Tuesday, December 5, 2017

Final Post for 2017 – Simply have a wonderful Christmas Time **


With the annual leave season starting in earnest over the next couple of weeks and many advisers taking either extended leave or alternatively taking the opportunity to catch up on things not progressed during the calendar year, last week’s post will be the final one until early 2018.

Similarly, the social media contributions by both the View and Matthew will also largely take a hiatus until the New Year as from today.

Thank you to all of those advisers who have read, and particularly those that have taken the time to provide feedback in relation to posts.

Additional thanks also to those who have purchased the ‘Inside Stories – the consolidated book of posts 2010-2016’ (see - https://viewlegal.com.au/product/inside-stories-reference-guide/).

The 2017 edition of this book, containing all posts over the last year, edited to ensure every post is current, indexed and organised into chapters for each key area should be available early in 2018.

Very best wishes for Christmas and the New Year period.

** for the trainspotters, with Paul McCartney in AUS, listen to his Christmas song ‘Simply Having a Wonderful Christmas Time’ hear (sic) - https://www.youtube.com/watch?v=hMhMekfIyos


Image courtesy of Shutterstock

Tuesday, November 28, 2017

Just Beat It - the notional estate rules & a lesson from Mr Pratt **


As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers the above mentioned topic in a ‘vidcast’ at the following link - https://youtu.be/sVKhCJ87BpI

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –

Mr Pratt allegedly died with a wife, some kids with that wife, and then perhaps two other spouses that were based in New South Wales. Those two spouses then made various challenges against Pratt’s estate.

One of the challenges related to assets owned via a family trust.

The structure involved a trustee company that had no individual shareholder.

The shareholder of the trustee company was another trust. That trust was ostensibly for Richard Pratt. The parties accepted that this was the case and that he had ultimate control of the trust beneficially and probably legally.

Importantly, that trustee company was setup in Victoria.

The trustee company was then a trustee of a standard family trust, other than this point, and that is Richard Pratt himself was not a potential beneficiary of the trust.

This trust then owned shares in a holding company.

That holding company was also a Victorian-based company.

That holding company owned 100% of the shares in a further subsidiary company. That subsidiary company owned New South Wales property, being I think an apartment where one of the additional spouses was living at Richard Pratt’s expense.

The argument of the spouse focused on the fact that in New South Wales, if you’ve got any asset in New South Wales, even if you died in another jurisdiction, the notional estate provisions can apply.

Like many business owners, Richard Pratt didn’t have many assets that passed under his will. Thus, there wasn’t a lot to be gained from trying to challenge the will, unless the notional estate provisions applied. If they did, then assets of the trust (being the shares in the company group that owned the apartment) would essentially be deemed to form part of the will.

What the court did was went through the notional estate provisions and methodically stepped through each aspect of the structures Pratt had put in place.

Despite the apartment being located in New South Wales, the structure used meant there was nothing else that created a nexus between the deceased, being Mr Pratt, and the New South Wales notional estate rules. In other words, the assets could not be attacked.

** for the trainspotters, ‘Beat It’ should need no introduction - watch hear (sic) and ask yourself if you can sing the chorus without swapping the lyrics to ‘eat it’ (also watch Weird Al’s remake below) -

MJ - https://www.youtube.com/watch?v=oRdxUFDoQe0


Weird Al - https://www.youtube.com/watch?v=ZcJjMnHoIBI

Tuesday, November 21, 2017

How to innovate: Think what BigLaw would do; and do the opposite


A previous post profiled the contribution I made to an eBook published by LegalTrek (see - Insights on the Journey to Value Pricing). For those that do not otherwise have access to the LegalTrek blog, a further article I have provided to them is extracted below.

While the article focuses on the legal industry, arguably the principles apply to all professional service firms.

Recently, we at View Legal started ‘Foundations for the Future’, webinars and one-day events, with the aim of broadening perspectives of how to structure professional service firms. The format is pretty straightforward.

The presentation is delivered by me, Matthew Burgess, with significant audience participation, in the form of questions and answers. The content is focused on optimising the business model of professional service firms. During the workshops, we usually discuss specialisation, productisation, resourcing, and pricing models.

This article explains why we at View Legal feel these talks are important.

Before that:-

For those who don’t know, in 2014 I exited ‘biglaw’. My sense is that most of biglaw is very similar in its thinking, regardless of how many partners are in a firm.

