CURRENCY woes may have been singled out earlier this year as the key culprit behind international law firm Hogan Lovells' modest growth for its financial year 2015, but in Singapore, it faces a more fundamental problem: talent.
Industry players agree that attracting a good team of lawyers - the DNA makeup of a firm - defines, to a large extent, how well the practice performs.
Currently, Singapore has an employer's market in the legal sector, thanks to an oversupply of young lawyers, that has resulted in lower starting pay and fiercer competition among peers.
That should be a happy problem for Washington, DC-based Hogan Lovells, which set foot here in 1998. But Stephanie Keen, partner at the Singapore office, says it is difficult to recruit the kind of lawyers she is looking for, specifically from the local talent pool.
"The real issue for us is that when we look at local talent, we tend to look at those who have been in the market for four or five years, who have got, one, the training; and, two, the experience."
So the firm often finds itself looking at lawyers trained internationally, as "they have a different perspective of how law firms work", she tells The Business Times in an interview.
"My sense is that the training for Singapore lawyers is very much about reading the legislation, reporting about the legislation, working very hard, working very long hours. I think they're incredibly diligent. (But) what I see is that they often are not asked to think outside the box at an earlier age and not interact with clients at the junior end."
Industry players BT spoke with echoed similar views, adding that young local lawyers are very exam-oriented. Some noted that many of these young lawyers leave the industry after about three years of practice as they become burnt out.
The ability to come up with what Ms Keen describes as "creative solutions" for clients becomes even more important now as business owners tighten their belts and look to maximise their money's worth.
She cites an example of creative solutions in Australia, where the banks went through a period some years ago bundling up loan portfolios. They were selling off some of the distressed portfolios but had packaged those with one or two positive ones that were interesting to investors.
"I think being a lawyer nowadays . . . is no longer about just being able to say 'the statutes say this' and 'this is what the law is'. It's much more 'okay, there's an opportunity out here, how can we help clients understand this is an opportunity where they can make money because we've seen it happening in the United States, we've seen it happening in Europe' and we draw on that sort of global knowledge. That is how I think we will stay ahead."
To pave the way for junior lawyers to interact with clients on a pro bono basis, Hogan Lovells has a global programme run at the regional level. Initiated last February, the sessions are run in the US, United Kingdom, and Asia Pacific and Middle East regions, on a semi-annual or bi-annual basis.
It gives lawyers the chance to meet with clients to help them understand what ticks in the business, what drives revenue and "how does what I do as a lawyer, in terms of looking at some of their documentation, help clients understand their business and help their business grow", Ms Keen says, adding that she is not sure that the local firms look at this aspect as much.
She points out that the problem with international hires, unfortunately, is that many tend to return to their home countries after a stint here, resulting in higher turnover at the Singapore office, compared to the firm's other offices. It may explain why she is supportive of taking in Singapore trainees and grooming them with an international perspective.
In order to stay ahead of the curve, it is also vital for the lawyers to have "particularly strong industry sector knowledge because that's what clients really need", notes Ms Keen. This translates to "commercial awareness of what's going on in the region and an understanding of how it impacts on clients' businesses", which will give the firm an edge over rivals.
Despite volatile financial markets and slowing economies, the business of law is still profitable. Led by chief executive Stephen J Immelt, the firm reported a 2.3 per cent year-on-year rise in revenue in FY2015 to US$1.82 billion. Excluding effects of currency, its revenue rose 8.2 per cent. Profit per equity partner rose 2.7 per cent to US$1.25 million from a year ago, although revenue per lawyer fell 4 per cent to US$724,000.
Of the total global revenue, about half comes from the Americas, 43 per cent from Europe, and 7 per cent from Asia.
Asia remains a key focus for the firm, which previously said it hopes to grow Asia's revenue to 10 per cent of the global sum. Almost a third of the 35 lateral hires last year were in the region. It has also said it will be making further significant regional investments in 2016.
In 2001, Lovells set up a joint venture with Singapore law firm Lee & Lee. Nine years later, the transatlantic merger of Hogan & Hartson and Lovells took place to create a global firm with more than 40 offices, including associated offices. The firm now comprises more than 2,500 lawyers, of whom more than 800 are partners.
It currently has 10 offices across Asia-Pacific in cities including Hanoi, Beijing, Tokyo, Hong Kong and Sydney. The Singapore office employs 80 staff, of whom 50 are lawyers, including 11 partners.
Ms Keen says corporate work, energy projects and infrastructure, as well as banking, are the top three drivers of growth here. In the next three years, the firm will focus on some of the industry sectors.
Says Ms Keen: "I was in Singapore as a trainee in 1997 and back in those days, in most of the international firms that were just coming here, they were focusing much more on project finance because that's kind of what the market wanted."
Over time, the market became more sophisticated and clients wanted not only corporate lawyers but also private equity or merger- and-acquisition (M&A) lawyers. Besides specialists within the practice, they now want specialists within industries, she adds.
"TMT (telecommunications, media and technology) is one industry we are focusing a lot on here. We have a partner in Hong Kong who is very strong in TMT and we're looking at enhancing the offering we have here and that's because I think we see fintech (financial technology), and the type of disruption that fintech brings, being very important in this region."
Asia, deemed a backwater by some, has gradually grown to be a priority in the global legal sphere. This trend favours Singapore.
In recent times, tie-ups between international and local law firms have come under the spotlight.
Last year alone, Singapore's legal realm was energised by several unions, such as that between US firm Morgan Lewis & Bockius LLP and Singapore's Stamford Law Corporation to create Morgan Lewis Stamford. The Republic's oldest law firm, Rodyk & Davidson, also struck a mammoth tie-up with the world's largest law firm, Dentons of the US, and Australian outfit Gadens, to create a powerhouse with collective revenue of over US$2 billion. KhattarWong partnered international law firm Withers as the two seek to expand in the region.
But hopes about whether the magic circle law firms - London's most profitable international law firms - will eventually tie up with Singapore practices were gently laid to rest.
"The magic circle, the silver circle, I suspect, will less likely see tie-ups here because I think the people they want to tie up with wouldn't necessarily want to tie up with them," says Ms Keen.
Instead, she believes that firms in the tier below the silver circle are the ones who are more likely to set foot in the region as they expand their global footprint and are able to offer more competitive rates.
Even as the legal sector grapples with expansion and cost issues, technology will inevitably transform the way legal firms provide services - something that has started happening in the financial services sector, making industry players nervous.
There are now computers that are able "to negotiate certain sorts of divorce proceedings" and it will not be long before computers can create the first draft of an agreement - seen as commoditised and simple work that lawyers do, Ms Keen says. She added that this "high-volume, low-revenue work" will eventually be dealt with by technology.
On the other hand, work that requires creativity or the more complex high-end work will continue to require lawyers' expertise, and the shift will come in the next 5-10 years.
"What you will see is that the days of very, very large law firms with lots of people running big deal teams will go; and over time, it will be lots more very talented, very specialised individuals who can't be done away with by technology."
This article was first published on April 18, 2016.
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