You can’t invest in American law firms—yet. But it’s only a matter of time. We live in an age where just about any income-generating asset one can imagine, from home loans to professional football players, has been securitized, collateralized and sold to investors. So you might expect there would be no ubiquitous class of large, highly profitable businesses that has failed to tap their receivables for capital. But if so, you’re wrong. Consider the American law firm and its peculiar partnership-based capital structure.
Interesting thought, but I'll check back in about 30 years. That's about how far behind the times these firms are. A lot would have to change, including the American Bar Association completely re-writing its ethical guidelines and allowing non-lawyer involvement in law firms, something that has been hotly rejected in the past even when there was real pressure a couple of decades ago to permit more multidisciplinary practice (more like the big accounting/consulting firms). It's still a crime in all 50 states to practice law without a license, and even part ownership might be a gray area there - they'd have to at least address that. The only real chance this has of happening soon is if law firms based in other countries start killing American law firms by taking many of the large clients, and they are forced to adapt. I am not clear how outside ownership would create that much sleeker of a business model, though, and firms still need to compete within the US market in order to serve those big clients. Even with profits way down (as they are now), U.S. lawyers' main concern will continue to be protecting their monopoly on the profession.
It's so disappointing to think that they're 30 years behind, but not surprising. Part ownership isn't the same as practicing law, and a firm could possibly be structured so that the legal decisions aren't made by non lawyers. I can see how this might get a bit ethically complicated, but it seems possible.
I would think a lot of the big clients that firms compete for are multinational corporations, but sure, the U.S. market still matters. As far as the benefits of outside ownership are concerned, I think the article is saying that if law firms allowed the partners to have traditional equity like owners of other businesses, then 1) lawyers could devote more attention to long term business development, instead of being short sighted, and 2) there would be opportunities for financial innovation. At least that's what I took from it.