In biglaw, very few people are thinking anything other than the traditional model, charging in increments, and billing the hours.

Many believe that small is the new big. From the start, View has known we can think and act differently.

Here are some examples of what we do differently from the biglaw model:
  • We don’t bill by the hour and we have no timesheets; 
  • We don’t have any offices, so don’t spend $millions on fancy office space; 
  • We don’t do performance reviews; 
  • We have no holiday policy – we are a results-only company. If you think you can take 12 weeks leave and still deliver what we want as an organization: go for it; 
  • Our longest business planning cycle is 90 days. 
And how did we go about thinking differently? Sounds difficult, right? When, in fact, it is the opposite. There’s not a lot of actual rocket science in what we’ve done. It’s public information, what the biglaw model is. We have just said…
“Whenever we are in doubt, we say what would a big law firm do, or a traditional law firm; and then we do the opposite…” – Matthew Burgess 
Disclaimer: It hasn’t always worked. But we keep experimenting.

Why did we start the ‘Foundations for the Future’?

In short: because it is important.

The change in the business of law landscape is already taking place. Our overriding objective is to be part of the conversation, that we believe is very important.

I felt we should not simply wait for others to initiate the discussion. So, we decided to do something about it.

We didn’t want to be in a situation where we had an opportunity to share what we knew and did not act.

Imagine us, reflecting in five or ten years’ time, only to find the industry has completely imploded and all of us are left with nowhere to go. That’s what’s happened in other industries (e.g. taxis and Uber and driverless tech).

However, I feel that the overarching question ‘How to face the future in a professional service industry’ is conceptually wrong. What we should ask ourselves is – What value does the legal profession bring to the community?

It seems there is a wide acceptance that – ‘in the future’ – the legal profession will need to change significantly, to deliver a compelling value proposition. However, our concern is that the future is already here.

So, we feel there is really no time to lose. This is why we have already started the discussion.

What changes can you expect in the next three years?
Let’s see if we can make some analogies, and learn from previous examples.

The impact of technology has been seen across most other industries. It has been most dramatic in industries that are adjacent to professional service firms. Examples include the music, publishing, and consulting industries.

Our view, however, is that technology is only ever an enabler for change, a catalyst in all industrial transformations. The work of thinkers such as Clayton Christensen (in the book The Innovator’s Dilemma) reinforces this concept.

The solutions that are already gaining traction, at an ever-increasing rate in the professions, focus on the delivery of outputs to end-users.

This type of business model is diametrically opposed to incumbent providers, that focus almost exclusively on input-generated value creation (in other words, recording time and selling it, according to an arbitrary hourly rate).

We have a clear client trend toward those professional services firms that have changed their business model and stopped selling time.

How should lawyers position their law firm for the “new normal”?
My answer is simple – just focus on the results of your work, instead of your inputs. In other words – charge for the value you create, rather than the processes that you use (and the time that you spend).

In our example, the starting point for our firm has been to focus our entire business on the outputs that we deliver, as opposed to the inputs that we create. This one change has had the single biggest impact on our ability to demonstrate our value as a firm.

Based on our experience (and what we observed in other successful firms), until all participants focus fully on outputs, it is very difficult to achieve any substantive innovation.

Let me give the example of Kodak. We all know what happened to Kodak. Kodak was doing a lot to remain the market leader. Except for one thing – they did not change their business model.

They got stuck with their premise that people will ALWAYS want to print photos.

Kodak used to say “We are in the film business”. Arguably, all they had to do to be successful was to say “We’re in the memory business”.

Likewise, the only thing law firms need to do is to say “We are selling solutions” – and peace of mind – not hours recorded.

What should the business model of modern law firms be?
Without question, a business model that is focused exclusively on outputs created for clients is the only business model that is likely to be sustainably successful.

Certainly, in all other industries, there is no role for providers wishing to charge clients based on inputs, as opposed to outputs. On this basis, we believe that ‘timeless’ law firms should be the universal pricing model for every firm.

But it is actually not that difficult at all to think outside of the box here. Take thought leader Ron Baker, for example. Every year, he wants to either give away or discard, all the knowledge that he has, by the end of the year.

But why!?

Ron Baker says the only thing that keeps him relevant is if he is constantly renewing the way he thinks. So, letting go of his knowledge will force him to renew his learning, and he will continue to be relevant.

The point here is that if you’re not disrupting, or trying to destroy, your current most successful business, somebody else will be.

