Passive and defensive
Mostly created in the 90s, the professional networks have now fallen into obsolescence.
The business of trusted advisors carried out by regulated professionals like lawyers, accountants, auditors… implied that they could reach other experts in foreign jurisdictions to handle cross border matters.
The first advantage is that every member hopes to see a referral land on his desk, because he is the exclusive member of the network in his jurisdiction.
The second advantage is that he can refer clients to a colleague who he thinks would handle his clients properly. This is particularly important not to lose a client in the course of a cross border deal to a larger international firm or competitor.
This implies that networks are predominantly passive and defensive instruments.
In today’s economy, the needs for cross border tax and legal services has become much more sophisticated and requires active and offensive support to remain a credible player in the market.
Large law firms are now copying the model of the Big four and have launched spin off ventures in the advisory sector. Interesting initiatives like Allen & Overy Advisory and Clifford Chance Applied Solutions are explicit.
This enables them to capture the business before it is triggered in a legal, tax or accounting dimension
The Big Four themselves are back in the legal market while the Sarbannes-Oxley legislation seems to be far away. The large audit firms shop for law firms around the world to include them in a “one stop shop” desired by a substantial part of the consumers.
Viruses and epidemies will deeply impact networks whose business is to gather crowds of professionals in one room. Events are cancelled, firms do not want to put at risk their best professionals. The viruses decrease the value of the membership to standard networks.
What is left for independent firms ?
Their business model is dependent of their international strategy because international referrals generate higher revenues than domestic work. Networks are particularly important for them.
The decline of the traditional professional network will impact independent firms heavily.
Indeed, a model based on the sole hope of generating a referral by an affiliation cannot compensate the capacity of a sophisticated advisory team where accounting and legal experts join forces with business consultants. This new horizontal model of “networking” beyond expertise is a far more active and smart way to target prospects. This is the difference between a regulatory-driven and a market-driven approach.
The best way to anticipate the legal or tax need of the client is to access deals and create opportunities. Lawyers and accountants should be able to fetch clients at the source of the business need. If they wait passively for the expression of a legal or tax demand, they are generally kept out of the most interesting work which has long been anticipated by more dynamic competitors.
Transforming from a status of “technical expert” into “dealmaker” is a key to stay ahead in a very competitive market. It is more a question of vision than means.
Romantic lawyers and accountants are now facing the reality of a very disruptive market which witnesses radical changes.
The sentence “we are members of network X” often sounds like an excuse not to do more to implement a modern international strategy.
Networks will remain important, but they are not enough to manage a sound presence in the international space.
Since most networks are run by lawyers and accountants themselves, they hold the cards of their own game …
Laurent Marliere is the CEO of ISFIN, www.isfin.net , an advisory backed by a network of accredited leading law and tax firms in 75 countries. ISFIN facilitates investments through a Dealroom where off-market opportunities are solely sourced by professionals.
He is a partner with www.bizzz.me
He can be contacted: LM@isfin.net