Four Big Reasons to Embrace Change
By McCarthyFinch.
In white-collar circles across the world, the term “Big 4” equates to accounting. The firms of Deloitte, PwC, Ernst & Young, and KPMG have reigned over the accounting sector for the past 15 years, having merged with, absorbed, or outlived other rivals.
At a glance, the Big 4 may not share much in common with any given law firm. However, the legal sector has more to learn from these accounting giants than one might suspect.
Their move to automate the auditing process has boosted efficiency and increased profit margins, providing a potential blueprint for law firms looking to implement AI in work.
With their staff unshackled from the more time-consuming aspects of auditing, the Big 4 have been able to set another example for the legal sector: the pursuit of consulting and advisory work.
Together, AI and consulting could create a bright future for law firms.
HOW DO THE BIG 4 REMAIN BIG?
To fully grasp the potency of the Big 4’s business model (and its value to the legal sector) one must first recognise the implications of their approach.
The Big 4’s monopoly over auditing is nothing new, but the advent of AI has enhanced their auditing strength — and posed an even greater threat to smaller competitors.
According to Accountants Daily, Deloitte’s audit practice is rolling out robotics technology within its SMSF audit team for menial data and document collection duties. The tech has reportedly allowed auditors to focus on high-tier risk-based tasks, while granting Deloitte access to a greater breadth and depth of data.
However, the move has further threatened smaller firms, who often lack the scope or resources to implement tech on such a scale.
Similarly, KPMG UK is making a grab for the SME market — historically the realm of small firms and solo practitioners. While critics are decrying the move as unrealistic, KPMG has countered that its use of automation will allow the firm to offer a greater service for a lower price.
THE LEGAL SECTOR COULD FACE A BIG THREAT
Such advances will no doubt cause concern for small-scale accounting firms.
However, McCarthyFinch CEO Nick Whitehouse warns that if law firms don’t incorporate AI into their approach, the Big 4 could poach even more of their menial work.
“Why wouldn’t a company like PwC use AI to poach more and more transactional work from law firms?” he said.
“They already have the relationships and trust of key influencers, excluding conflicts, if they can do it faster and cheaper, then what is stopping the work falling into their laps?.
To safeguard against such incursions, Nick suggests legal practitioners adopt the same type of approach used by the Big 4.
“It’s doom and gloom if you don’t do anything about it,” he said.
“We have to positively lead this, and start giving lawyers tools to control their destiny. For example, if we start introducing lawyers to UX and AI, they’ll be much better placed to use tech in meeting their workload and address client needs.”
LAWYERS SHOULD BE IN THE BUSINESS OF BUSINESS
McCarthyFinch’s Legal Tech Counsel and Legal Services Manager Jean Yang argues that law firms need to challenge the way lawyers are viewed by both clients and themselves.
A recent report released by the Georgetown University Law Center suggests that lawyers continue to be viewed as cost centres rather than profit centres, and calls for lawyers to underscore their potential in business.
“We want to shift this connotation to something more positive and proactive.” Jean said.
“This was recently exemplified by Spark NZ, whose recent innovation strategy was led by its in-house legal team. This responsibility would typically fall to the CTO, but it was the legal team who found themselves best positioned to lead the charge on this.”
To this end, Nick believes major accounting firms provide a sound case study to emulate.
“Many accounting firms are consultancy firms,” he said.
“Before, they may have just focused on auditing and tax requirements. Now they ask: ‘What is the client need, or can we make the client aware of a need that they don’t know about?’ There are rules surrounding what can be offered for accounting, but in advisory, they can create more opportunities for themselves.
“This provides a roadmap for law firms to follow.”
Indeed, some law firms are already taking note. In Australia, MinterEllison has recently employed a consulting-based approach to client work, and the results have served the lawyers, clients, and the firm.
“A good lawyer with commercial understanding is just as good as the best consultant,” said Jean.
“Lawyers view themselves differently, but that’s changing. If you can provide more value and relevant thinking around a business problem, you’re going to get more work.”
McCarthyFinch is an artificial intelligence platform for automating and innovating the business of law. Founded in 2017, McCarthyFinch is a 50:50 joint venture between MinterEllisonRuddWatts and Goat Ventures.
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