If you’re not disrupting or trying to destroy your most profitable, most successful part of your business, that’s fine. But accept that somebody else is doing that, right now.

Can lawyers use outsourcing, and if so, from where?
The model that best explains our views about outsourcing is known as the Stan Shih ‘Smile Curve’. Stan Shih is the founder of Acer, a technology company headquartered in Taiwan.

Shih noted that in the personal computer industry both ends of the value chain have higher values added to the product, than the middle part of the chain. To illustrate:

Measuring Smile Curves in Global Value Chains, page 5

How does this apply to law firms? Simply put, firms should focus all of their internal energies, and resources, on the activities that are least able to be outsourced. In order of priority, this means firms should focus on:-
  • conceptualisation and sales; or
  • branding and marketing; or 
  • design and distribution; or 
  • manufacturing and production.
In other words, law firms should focus on strategies that will bring them more business. Including (without limitation) finding their right niche, positioning, putting the business development team and/or lead generation system in place, designing products, and experience around the service delivery.

The middle part of the Curve illustrates lower effort on the law firm’s end in terms of the actual service “manufacturing’’ (or rather, delivery).

This means law firm still must be hands-on in terms of controlling the process, but it would be wise to outsource most of the elements, if not all, from this value chain segment.

Based on these principles, in our business, we actively look to outsource (whether to computers, onshore providers or offshore providers) everything other than conceptualization and sales.

Indeed, even with conceptualization and sales, we also seek specialists, with non-legal backgrounds, to assist us to achieve best practice.

Why is P3 (process, product, and pricing) important for law firms?
P3 is widely recognized as the cornerstone of any successful professional services firm.

Somewhat ironically, however, in a firm that focuses on inputs (time billing, or even time recording), the level of innovative thinking that is applied to any of the P3 tends to be limited.

Arguably, it only makes sense to focus on processes, pricing, and productisation, once you have decided to move away from the billable hour.

Where a professional services firm focuses on the value it creates, then this tends to create significant improvements in each aspect of the P3 areas.

Again, once you focus on value-based pricing, in the true sense of that meaning, you will have no obstacles to improving any of the P3 areas.

Let me give an example. If you opt to charge based on value (and not use hourly rates), then:-
  • Process, particularly around project management, becomes very important; AND
  • Productisation of solutions becomes a core competency (if not immediately, then over time).
The journey from time billing to fixed pricing, to value pricing, to segmented and tiered value pricing, is a natural evolution as the firm’s skills in pricing continue to develop.

Disruptive innovation and ultra-specialisation is the perfect storm

What do I mean by that?

The science in relation to disruptive innovation (as first explained by Clayton Christensen, in The Innovator’s Dilemma) is compelling.

In short, the theory explains that disruptive entrants to a legacy business model tend to start at ‘the bottom’ of the industry.

The theory describes how incumbents get taken by surprise. Let me illustrate:


The disruptive firms use technology to undermine ‘low hanging fruit’, in the businesses of the incumbent firm. You can draw parallels here and see that this is exactly how NewLaw act today.

NewLaw has focused on the legal work at the bottom of the value chain. That is the work which can be most easily productised.

At the same time, incumbent law firms simply start disengaging from those practice areas, on the basis that they are becoming less profitable, and they wish to focus on more profitable areas.

In other words, law firms forego those standardized areas. However, they do not change their business model. As a result, they remain large inefficient machine, but with a smaller market share.

In time, the NewLaw will start to move up the value chain. The range of practice areas, that have been subjected to disruptive forces, continues to grow quickly, across areas such as conveyancing, general commercial work and even more specialized areas, such as intellectual property, estate planning, and industrial relations.

Also, at least some (if not many) of the highly specialized ‘best in show’ lawyers are becoming disenchanted with life inside the ‘biglaw’ machine.

These highly talented lawyers are leaving larger firms at an ever-increasing rate. Similarly, the number of international firms entering even the smallest markets means that much of the talent that is not setting up their own firms is joining these large multinational firms.

Essentially, many incumbent firms are ‘stuck in the middle’; losing talent and work at the very high end of their client base, and losing work at the bottom end also.

What is our experience with value pricing?

For us, value pricing has been a journey, with a destination we accept we will never arrive at. A threshold question of pricing is: How do you fixed-price litigation work?

Now, I’ve never done any litigation work, but we do M&A work, and I would argue that an M&A transaction is largely analogous to a litigation matter. You’ve got no idea where it’s going to go. You’re totally in the hands of both the client and the other side. There’s no definite timeframe. It can change on an hourly basis.

