Often towards the end of their working life, many partners in law firms give up their equity status and become consultants. This allows them the flexibility to work shorter hours often on specific clients or projects. The advantage to the firm involved is that they do not lose key client contacts and the wealth of experience that the former partner can offer. An effective handover of matters and clients can be put in place, at least in theory. However, working as a consultant can also be an alternative way of practising for the younger previously employed lawyer either independently or affiliated with a particular firm.
Most consultants will have an arrangement with a firm that allows them to act for their own clients but with the freedom of pursuing other interests in other businesses, or more leisure or family time. To establish such an arrangement, you are going to have to have a following, or strong and provable expertise or industry presence in the practice area of a firm. The aim is often to strike a better work life balance and hopefully take a larger slice of the fees earned. The consultant will advise his or her clients under the umbrella of the firm - affording them the protection of their PI cover, use of IT and other support. The fees generated will be shared on an agreed basis such as 80/20 in favour of the consultant and a separate agreement could be reached for introduction fees for work referred to other departments of the firm. There is little for the firm to lose as PI cover is unlikely to be affected (if the practice areas fit with those of the firm). With the right agreement in place a mutually beneficial business relationship can be established.
The attractions to the consultant include the following:
• Greater flexibility in working hours and freedom to pursue other interests or an improved work life balance;
• Potentially a better share of the fees generated;
• Tax advantages e.g. claiming expenses and a tax break in the initial years (tax advice should be taken);
• Access to support, PI insurance, payment for practising certificate, IT, know-how, lawyers who can assist on cases, etc and
• Avoids the trials and tribulations of setting up as a sole practitioner.
The disadvantages are as follows:
• No guaranteed income or work flow – really tests the loyalty of your clients;
• No career established future path and some firms will be totally against the idea;
• No statutory employment rights – the agreement will be terminable on notice and without the need for any fairness in termination;
• No benefits (e.g. health care, pensions or paid holiday) - you are self-employed; and
• Some firms may just seek to milk the client contacts with little in return and often disputes about fee sharing can arise.
More unusual, but not unheard of, is for a consultant to set up offering particular skills as and when a shortage arises at law firms. However, this would generally mean competing with the myriad of agencies providing interim lawyers. So would prove difficult unless the consultant was very well connected with law firms, that would be willing to take them on form time to time or clients with an in-house function that they could join. Otherwise to set up as a consultant lawyer providing services direct to clients would be the same as setting up as a sole practitioner – don’t go there.
A final word of warning is that, particularity for tax purposes, consultants do not want to acquire employee status. They must be free to do what they want and not owe any mutuality of obligation to their umbrella firm – by this we mean that they are not under the day to day control of the firm. The lack of set hours, targets, management control (although there will need to be some control for regulatory reason) and the other constraints that the individual probably hoped to avoid anyway is likely to ensure this doesn’t happen.
If you are looking for increased freedom but willing to take the risks that go with it a move to consultancy status may be for you or at least worth considering.