Non-attorney ownership of law firms? What was once impossible, now seems inevitable. KPMG just became the first of the Big Four to officially operate a U.S. law firm. Arizona’s Alternative Business Structure (ABS) program paved the way for this development.
If history is a guide, other states will follow. Utah and Washington D.C. already allow ABS structures. Washington State is piloting a program in Seattle. California, Illinois and New Mexico are currently examining the prospect.
The Arizona Supreme Court granted KPMG a law license. KPMG Law US will operate as an independent subsidiary. The firm will focus on corporate legal services. They’ll handle post-merger contract integration and compliance management. Their tech-driven approach and use of (Gasp!) artificial intelligence will give them a huge, strategic advantage. Traditional law firms should be paying close attention because KPMG will soon normalize commoditizing mundane tasks like initial contract drafting or doc review.
KPMG isn’t entering this space on a whim, either. They’ve studied how law firms operate and bill. They know the inefficiencies in traditional legal models (which I’ve written about in numerous articles – especially when comparing them to New Law models). They’ve seen clients frustrated with archaic processes and skyrocketing rates. They understand how AI can streamline workflows. They also know that pricing matters to businesses. Now, they’re bringing corporate efficiency to the practice of law.
The legal field is entering another transformation. We’re witnessing a historic shift firsthand. KPMG’s entry is just the beginning. More players will follow in due time. The old guard will resist, as expected. But resistance won’t stop what’s already happening. Innovation doesn’t wait for permission to proceed. For example, New Law model firms like Rimon and Pierson Ferdinand have grown faster than any other type of law firm over the last decade.
This move isn’t happening in a vacuum. The Big Four have expanded legal services worldwide. The UK and Australia saw this shift first. The U.S. remained resistant due to regulatory barriers (largely influenced by the AmLaws).
Arizona’s ABS model cracked that door open. KPMG just kicked it wide with confidence. Deloitte, PwC, and EY are watching closely. I’m predicting that not only will they follow suit, but consulting firms like McKinsey and Boston Consulting Group, as well as forward-thinking attorneys, are examining the possibility of offering counsel that is more innovative and holistic than traditional lawyers can offer.
Critics claim this is bad for lawyers. It is! Especially the AmLaws! Imagine trying to gouge clients for $1,500 – $2,000+ an hour, when they can get smarter, more strategic counsel and a pre-priced, cost-efficient delivery of same services, from equally pedigreed lawyers, combined with the best MBAs and other professionals in business.
I spoke to Cecy Graf, the CEO of Federate Legal Services. Federate is a legal Management Services Organization (MSO) that cuts the cost of operating law firms by taking the day-to-day minutia, payroll, tech etc. out of the hands of partners (as it should be) and having business professionals handle all non-billable functions. In addition to non-attorney ownership of law firms, I’m predicting legal MSOs will proliferate as they enable partners to focus on what they should (bringing in clients and providing quality legal product). Cecy sees KPMG as just the start of a snowball, ready to begin rolling downhill.
“The legal industry is evolving whether traditional firms like it or not,” Cecy said. “Clients want efficiency, innovation, and cost predictability. The firms that deliver will thrive and the ones that resist will fade. The idea that only lawyers understand how to run a law firm is outdated. If anything, legal professionals need the expertise of business strategists, technologists, and financial analysts now more than ever. The firms that embrace this reality will lead the future.”
Clients want value, speed, and cost predictability – the best overall value. Corporate Darwinism is hitting the practice of law and firms will need to adapt like never before. If they embrace the insights and business acumen that non-lawyers can bring, and actually offer said non-lawyers a real seat at said table of power (and equity), they’ll thrive.