The answer to pricing this type of work is all about the scope, in other words, competent pricing is all about competent scoping.

One way to look at value-pricing, is to decide what is a fair price to be charging the client? The fair price is the most that you can charge the client with the client still endorsing your firm to their friends, and actually coming back and using you again – Not necessarily happy, but willing to be an advocate.

That, in a sentence, is what value-pricing is about.

This is just a journey. Don’t ever feel as though you’re getting close to being perfect about value pricing because you never actually get there.

Should law firms burn the timesheet? What is the substitute?
Until we, at View Legal ‘burnt the time sheets’, our sole focus was on what would be ‘chargeable’.

Having abandoned timesheets and embraced a timeless organization, our focus immediately changed to “what is valuable”.

While the journeys of other firms may be different, when we look at the industry, the common theme about the firms making real and tangible progress is that they do not track time on timesheets in any manner.

The substitute for timesheets is, in our experience, a very personal one.

The three KPIs we use are:-

Number one is the “Shipping”. This concept has been popularized by leading thinker, Seth Godin.

Counter-intuitively, even though we do not track any time spent on a task, we religiously track the time it takes for us to fulfill a promise to a client. In other words, how long it takes between agreeing a tranche of work and completing it?

Next, we regularly conduct “After action” reviews. Since we constantly want to improve our overall performance, after action reviews are the only tool that allow us to capture the key conclusions from any piece of work in real time.

Finally, we have “Fun and flow”. The concept of flow is an entire topic in itself. It focuses on achieving excellent levels of performance, and ultimately provides the foundation for a more easily understood concept – i.e. having fun.

Are you having fun at your law firm? How about your employees?

Tuesday, November 14, 2017

Privilege (on privilege) in family law matters **


As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers the above mentioned topic in a ‘vidcast’ at the following link - https://youtu.be/E69HxwaO3A4

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –

The decision in Nolan (email me if you would like a copy of the judgement) is interesting because former parents-in-law of a spouse actually released all of the material around the estate plan to the former son-in-law, before their lawyer raised that the material might actually be privileged.

When the issue was reviewed, the court held as a general rule, estate planning material of the parents of a couple is privileged. In Nolan however, the court held the parents had already released the information and therefore no privilege attached to it. This is because privilege is the client’s privilege. Once they waive it, that's the end of the discussion.

Another privilege case in the family law space to remember is Kern. As usual, if you would like a copy of the judgement, please email me.

In Kern, the parents had arranged for vacant land to be transferred to their daughter and the son-in-law.

The daughter’s argument during the litigation with the former husband was that clearly the asset had come down ‘her’ side of the family and clearly that needed to come back to her benefit under the family law settlement. Not an amazingly complex argument and one that the court was comfortable to agree with.

Where it started to get somewhat more interesting was that the daughter then argued she and her parents had transferred the land to her for (say) $100,000, when it was actually worth (say) $400,000.

The reason for the transfer being significantly undervalued was to minimise the tax and stamp duty otherwise due and payable. The family court gave the wife the uplift to $400,000.

However, the undervalued transfer breached specific provisions under the stamp duty legislation. So while the court acknowledged the argument and gave an effective benefit under the family law settlement to the wife, the court also immediately sent the matter to the criminal investigations division at the Stamps Office.

Again, generally this information would be protected by privilege. However, as the wife was the one that submitted it into the court, she waived the privilege.

** for the trainspotters, ‘privilege on privilege’ is a line from the Church song ‘Myrrh’ (as I recall it I got an A+ when doing my grade 9 English assignment analysing the lyrics for this song … just sayin’) listen hear (sic) - https://www.youtube.com/watch?v=h6T_BtPSRL0

Tuesday, November 7, 2017

The new (Matthew) - 40 Forms of Trusts workbook release **


One of key goals at View is ensuring that we have ‘written the book’ for every aspect of the law we specialise in.

Following the successful launch of books in estate planning, tax, trusts, entity structuring, testamentary trusts, SMSFs and business succession, we have now developed and launched another book – 40 Forms of Trusts – workbook.

The concept of a trust is in theory relatively simple – one party (the trustee) holds assets for the benefit of others (the beneficiaries).

Counterintuitively, the relative simplicity of there being only a few core elements has meant there are almost a limitless number of forms of trusts.

