowed the opportunity to enter markets that they were once more restricted from getting involved with.
There is an increasing focus on the relationship between law and business. Instead of being completely separate, alternative legal service providers (ALSPs), like the Big Four, have integrated law with the larger category of business solutions.
The expansion of the services provided by the Big Four has led to their rebranding as professional services networks rather than just regular accounting firms. Their websites all sport a list of services beyond those of accounting firms. By acquiring a large range of smaller companies and creating an expansive network of services and areas of practice, the Big Four have infiltrated the legal market.
Although they began with solely tax-related legal counseling, they have expanded, now providing many legal services. This has separated the idea of practicing law and providing legal services. These firms may not be able to say that they are law firms that practice law but can still offer services a law firm does.
The Big Four have such a strong reputation and are well-known for their expertise, giving them a leg up from other law firms on the global market. They often compete in services such as regulatory risk and compliance services and M&A. More and more law firms are beginning to lose business to ALSPs, and specifically the Big Four.
Generally, ALSPs are exactly what the name suggests, an alternative to the legal services provided by law firms. Instead of having to go to a big law firm for "legal expertise," clients can choose to rely on the legal services of alternative networks. more appealing to clients due to their specialized expertise and often more sophisticated services. They also tend to invest more in technology and innovation, also known as "LegalTech." This allows them to combine their people and processes better than law firms in order to deliver their services at a better value and in a more efficient way.
Law firms have a major competitor in ALSPs and more specifically, the Big Four. Early on, the Big Four believed that in order to succeed, they needed to look like a law firm. They had to be as similar to a law firm as possible to compete with them. After this strategy failed, and SOX was implemented, they were forced to take a route that ended up being even more successful. Thus, today, the Big Four are not interested in looking like a law firm, but law firms may want to consider looking more like an ALSP.
ALSPs exemplify the future of the legal market. Their use of technology and efficiency demonstrate the direction in which law firms should aim for. Instead of sticking to traditional tactics, it is important for law firms to be malleable and change with the times.
They should be willing to incorporate the technology that ALSPs are beginning to use. Big law firms everywhere are losing business to the ALSP counterparts, especially the Big Four. The client-centric nature of the Big Four has also helped garner support for their services and thus should make law firms rethink how they cater to their clients.
Another viable option for law firms, instead of attempting to compete with their ALSP counterparts, is consider being acquired or becoming part of one of these large professional service networks. As the Big Four expand their oversight, they have acquired law firms and legal service providers in order to provide the maximum amount of services to their clients. Becoming part of the Big Four world is always a possibility for law firms as they think about the future of their personal firm and the world around them.
Whether law firms choose to adapt and compete against, or join the ALSP bandwagon, the Big Four cannot be disregarded when looking at the course of the legal market.