François Pfister. We believe that the legal market is changing and is going to be very different in five to ten years’ time from what it is today. Following this basic statement, over the last 12 to 18 months, we have developed “Vision 2020” and we have been working on what a law firm should be by 2020. A number of task forces have been put together to come up with our three pillars: redefining talent, transforming offshore, and service innovation.

Seemingly quite obvious in its general concept, service innovation describes a series of new concepts based around client service and what clients would expect from us in 2020, an approaching point in time. As a matter of fact, a number of new entrants in the legal market are quite disruptive, and this is going to change the way clients purchase their legal services. For instance, a number of online legal service providers propose to put at the disposition of clients, ready-made templates on basic questions at a cheap price, and that’s going to undercut the current business of some law firms.

Leaders League. Is this innovation very tech driven?

F.P. Yes and no. Service innovation is not merely about technology, it’s also about process mapping, efficiency, service streamlining, and certainly value creation, since doing something quicker doesn’t necessarily mean it’s cheaper for the client. That’s the scheme we are working on today: making sure that everything we do on a day-to-day basis can be better, more streamlined and easier to deal with.

Actually, we have one internal working group, “The Innovation Group,” composed of fellows and professionals, and their task is to come up with handy solutions to implement throughout our whole organization.

Leaders League. How do you consider the relationship between law firms and the new entrants in the legal market?

F.P. We are not always comparable, but these new players are sometimes complementary to what law firms do and are going to work along existing law firms. Furthermore, some law firms do already have platforms that provide legal documents for free or on a subscription basis. As a general conclusion, all the law firms, rather than just one or two, will have to work on their internal processes when faced with this change in the market.

Fortunately, sophisticated markets have already recognized that these new entrants are potentially disruptive and reacted correspondingly, and some firms are putting in place similar actions to ours. On the offshore side, I think we are the pioneer, being the first to adopt a reasoned, structured approach to address this issue. What we are trying to achieve is to find alternative ways to serve the client: ways that are not always necessarily completely new, but certainly an improvement and sometimes we do come up with very innovative ideas.

Leaders League. Why are you transforming offshore?

F.P. First of all, there is the matter of definition. To give you an idea, Luxembourg is offshore for the US, and is onshore for traditional offshore like Cayman. So the point here is about transforming offshore rather than redefining it.

The world has changed and offshore is perceived as providing added value to what is regulated. Of course, some zones or countries are still in the old offshore set up, which is more related to tax havens, non-disclosure and lack of transparency, and on the other hand the sophisticated offshore, which is part of the modern finance industry, is aligned with the interest of big financial centers, as is the case with Cayman and Jersey/Guernsey. That is where we are, so we believe we are in the right jurisdictions.

All in all, transforming offshore means transforming our service level to be aligned with our clients. We have to match the increasing level of demand from pure onshore players, understand how these clients work now and in the future, what their service levels and requirements are, what services they are expecting from us, etc.

Leaders League. How about talent?

F.P. The notion of “talent” is neither partner driven nor linked to structure review, but we want to create a law firm that is more innovative, inspiring, tech savvy, collaborative and team minded, making sure that our work is more efficient and done in a better way. This is prompted by the fact that we now have a new generation of partners who are very young and energetic at the firm.

When we sold our fiduciary business three years ago, we were able to concentrate on law firm management, and the transition has been extremely successful. When we had two businesses, issues like capital allocation, decision making and dedication of management time could sometimes be conflicted; now that we have sold the other business, we have been redefining our firm, refreshing our brand and working on our new strategy. Throughout the whole organization, at all levels, everybody is working towards the same goal.

Leaders League. What is the main challenge in implementing your plan?

F.P. I think it’s essentially a mindset change, a cultural change. We are basically challenging (in a positive way) everything our people are doing and inciting them to ask themselves: “Is there another way for me to do this? Is there a better way to do it? An easier way? Or a way more in line with my own or collective wellbeing?”

Naturally, resistance to change always exists, but our structured approach is capable of handling opposition in order to make change happen. Internally we have a number of forums that are incredibly active on the three pillars. People come up with small ideas on simple things, but thanks to everybody’s participation, we have completely transformed our systems for taking on clients, from due diligence processes to conflict checks to engagement letter drafting. For example, we have reduced the time of writing an engagement letter from four hours to ten minutes, just by mapping the whole work process and potential improvement points.

Leaders League. What impact has Brexit had on your activity?

F.P. In my view, Brexit concerns mainly the UK and Europe, which is a small part of what we do; so Brexit is certainly important, but the presidential election in the USA is no less important as far as we are concerned.

In the short term, due to the general “wait-and-see” attitude, Brexit does affect our day-to-day business and we expect some activity to stand still for a while; in the medium and long term, however, the impact is hard to predict.

Business wise, we have noticed that players in the UK or players who wanted to go to the UK have delayed their decision and in some instances are considering a Plan B. On a smaller scale, in the financial services sector where access to a passport is necessary to serve throughout Europe, the question of jurisdiction becomes more important, in particular when it comes to setting up a fund structure, and entities are now considering setting up in Ireland or Luxembourg rather than in the UK. This will potentially benefit Luxembourg and Dublin, because there could be a shift of back office services in fund administration, depository work, reporting, accounting, etc., which will generate a staffing need to help and service newcomers.

Finally, regarding the Alternative Investment Fund Managers Law, offshore jurisdictions such as Jersey/Guernsey and very soon Cayman are ready to have the EU passport. Jersey/Guernsey already have legislation that can be co-opted to comply with the AIFM directive, and ESMA (European Securities and Markets Authority) has already given its favor to Jersey/Guernsey. Cayman is adapting its legislation, too. Nevertheless, the final say falls to the European Commission, which makes it more of a political issue.

Leaders League. What recent changes have been seen in the Luxembourg market?

F.P. The first development to mention is the emergence of unregulated funds, reinforced by the recent launch of RAIF (reserved alternative investment fund). The trend of emerging unregulated funds existed already 18 months ago, but RAIF gives us additional tools to improve our services mainly to non-EU clients and can open on markets on the alternative fund side, which has traditionally struggled to attract Americans who are not fond of having to comply with regulations outside of the US.

A second revolution is the clean up or revision of modern company law. It’s quite a transformational change and we see this as a new improvement to the tool box, as it marks the beginning of new ways of approaching corporate structuring.

In addition, there is also an increasing influx from Asia, especially China, into Luxembourg. The level of sophistication has increased, and Luxembourg is clearly on the radar for the next two or three years. There is an authentic interest, but also much resistance because the structures have not yet been tested. In the past, Asian asset managers didn’t feel the need to have a Luxembourg AIFM or fund because of their monetary self-sufficiency; now they want to get a feel for the techniques of European asset management and European structures, because they need to understand the approach and culture in Europe in order to convince European investors to invest in the their managed funds, especially considering the fact that they will undoubtedly become global leaders at a certain point in the future.

Jeanne Yizhen Yin

IMAGE: François Pfister © Ogier

For more on this story go to: http://www.leadersleague.com/en/news/francois-pfister-ogier-the-legal-market-is-changing-and-is-going-to-be-very-different-in-five-to-ten-years-time