Indeed, over time advisers and clients alike have largely only been limited by their imagination in terms of the way in which they craft any particular trust deed.

The workbook practically explores 40 different trust structures, including:
  1. The increasingly popular ‘GST’ structure 
  2. All key forms of protective trusts 
  3. Secret trusts 
  4. International structures 
  5. Perpetuity trusts 
  6. Legitimate tax advantaged trusts 
The workbook also has a number of key checklists for use when establishing a new trust or reviewing an existing trust.

All of the View books (over 15 at last count) can be accessed via our website – see - https://viewlegal.com.au/product-category/books/

Everyone who likes or shares this post will go into the draw to win a free copy of this book.


** for the trainspotters, ‘The New Matthew’ is a song by BrisVegas band Custard, watch hear (sic) – the video was in fact not the winner of the best video award at the ARIAs back in 1999 (despite the revolving ‘ARIA’ at the bottom of the screen … instead they had won it for ‘Girls like that’) -

The New Matthew - https://www.youtube.com/watch?v=DoEfnqbBC7k

Girls like that - https://www.youtube.com/watch?v=MoW_fqr86JU

Tuesday, October 31, 2017

(It has) access now - estate planning documents & family law cases **


As set out in earlier posts, and with thanks to the Television Education Network, today’s post considers the above mentioned topic in a ‘vidcast’ at the following link - https://youtu.be/GyqLtNpPv_8

As usual, an edited transcript of the presentation for those that cannot (or choose not) to view it is below –

A classic case study example is where there is a mum and dad with adult kids. The parents have set up their estate plan and one of the adult kids then goes through a relationship breakdown.

The type of argument that can be run by the estranged spouse is as follows –

‘I’ve got reason to believe that under the estate plan of my former in-laws that my ex-spouse will be getting a fair entitlement under their estate plan. So on that basis, I want to get access to the documentation that sets out how the estate plan works and I want to get access to how any family trust they may have is setup.

I also want to get access to all the distribution resolutions overtime. Even though none of this is a direct asset or something that is directly within the portfolio of my former spouse, it is all within the overall family unit, and therefore, I am entitled to get access to those documents.’

The case law in this type of situation is somewhat unclear. There are certainly cases to support the fact that parents’ estate planning documentation can be accessed.

Indeed, there are examples where in the actual trial, the parents-in-law are called into the courtroom, the doctors are called in, and there’s a medical assessment of how the mum and dad are tracking, and whether they are actually going to die anytime soon.

All of this is done to allow the court to put a monetary value on what a spouse’s entitlement might be out of their parents’ estate plan.

** for the trainspotters, ‘it has access now’ is a line from the At the Drive-In song ‘One Armed Scissor’, watch hear (sic) - https://www.youtube.com/watch?v=7NYbojdoAQE

Tuesday, October 24, 2017

(A sea of) permutations on reading the deed - regulating family trust assets via wills **


Recent posts have considered aspects of the prohibition on a trustee fettering its discretion, see -
Fettering of a trustee's discretion – when will it be ignored? ** and Leading case about fettering of a trustee’s discretion

One related issue that we see arise from time to time is an attempt to regulate the distribution of the assets of a trust via a will direction. Generally this approach is adopted on the basis that some argue that a will can have legal force over a trust.

The idea that a willmaker can mandate that a company take certain steps in relation to its assets is clearly untenable (even if the will maker is the sole director and shareholder of the company). The analogous argument that a will maker can somehow force a trust to take certain steps seems (at least conservatively) similarly without basis.

In any event, if the outcome of mandating certain trust distributions is required, a simple deed of variation, with an effective date of the willmaker’s death arguably achieves the same outcome, without any of the esoteric debate about whether a willmaker can regulate trust distributions.

While we do from time to time adopt the ‘delayed commencement’ deed of variation approach we generally recommend against it as it goes against virtually all the benefits of having a discretionary trust in the first place (quite aside from the significant tax and duty risks of such a variation).

Instead, our strong preference is to use one or more of strategies such as memorandums of directions, crafting control roles (such as appointor or principal powers), family councils, bespoke constitutions, trust splitting, trust cloning, independent trustees or gift & loan back arrangements to achieve the required objectives.

** for the trainspotters, ‘a sea of permutation’ is a line from the John Cale/Brian Eno song ‘Lay my Love’, listen hear (sic) - https://www.youtube.com/watch?v=pYvXp7_9GPE



Image courtesy of Shutterstock