Annual Legal Market Overview

ANNUAL LEGAL MARKET OVERVIEW - 2011

Stanford, the global legal and compliance search firm, today publishes highlights of its extensive annual report on market trends among financial institutions and law firms re: compensation, recruitment and retention of legal talent.

Highlights of the report include:

·         Changing structures in remuneration both in-house and private practice (where length of post-qualification experience is becoming less relevant);

·         Remuneration is increasingly geared towards individual rather than team performance;

·         Law firms are run as businesses with a higher level of performance management at all levels; and

·         Continued movement towards modified locksteps and the increased use of salaried partnership structures as a prelude to equity partnership.

Remuneration

During 2011 remuneration for all legal professionals has become increasingly focused on individual rather than team, department or firm related performance.

For in-house lawyers within investment banks, bonus pools have typically shrunk by 10-20% and as a consequence bonuses are necessarily being distributed more selectively. General Counsel are focused on rewarding and retaining their best talent. Lawyers in key areas (within investment banks in particular) are increasingly being targeted by interdealer brokers, asset management, private equity and buy-side firms who are looking to top grade their legal and compliance functions. We have also seen more investment in training and coaching.

In private practice the principal of lock-step remuneration for all partners and associates is diminishing. Partnership agreements and structures are being modified with remuneration becoming increasingly merit-based, rather than tenure-based. Post-qualification experience (‘PQE’) for associates is seen as less relevant with the remuneration criteria becoming more performance based, both in respect of bonus levels and base salaries. Top performers now enjoy both higher base and bonus levels (which are often calculated as a percentage of base salary).

Non-core practice areas are under increased scrutiny resulting in some being jettisoned, whilst areas identified as core or strategically important to firms are being paid a premium.

Due Diligence

There is greater awareness that ineffective/unsuccessful legal recruitment is expensive, potentially damaging to institutional brands, and absorbs a lot of senior management time and effort in exiting non performers. Both banks and private practice are spending more time and money on securing independent due diligence reports from search firms ahead of hiring new partners.

Retention

Across all organisations there is raised awareness of the need to retain talented individuals. Within the in-house community, management of individual career trajectory perhaps represents the biggest challenge with a large pool of professionals chasing a restricted number of senior or general counsel roles.

For private practice the bar for entry into/remaining within partnership is becoming ever higher with firms investing in internal and external coaching for groups and individuals.

Hiring

There is increased hiring by new financial institution entrants, driven by the need to ensure there is sufficient legal and risk coverage/expertise. Areas of significant in-house demand include Prime Brokerage, Commodities and Regulatory. Finally, international mobilisation to growing markets (particularly Asia) is creating internal and external career opportunities.  In private practice the focus is on identifying core practice areas together with strategic lateral hires to acquire market share. The investment banks are similarly keen to internationalise.

Commenting on the report, Stanford Managing Director, Mark Franklin said:

“The legal market is becoming increasingly competitive with firms consistently having to compete for clients and mandates. Panels are becoming leaner and competition to be on them more intense. Firms are increasingly geared towards international expansion which in turn has led to our opening an office in Dubai (covering the Middle East) this year and significantly increasing our headcount in Asia.’