A Multidisciplinary Bar and Financial Planners: The Recommendation of the District of Columbia Bar Special Committee...

Author:George Steven Swan
Position::Associate Professor

I. Introduction. II. The Rise of Multidisciplinary Practice. A. The Protectionism Problem. B. The Free Market Solution. 1. Opportunities Running to Clients. 2. Opportunities Running to Practitioners. III. The Rise of the Financial Planning Profession. A. What Is Financial Planning?. B. Who Is the Certified Financial Planner?. IV. Lawyers and Financial Planning. A. The Law as a Multifaceted... (see full summary)


A Multidisciplinary Bar and Financial Planners: The Recommendation of the District of Columbia Bar Special Committee on Multidisciplinary Practice

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Rita, an investment counselor, decided to go out on her own. She was shrewd and diligent, so business kept coming in. Pretty soon Rita realized that she needed an in-house counsel, and she began to interview new lawyers.

'As I'm sure you understand,' she started off with one of the first applicants, 'in a business like this our personal integrity must be beyond question.' She leaned forward. 'Mr. Peterson, are you an honest lawyer?'

'Honest?' replied the job prospect. 'Let me tell you something about honest. Why, I'm so honest that my father lent me $15,000 for my education and I paid back every penny the minute I tried my very first case.'

'Impressive. And what sort of case was that?'

The lawyer squirmed in his seat. 'He sued me for the money.' 1

I Introduction

This Article assesses the legal profession and the rise of multidisciplinary practice. Resistance on the part of the organized bar to the sharing of legal fees evinces professional protectionism.2 The marketplace for services is far from a free one, not merely for attorneys, but also for investment advisors,3Page 370 and money managers,4who are heavily regulated. A free market response to widespread pressures for multidisciplinary practice would expand the opportunities for clients to enjoy the package of professional services they most prefer. Numbered among such clients are both multinational corporations and monied individuals. In a free market, the price mechanism can impel service providers to deliver high quality efforts. Furthermore, a free market environment could enrich the career potential of youthful lawyers. Opening professional doors to, instead of engineering artificial hindrances against, America's young men and women5 would improve the chance for their potential recognition and success.6

The fledgling financial planning profession meets a mounting demandPage 371 from a public thirsting for objective financial advice.7 Accountants likewise have reacted to this demand.8 Yet the Certified Financial Planner (C.F.P.) boasts the credential of choice in the financial planning field. Understandably, C.F.P.s in the marketplace encounter attorneys who themselves engage in the business of financial advising.9 Interprofessional cross-training grows timely. A decade ago the Supreme Court already had acknowledged the practice of Silvia Safille Ibanez, a lawyer who simultaneously listed herself as a C.F.P. and a Certified Public Accountant (C.P.A.).10 And the partnering of various professions in multidisciplinary firms represents an idea whose time has arrived.

It was in this perspective that the District of Columbia Bar Special Committee on Multidisciplinary Practice reported concerning the future of that Bar. Attorneys, as well as professionals such as financial planners and accountants, should be permitted to share legal fees in the District-in practices not necessarily to be controlled by lawyers-to the benefit of clients and firms alike.11

II The Rise of Multidisciplinary Practice
A The Protectionism Problem

The 2001 collapse of Enron Corporation was supposed by some to put anPage 372 end to the debate over multidisciplinary practice.12 But that scandal is unlikely to impede the movement toward multidisciplinary practice significantly.13 Notwithstanding protests, the organized bar still tolerates Big Five law practice on a major scale.14 The market forces evoking multidisciplinary practice endure.15 Multidisciplinary practice is here to stay.16 The hunger for multidisciplinary services, demanded by clients, will be appeased. Entrepreneurs within the bar will formulate a method for delivering those services.17

The multidisciplinary practice debate is, at root, about clients hunting diverse means to achieve their ends.18 And multidisciplinary practice is about the provision of services (meaning, often, bundled services) for which there is a market.19 Accountants are still beating attorneys into that market.20 The "Enron debacle" cannot foreclose the competition with lawyers by accountants.21 But the issue reaches beyond accountants attempting to do what attorneys do.22 A scenario wherein law firms enter businesses extrinsic to legal practice-including not just financial planning, but real estate brokerage and benefits consulting-can be benign.23

The multidisciplinary practice signifying the conjunction of lawyers and nonlawyers in partnership in the provision of mixed professional services, and a sharing in any resultant fees, remains generally proscribed (at any rate in the version of total business integration).24 The American Bar Association'sPage 373 Model Rule 5.7 is a template for state ethical rules.25 It bans attorneys from maintaining, with nonlawyers, partnerships including law practice; feesharing with nonattorneys; and attorneys' permitting nonattorneys to supervise lawyers or to control lawyers' professional judgment. Model Rule 5.7 provides:

(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that:

(1) an agreement by a lawyer with the lawyer's firm, partner, or associate may provide for the payment of money, over a reasonable period of time after the lawyer's death, to the lawyer's estate or to one or more specified person;

(2) a lawyer who purchases the practice of a deceased, disabled, or disappeared lawyer may, pursuant to the provisions of Rule 1.17, pay to the estate or other representative of that lawyer the agreed-upon purchase price; and

(3) a lawyer or law firm may include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement.

(b) A lawyer shall not form a partnership with a nonlawyer if any of the activities of the partnership consist of the practice of law.

(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering such legal services.

(d) A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit, if:

(1) a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration;

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(2) a nonlawyer is a corporate director or officer thereof; or

(3) a nonlawyer has the right to direct or control the professional judgment of a lawyer.26

But critics aggressively decry these prohibitions as plain economic protectionism.27 Attorneys are, first and foremost, turf defenders.28 Indeed, the proscription against sharing legal fees has not foreclosed the emergence of multidisciplinary practice.29 It merely renders multidisciplinary practice more costly and inefficient,30 because law firms create joint marketing and joint practice affiliations with varied providers of professional services encompassing, for example, financial services providers, accounting firms, and consulting firms.31 Unquestionably, multidisciplinary practice can be driven underground, but not eliminated.32

B The Free Market Solution
1. Opportunities Running to Clients

In large part, the clients relevant to the multidisciplinary practice debate include some of the most sophisticated multinational corporations of the globe, in the view of David B. Wilkins, Director of Harvard Law School's Program on the Legal Profession.33 Such clients command massive in-house capabilities.34 It must be odd for the legal profession to strike a paternalistic pose toward such potent clients.35 That paternalism deprives clients of the right to choose between a law firm and a multidisciplinary practice, notwithstanding that most such companies are on record as being in favor ofPage 375 the multidisciplinary practice option.36

And high-level net-worth individuals desire one-stop shopping for services.37 Persons planning for retirement can save time and money if attorneys and financial planners can provide services through a single organization.38 People undergoing divorce can benefit from legal, financial, and counseling services delivered by a single source.39 The crux of the matter proves to be who decides where a client obtains her multiple professional services: Should it not be the client herself?40

The market for the services of self-employed professionals is characterized by a high degree of consumer uncertainty as to the service quality.41 Hence, government agencies and professional organizations undertake regulatory measures, such as quality standards, barriers to entry, regulation of professional education, and the protection of professional titles.42Many of these moves rigorously check competition.43 Therefore, the query becomes inescapable: Are these regulatory measures efficient?44

Services the quality of which can be assessed only post-purchase are frequently denominated "experience goods."45 Specifically, experience goods...

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