Burne: Traditional path to retirement for equity partners no longer works
New-breed firm Carbon Law Partners has introduced a structure to help senior lawyers realise the economic value of their client base so they can retire.
Carbon, which recently announced a share ownership scheme [1] for its lawyers and staff, said that, by placing a value on partners’ client portfolios, they could transfer them directly to other partners for cash in a way that is not possible in traditional firms.
Alternatively, the Carbon model also allows soon-to-retire partners to appoint a junior lawyer to manage their clients on a day-to-day basis, while they maintain a strategic overview over their practice.
If nobody wants to buy the practice, Carbon can appoint a lawyer to manage it.
Equally, a partner approaching retirement is still able to carry on working, as the firm does not have a mandatory retirement age.
Michael Burne, Carbon’s founder and chief executive, said: “We can see that the traditional path to retirement for equity partners no longer works. Partners leaving LLPs are increasingly concerned about their financial and career options.
“They have spent their entire careers building up a portfolio of clients; they still want to work and don’t want to just throw this capital away – they want to be in control of their futures.”
Carbon is one of the firms commonly described as a ‘virtual’ or ‘dispersed’ practice, because its lawyers work remotely on their own books of business in a ‘hub and spoke’ model. The law firm and the support services behind it are owned by a holding company, Flourish Holdings.
Speaking to Legal Futures, Mr Burne said he saw it as a platform akin to financial advisory business St James’ Place, which at the moment is being used for legal advice – so much so, in fact, that he is piloting the model for business advisers under the name Carbon Advisory Partners.
He said Carbon’s mission statement was “to create and develop the conditions for exceptional people to flourish”.
There were four elements to this. First was stakeholder value, that “those who drive value in business have opportunity but not obligation to own a stake in it”.
Some 12 out of the then 26 partners accepted the offer to buy a share in Flourish last year. There was no minimum stake and Mr Burne said contributions ranged from £150 a month to a lump-sum payment of £120,000.
There will be further share offers at least once a year, available on a ‘first come, first served’ basis.
Last Christmas, meanwhile, the solicitor gifted shares to the staff who work in Carbon’s headquarters. An employee share option scheme based on performance has also been put in place for them.
The second belief behind Carbon was “freedom and value in retirement”, and the third was quality assurance.
Mr Burne explained that every lawyer was individually risk assessed on an ongoing basis; the firm uses independent third party auditors who select files randomly and remotely for audit. There have been lawyers who have left the firm over quality concerns.
The fourth element of the business is people development.
“We expect people to come here with the potential for business. We are looking for seven things in every joiner: entrepreneurial flair, commercial acumen, an ability to collaborate and earn trust, a passion for learning, a record of delivering results, a client obsession, and an insistence on the highest standards.”
Carbon now has 32 partners, and while Mr Burne said he was focused on productivity of partners rather than their number, he expected up to 12 to join the firm this year.
He said he has received approaches from private equity, but rejected them for the time being as the priority was for the lawyers to become shareholders. “It might make [private equity] buying a stake more expensive in future but it will make it better value,” he argued.