Alternative Law Firms growing faster than traditional firms, report shows

Alternative Law Firms growing faster than traditional firms, report shows

New research has revealed that alternative law firms (ALF)s are growing at a faster pace than their traditional counterparts – and there are even suggestions that up to a quarter of lawyers could work at ALFs in the next three years.

The data, supplied by Codex Edge and their software platform ATLAS, marks all lawyers as “consultants” due to some firms recording their lawyers as partners. ALFs work on a split fee basis, meaning fees paid by the client are split between the regulated firm, the lawyers that act for the client, and the lawyer who introduced the client. Around 70-80% of the fees go to the lawyers and the rest to the firm.

For gender, the report shows that females make up 52.08% of the ALF sector. This shows the growing number of women in this marketplace as in 2020 there were more males in the ALF market. However, the number of women in ALFs are lower than solicitors across the whole legal spectrum with SRA figures showing women make up 61% of all solicitors.

London has by far the largest number of consultants of any city at with 1281, with the next closest being Manchester’s 121. 

Figures show that Residential Property (556 consultants) is the most popular specialism, followed by Commercial Property (447 consultants) as the next most popular.

Alternative law firms
Figures for the number of ALF consultants in each specialism.

In residential property, Taylor Rose MW possess the largest number of consultants with 218, closely followed by Setfords with 216. There are also 342 female consultants compared to 214 males.

There are also more males with 461 male consultants across the whole property sector, with 542 females. This shows that women make up just over 54% of the property market in ALF. This is below the national average of 65%, according to the SRA figures for 2022.

The number of new consultants for all the major ALFs is higher than the number of leavers, outlining the growth in ALFs. Whereas, in firms such as DWF, Eversheds and CMS – three of the most active traditional firms – the number of leavers is higher than joiners.

Adrian Jaggard of Taylor Rose MW commented earlier this year on ALFs, and why the firm changed their approach. He stated:

“The past year has marked a step-change in the growth of our consultancy division, which has become one of the key drivers of our continued expansion. Our integrated growth strategy, where the development of our traditional practice through M&A continues alongside the growth of the consultancy division, is paying dividends as it enables our consultants to benefit from referrals and increased marketing and business development capability, enabling us to attract bigger contracts and attract and retain talent more effectively.”

Taylor Rose MW says its consultants enjoy multiple benefits, including a referral network, marketing support, a recognised brand, sophisticated IT support and systems, professional indemnity insurance and SRA supervision, as well as the lower operating costs of home working.

For consultancy lawyers themselves, Jaggard draws comparisons between the partner model, citing consultancy as a “similar proposition”, except with consultancy, lawyers have the added benefits of “improved technology”, less in the way of politics that can occur in smaller firms, and is a “viable way of upping income”. He added:

“Consultancy has become an attractive and viable alternative way of working for experienced lawyers that offers increased earnings and a better work/life balance. We’ve worked hard to develop a platform and processes that give our consultants the best possible experience and which is now really paying off.”

Paul Bennett, Partner at Bennett Briegal LLP, provided exclusive commentary to us on the ALF report. He stated:

“My general observation is the freedom for solicitors to do their own work and be self-contained businesses within a platform structure is proving to be a very attractive experienced lawyers in particular.

What the report does is identifies, not just that known group of people are using this model, but also those who are 4-6 years PQE are also. They are a genuine alternative to high street firms, mid-size commercial firms and also to starting your own law firm.

It is interesting the dominant areas are residential property, commercial property and commercial litigation. These are all very ‘vanilla’ areas of practice and are done in almost every law firm in the country, which tells you the ALF model is actually proving a wide-ranging model.”

However, Bennett also warned the model is not suitable for all firms. He added:

“It is only the right model for those who aren’t interested in management and for those who aren’t interested in running their own business. It’s not the right model for those who want to succeed or fail purely upon on their own resourcing skills and contacts, but absolutely the right model for those who want an infrastructure and to then to be given a high degree of autonomy within that infrastructure.

The lack of ownership for very senior lawyers makes it unattractive for those who have a huge following and are looking to reduce their own workload. In that scenario, the lack of centralised quality control across the disciplines because lots of these platforms require people to work from home or rent a small office.”

On the predictions in the ALF report that the ALF model would supersede the traditional model in the next three years Bennett stated:

“I don’t think it will happen in the next three years, but I do think it will happen. I think it will take slightly longer than that. The instability in the economy and the rate of inflation and cost of living  crisis. All of that will, potentially, slow down the appetite for those who are looking at this already. I think more likely this will happen in the next 5-7 years.

I think we will also see a shift to niche firms as after the pandemic people have seen the benefits to working from home which will lead to more specialist firms.”

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Joseph Mullane

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