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“Where are the customers’ yachts?” goes an old joke about Wall Street pay. These days, the jibes are levelled at the salaries of top lawyers. Outsize rewards in the legal profession are a sign that traditional client relationships are changing.
In London, the arrival of high-paying US firms has helped push up top UK law firms’ charge-out rates by almost 40 per cent over five years, roughly two-thirds more than inflation. The trend has been driven by the rise of private equity and massive, complex lawsuits. Several London partners now earn as much as $20mn. Once qualified, top lawyers are doing as well as bankers, says Scott Gibson of recruiter Edwards Gibson.
It used to be said that the typical British lawyer was too cautious and risk averse to be a natural rainmaker. This came more easily to US lawyers who had a more personal relationship with their clients, akin to that of “consigliere”. The UK is starting to move more towards a similar model, according to Evershed Sutherland’s Lee Ranson. Clients are tending to rely on fewer, highly trusted advisers. Lawyers’ impartiality and confidentiality are highly prized.
There have been big changes in the London legal market, as firms have also shifted away from traditional lock-step pay structures that rewarded seniority. UK-headquartered firms have traditionally stressed their team-based approach. But in certain areas, high-profile defections are a sign of the growing importance of the bond between individual lawyers and clients compared with the traditional loyalty to the firm.
In a few cases, lawyers are moving on to bankers’ turf. Brown Rudnick’s Tuvi Keinan is a lawyer-turned-banker-turned lawyer. UK legislation permitting multidisciplinary firms introduced in the late noughties has allowed him to both originate and execute real estate financing deals. His clients are confident there is no conflict of interest, he says.
Rob Kindler, the former Morgan Stanley rainmaker, also made waves when he joined law firm Paul Weiss last year. Lawyers are increasingly taking a pivotal role in deals, not least because of the make-or-break potential of regulatory hurdles. Now it is lawyers, not bankers, who get the first call on deals, Kindler argues.
Such shifts are still rare — at least for now. Bankers usually take the driving seat, and have pay packets to match. The lifting of the UK’s bonus cap for bankers will increase their share of risks and rewards. Nonetheless, changes to the way that law firms reward performance favour entrepreneurial types. When it comes to rainmakers’ pay and behaviour, law and banking are increasingly converging.
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