Some of the glamour associated with the jet-setting lifestyle of the world’s super-wealthy has, nevertheless, rubbed off on the lawyers who advise them.
“Private client law used to be viewed as a poor relation, somewhat fusty and unglamorous,” observes Macfarlanes private client partner Sebastian Prichard Jones, who spoke at the conference.
“That has changed with the increased interest in, and awareness of, wealth.”
The work, too, has changed, both in terms of its complexity and its geography. While there may still be a concentration of millionaires in the G8 economies, the rate of growth in the number of millionaires being created is significantly higher in Asia, the Middle East and
The range of work is also growing. Delivering one of the conference’s keynote speeches, Barclays Wealth chief executive Tom Kalaris said private banks and law firms were having to adapt to a new breed of clients who had generated their own wealth and expected an investment banking-style service offering sophisticated financial products.
“No longer can you just sit in
Law firms are naturally reacting to this phenomenon. The offshore world has seen an explosion of law firm mergers, with many of the leading firms pursuing strategies of building capability across all the major jurisdictions.
This year alone, Appleby has merged with Bailhache in Jersey and opened an office in
Withers was the first private client firm to make a splash on the international stage with its merger in 2002 with US firm Bergman Horowitz & Reynolds. More recently, it has opened an office in
Private client-focused firms are also having to change their mix of services. In June, Withers sent out a strong message to the wider market when it elected its first chairman from outside its private client and family practices.
It said the choice of corporate lawyer Anthony Indaimo as chairman reflected the ‘commercialisation’ of the private client sector.
“Private client work is increasingly commercial in nature,” Indaimo told Legal Week at the time. “A lot of high net worth individuals and families now see little difference between business and domestic needs. There is a lot of cross-border M&A work and exit work. My objective is to reinforce our position.”
Prichard Jones says this change in outlook is closely associated with the emergence of a new generation of private clients. “The new wealth in places like the Commonwealth of Independent States, China and
In the light of these developments, the decision taken by Macfarlanes several years ago to stick with private client work when so many rivals were bailing out appears ever more shrewd. Likewise, the presence of sizeable private client practices at international giants Baker & McKenzie and Allen & Overy no longer seems so incongruous.
The opportunities being thrown up by what has become a dynamic practice area are self-evident. But a fast-moving market inevitably brings with it challenges for the unwary. For example, international expansion is expensive and needs to be well planned and executed. And there is the danger that private clients may become too sophisticated for the lawyers that are supposed to serve them.
“The legacy of the closure of the private client departments of many major City firms lives on,” says Prichard Jones. “There are more partners in Clifford Chance’s corporate department than in the entire private client departments of the tier one and two firms in Chambers UK 2008. There will be major resource issues in the future.”
Prichard Jones believes the difficulty lies not in attracting lawyers to the discipline but in training them effectively — and then retaining them in the face of competition from private banks and family offices. Family offices and multi-family offices, which offer their services to more than one family, have emerged off the back of the steep growth in the number of super-wealthy individuals.
Withers partner John Riches estimates that a private client needs £200m of wealth to justify the establishment of a family office. He says his firm now has dealings with more than 50 such offices in
Many lawyers, including Riches, welcome the emergence of family offices as a growing force within the private client market. They say it makes their lives easier because the people who instruct them are professionals who know how important it is to read documents and respond to queries quickly — unlike some of the clients themselves. But some are not so sure. They fear family offices may come between them and their clients and are wary of their cost-cutting agenda.
The reality is that family offices — and especially multi-family offices — are having a similar impact on the private client market as company legal departments have had on the corporate sector. Indeed, the gravitation of private client teams to a few key players — such as the move last year of Simmons’ private client team to LG — is a symptom of this trend.
Another challenge that is migrating to the private client arena from mainstream corporate law is the emergence of conflicts of interest as a force to be reckoned with. “The issues of attorney ethics and conflicts is becoming more significant,” says Marnin Michaels, a partner at Bakers’
Acting for clients as well as their businesses is another issue that private client lawyers are increasingly having to contend with, he says.
These concerns emerged out of the forum’s last session, which tapped the views of a new generation of private client lawyers, of whom Michaels is one.
However, the panellists were generally optimistic about the prospects for emerging legal talent. Indeed, they noted that it was natural for relatively young self-made billionaires in search of long-term relationships with their advisers to turn to younger lawyers for advice. It is a trend that is likely to be reinforced by the upcoming transfer of wealth from the ‘baby boom’ generation to their children.
It was a suitably upbeat note on which to draw the conference to a close.