Nexus Law Group Founder Marcus McCarthy

Since the phrase ‘NewLaw’ was coined by George Beaton it has quickly become a meaningless buzzword. Multiple new businesses have jumped on the bandwagon and announced themselves as ‘NewLaw’ when, in fact, they are either just a traditionally structured firm operating virtually; a fixed pricing strategy; or a lawyer procurement agency for a disconnected bunch of sole operators and not a law firm at all.

Richard Susskind has predicted the end of lawyers with the emergence of artificial intelligence. But not everything that glitters is gold, and not everything that is artificial is ‘intelligent’ when it comes to serious lawyering.

Very little of the so called ‘NewLaw’ landscape is actually new at all, or delivers any net positive benefit to clients, and certainly not lawyers. Much of ‘NewLaw’ is not even run by qualified lawyers, or law firms. This may not be the best outcome for consumers despite the promise of a lower price tag or a fixed fees.

Anything that brings about less cost for consumers can be a good thing, and it is a laudable aim to service the end of the market that cannot afford traditional legal services, but there is one universal truth in this world – you get what you pay for. If the cost is driven too low, or is free, the quality of the advice always suffers. No one can expect real expertise done properly to be cheap or free.

If ‘NewLaw’ is only about less cost to consumers, then it is a false economy. Less professional value leads to less skilled and more generic input, which ultimately results in less protection, additional cost and problems in the long run. Online documents, even when intelligently automated, can be an example of this.

It is also true that there are always better ways to do things that can reduce cost and increase quality. If you can do both, it is the holy grail of business improvement (and, of course, a rare thing).

The problems with traditional practice

I came into the legal profession with a business management background and, although I loved being a lawyer, I could not understand why the legal profession was structured in the way that it was. Partnership models and corporate structures full of enslaved, unhappy lawyers on a path to nowhere who were constantly switching from job to job looking for a better world that did not exist. At the same time clients were (and still are) disgruntled with the high rates paid for lawyers.

I realised it was the very structure of traditional practice itself that caused the problem, driven by high overheads and unrealistic hourly budgets as a result. If both lawyers and clients are unhappy at the same time, something is clearly wrong with the system.

There was (and still is) a vast disconnect between the fees charged to clients by the larger firms and the low relative returns for skilled lawyers. This can drive many lawyers into sole practice, which can be an even harder and isolated road which does little to relieve their desire for a better professional career experience. The reason is simple – they end up replicating the same traditional structure they just came from, with the same overhead problems.

It is the law firm model itself that needed a change. In fact, the law firm model needed inverting so that great lawyers could take control of their own careers in independent practice, without the high overhead and budgets, but remain fully connected with others doing the same.

The answer was connected sole practice.

There is a vast sea of ex top-tier legal skill out there, but only by connecting them into one operating platform can they compete with the top-tier as a single law firm. A law firm based on the connection of independent contractors, instead of employees, could have less overheads and more skill at less cost than the traditional large firm structure ever could. Such a thing could be a new practice option in the market that did not previously exist – an option sitting squarely between the big firm model and sole practice, without the downsides of either.

Unfortunately, it did not exist. But with the help of some new cloud technology platforms, I created it. It’s called Nexus Law Group – Australia’s first ‘dispersed law firm’ or as I prefer to call it these days, the ‘embedded contractor law firm model’ (I’m still trying to come up with a less boring name for it …).

Changing the industry

What has been interesting to watch is how the industry reacts to this new model.

There are the typical naysayers that believe a firm based on embedded contractors could not be successful, or perceived it as a threat to the industry. However, it has proven to be very successful and, in my view, it was time for a positive change. There is certainly room for more than one practice structure in the market.

Most of ‘NewLaw’ are not engaged in any revision of the typical business structure of law or seeking to develop a culture of collaboration, commonwealth and information sharing.

Only the embedded consultant model is doing this. It is, in fact, one of the only new legal business models undertaking a fundamental and positive restructure of the law firm itself, and even the industry commentators seem to be missing this rather obvious point of difference in the NewLaw landscape.

Law firms vs legal networks

What is really confusing the industry right now is the difference between websites running simple networks of disconnected lawyers, recruitment or bidding services, and the embedded lawyer network. At first glance they look the same – but they are in fact vastly different.

Look past the flashy website and clever words and understand what is really happening behind the scenes. The difference between the two is obvious – one operates as a law firm, one does not. One has chosen to comply with legal profession legislation, one sidesteps it with a non-legal business that lists or procures independent lawyers. This is much easier to do, but comes at the cost of no longer being a law firm.

