Practice Profile: Lawyering Up
RBZ has spent the last 25 years crafting its Law Firm Services Group to what it is today, and the Los Angeles-based firm left no stone unturned when it comes to providing services to mid-market law firms.
“Our clients love us because we really help them in a very significant way and we provide value,” said David Roberts, who is the partner-in-charge of the group. “Most accounting firms do not have a law firm services group like we do.”
RBZ has consulted with more than 1,200 law firms over the years, and its solid grasp on the legal field was one of the desirable assets that recently got the attention of Top 100 Firm Armanino of San Ramon, Calif. In early June, RBZ got swept up in the M&A wave and agreed to join Armanino’s team. “We’ve been looking at this for a number of years to try to find the right partner in Southern California to unite the space. In RBZ, we found that partner,” Armanino chief executive officer Andy Armanino said in a phone interview with Accounting Today.
“There are accounting firms that say that they have a law firm group and they might handle about a dozen firms,” said Roberts. “When I say handle, they usually do accounting tax work for the law firms but they don’t have a specialty of really understanding the law firm industry. That’s what makes us very different and special. We really are a specialist in the industry, not just handling a couple of law firms.”
Roberts works side by side with Tammy Saetia, a partner in the Law Firm Services Group. Saetia spent five years as a chief financial officer at a large full-service law firm where she specialized in real estate, entertainment law and litigation. “Because of my background of being a CFO of a law firm, I am able to help law firms restructure their accounting department or their operations,” said Saetia. “I help them to bring in their best practices.
At the same time, if I need extra help I will work with Dave on it. We also have other people in the law firm group and we all work together closely.”
Roberts knows that the large law firms have plenty of qualified people to help them run, but it’s the mid-market firms with between 30 and 200 lawyers that need the services of RBZ’s Law Firm Services Group: “This is where they really need to rely on people for organizational structure, profitability, succession planning, partner compensation you name it.”
Just like the accounting profession, law firms are going through an M&A surge. “The legal community in the U.S. is very volatile right now, so there’s a lot of mergers and acquisitions going on, law firms even significantly more than accounting firms,” said Roberts, who explained that the main drivers behind the M&A trend are economics, the exodus of retiring Boomers, and firms not having a solid succession plan in place (all of which may sound familiar to accountants ...).
“We try to help firms avoid the merger and acquisition frenzy by succession planning,” Roberts shared. “We handle management, restructuring and leadership coaching, because a lot of firms lack sophisticated leadership. It’s the same thing with accounting firms, where managing partners were selected because they have a big book of business so they are put in charge of a big business. They are lawyers, they are IT lawyers or a litigator, but they are not a CEO. They don’t have the educational background or the tactical training. So they need outside help to [move things along.]”
Roberts added dissolutions to the list. “There are a lot of firms that can’t get in on the mergers and acquisitions bandwagon, because they get in it kind of late. So we help firms through that final stage of life to dissolve or downsize.”
He also explained that RBZ’s legal practice assists firms in shutting down completely. “We call them planned dissolutions, where you plan out a year or two years near the end of the lease where people scale down appropriately.”
“On the other side, we help firms start up,” he continued. “We might get a trained lawyer group saying, We are leaving a firm and we want to start our own. How do we do it?’ We can help them from A to Z. We help them to get office space, in hiring people, and getting their systems in place.”
RBZ’s Law Firm Services Group also helps with partner compensation, profitability, organizational structuring, and pricing, which Roberts said is a “hot button today.”
“There’s a tremendous amount of fee pressure in the industry, which the legal field calls alternative fee arrangements,” he said.
The alternative fee arrangement may look similar to what some accounting firms are using to bill their clients with value pricing, but Roberts said it’s a little different: “Let’s say we’re doing a financial statement, we know exactly what that is. ... We give them a flat fee for that. Anything outside that scope will be charged differently or on a time and material basis. When you’re in the legal world and you go into litigation and the client asks, What is that going to cost me?’ It’s a little harder because you really have to assess what the litigation is going to look like, the pros and cons, is it going to go on appeal; it’s a much more sophisticated process. ... If I give you 100 litigation matters [a client wants to know], how much is that going to cost me?’ And that’s when the pricing starts. That’s like someone coming into an accounting firm with 100 tax returns and the person asks, How much is that going to cost me?’ It’s similar to the way accounting firms handle their billing, but a little more complex in the legal arena.”
Roberts noted that the turnkey arrangement of pricing has become such a hot topic that some law firms have started to create new positions, called directors of pricing, to handle matters. He said that they are not lawyers, but instead large-scale project managers.
RBZ’s Law Firm Services Group does not work with general counsels — the lawyers who work in house within a corporation. The group’s clients are primarily private law firms. “Within that range, there’s only one area we will not work for — only because of the way they are organized, we don’t work with criminal defense lawyers,” explained Roberts. “They are usually very small firms that have about three people and they usually only work on a cash basis. ... They are not the best clientele. It’s a whole different world.”
The group clientele list includes divorce and family lawyers, which is a big area, along with bankruptcy, workers comp, multi-disciplinary practices, and intellectual property lawyers. They have also tapped into law firms that specialize in Internet security, gaming, bond, contingency firms, and construction and real estate.
“You have to know when you’re walking into a law firm what are the peculiar issues to that firm and what they are dealing with,” said Roberts. “A bankruptcy law firm is significantly different than a workers comp law firm, which is significantly different than a real estate law firm, which is significantly different than a plaintiff contingency law firm.”
And if you’re wondering if there could be a conflict of interest between legal and accounting referrals, Roberts said that’s not something that they worry too much about: “We don’t take on work that we can’t do.”
Among the resources RBZ makes available to its clients is its annual Law Firm Survey, which usually comes out in October, and which Roberts said law firms refer to as “a bible.” Only law firms have access to it, and it gives their managers and leaders information that’s not available anywhere else in their market.
“Since we accumulate and compile the survey, which we’ve done for more than 20 years, we have never had a breach of data,” said Roberts. “It’s always confidential. No firm’s identity is released but the information is extremely valuable. As consultants, we are going into a law firm and we see that they are paying or billing people or they are organized in a certain way, we can come in with very targeted and specific recommendations that are very current in their market base.”
“This also helps law firms because a lot of them do their annual evaluation at the end of the year,” added Saetia. “The survey will not only have information about lawyers, but it will also include data on administrators and receptionists, all the way to executive directors.”
“This is where we become very specialized. If you were to ask us, How much do you pay for a nine-year associate who specializes in intellectual property and works for a 50-lawyer firm in Orange County?’ When you have that kind of specific information, that is very valuable to the legal community,” said Roberts.
Overall, RBZ Law Firm Services Group prides itself on what they do and how they help law firms. “If a law firm has an issue, we are the people to come to,” said Roberts. AT
AT A GLANCE
Firm: RBZ Law Firm Services Group (now part of Armanino)
Headquarters: Los Angeles
Year founded: 1990
Clients: Private law firms, including lawyers focused on divorce and family law, bankrupty, workers comp, intellectual property, and more, but excluding criminal defense firms
Services: Management restructuring, leadership coaching, firm start-ups and dissolutions, succession planning, partner compensation