These are in fact ‘disconnected agency’ businesses that have no responsibility for the lawyers on their networks and do not properly connect them together in any way. This creates confusion when something goes wrong and opens the door for problems as the profession legislation states:

An entity must not engage in legal practice unless it is a qualified entity.”

Of course the agency networks will say they are not ‘engaging in’ legal practice. Although this perhaps neatly sidesteps the words it is, of course, nonsense as they are in the business of providing legal services. It will be interesting to see if the regulators ever decide to define legal practice for what it actually is – the delivery of legal services, or alternatively, exempt them. At the moment, the regulators seem unconcerned about this anomaly or asleep at the wheel.

The disconnected agency thing is proliferating at a rate of knots, simply because it is really easy to get on the ‘NewLaw’ bandwagon by throwing up a website and list a bunch of sole practitioners with the promise of work referrals. As such, the digital natives are having a field day, seemingly unconcerned about the legislative problem. It is of course much harder to build an actual law firm of embedded contractors (and much more functional).

Harnessing technology

When Nexus Law Group started in 2011, the technology did not exist to support a practice model such as this.

It wasn’t until 2013 that a cloud based practice system emerged that could run such a thing. We were able to work with the vendor to configure it to our exact requirements and build an open, universal remuneration system – the OpenLaw™ practice system – which now runs the Nexus Law Group.

The OpenLaw™ system is unique in that it allows the embedded connection of independent practices in a single platform, which allows our Consulting Principals to silo information for their own individual practices, while still providing the infrastructure needed to connect the Group for team based service.

It is a direct-access model that enables lawyers to increase their earning potential relative to traditional firms or sole practice through a direct input/direct reward remuneration system.

The system generously incentivises lawyers to refer to other specialists when a matter is outside their expertise, encouraging team-work and building a positive culture of client care.

It is a completely open and transparent system. Lawyers receive 70 per cent of everything they bill on their own matters, 60 per cent on matters referred to them, and 15 per cent of the fees for work they refer to others in the system.

To be completely open and even for all in the system was a core element in the idea behind Nexus. I wanted to ensure not only that highly skilled independent lawyers received the lion’s share for the work they do, but also for the central hub to retain enough fees to run the practice systems required for a national law firm. This, in turn, allows our lawyers to leverage off each other and the strong platform it creates.

The fact is, this universal remuneration metric alone replicates an equity partnership model without the need for a partnership or a corporate structure, which only drives up cost. The remuneration systems are fully automated and capture all work inputs for all lawyers in the system, regardless of the state (our country) in which they work.

Unlike a traditional structure – it is a freelance model which means our lawyers are free to set their own fees, including fixed fees, and to contract into in house roles or even whitelabel to other firms, which they do on a regular basis.

In building such a system we realised that it was borderless and replicable by jurisdiction so that anyone could run a dispersed law firm, including the possibility for third party firms to connect its lawyers to Nexus through a broader OpenLaw network using the same system. This has the potential to shift a large portion of the industry to this form of practice and connect separate lawyer networks together for mutual work referrals.

With a bit more tweaking we hope to launch the OpenLaw system to the broader market in the second half of this year.

And the reason for all this? To build a new foundation for the practice of modern law that is better for clients and better for the lawyers delivering it.

NewLaw vs BigLaw

Realistically ‘NewLaw’ will not wipe out the traditional big law firm, there are many people out there who draw comfort in the processes they have always known – a law firm with four walls and many lawyers, paralegals and support staff all under one roof.

Contrary to some industry commentators, it is not contractor models, emerging document automation or artificial intelligence that is disrupting the legal industry. It is the dangerous proliferation of non-lawyers delivering legal services and the rise of in-house legal teams (corporates are exempted from the above rule), who now run massive internal legal teams without regulation imposed overhead profiles of an actual law firm, and thus an uneven playing field.

The OpenLaw practice model is a viable practice alternative for lawyers, and a real value proposition for clients, who want to work directly with the lawyer of their choice without inflated fees driven by high overheads and budgets.

With technology and a common sense business model it is now possible to have some of the best lawyers in the industry at significantly less relative cost than when they were at their former big firms, while better rewarding them at the same time.

There is one universal driver for this model: happy lawyers make the best lawyers. Well rewarded lawyers, free from the strictures of traditional practice, are extremely happy – simple really.

With all of this worrying disruption out there, OpenLaw™ aims to bring about positive change to the industry by properly valuing and preserving the skill of experienced lawyers and bringing them together for unified service delivery, while respecting their independence and providing fair rewards for good work.

We may be swimming against the tide … but who cares, we are loving it.