Conversation with a dealer...

[greggy]

I never understood what the difference was between a corporate attorney and a CPA (which I am one). We both did a lot of the same thing for clients -- I think we charge less though.

 

CPAs at larger firms usually charge more than lawyers. A good buddy of mine who has been a CPA for two years less than I've been a lawyer has a billing rate almost $100 an hour higher than mine and he's not even at a Big 4 firm (he's at BDO Seidman). And the wife of a friend of mine who is a tax attorney at D&T was charging more during her second year than I charge now. It is insane what people pay for accounting services from the Big Four.

 

Scott, Scott, Scott. Sigh. You forgot the biggest difference. Lawyers MAKE more.

 

Seriously though, either your firm bills you out way too low, or companies in the bay area are getting taken for a ride by their auditors. Or both.

 

I always think my billing rate is too low, but that's just the ego talking. Our rates are among the highest in the bay area, so that ain't the problem. Large accounting firms just charge obscene rates. It's crazy.

Maybe your billing rate is adjusted for your "slack off" time? I will slither back under my rock now!

[FFB]

I never understood what the difference was between a corporate attorney and a CPA (which I am one). We both did a lot of the same thing for clients -- I think we charge less though.

 

CPAs at larger firms usually charge more than lawyers. A good buddy of mine who has been a CPA for two years less than I've been a lawyer has a billing rate almost $100 an hour higher than mine and he's not even at a Big 4 firm (he's at BDO Seidman). And the wife of a friend of mine who is a tax attorney at D&T was charging more during her second year than I charge now. It is insane what people pay for accounting services from the Big Four.

 

Scott, Scott, Scott. Sigh. You forgot the biggest difference. Lawyers MAKE more.

 

Seriously though, either your firm bills you out way too low, or companies in the bay area are getting taken for a ride by their auditors. Or both.

 

I always think my billing rate is too low, but that's just the ego talking. Our rates are among the highest in the bay area, so that ain't the problem. Large accounting firms just charge obscene rates. It's crazy.

Maybe your billing rate is adjusted for your "slack off" time? I will slither back under my rock now!

 

Ha ha ha Pha Q.

[greggy]

I never understood what the difference was between a corporate attorney and a CPA (which I am one). We both did a lot of the same thing for clients -- I think we charge less though.

 

CPAs at larger firms usually charge more than lawyers. A good buddy of mine who has been a CPA for two years less than I've been a lawyer has a billing rate almost $100 an hour higher than mine and he's not even at a Big 4 firm (he's at BDO Seidman). And the wife of a friend of mine who is a tax attorney at D&T was charging more during her second year than I charge now. It is insane what people pay for accounting services from the Big Four.

 

Scott, Scott, Scott. Sigh. You forgot the biggest difference. Lawyers MAKE more.

 

Seriously though, either your firm bills you out way too low, or companies in the bay area are getting taken for a ride by their auditors. Or both.

 

I always think my billing rate is too low, but that's just the ego talking. Our rates are among the highest in the bay area, so that ain't the problem. Large accounting firms just charge obscene rates. It's crazy.

Maybe your billing rate is adjusted for your "slack off" time? I will slither back under my rock now!

 

Ha ha ha Pha Q.

[tth2]

Maybe your billing rate is adjusted for your "slack off" time?

 

Greggy, you don't say much in non-gremlin speak, but when you do, it's always worth the wait!

[tth2]

Large accounting firms just charge obscene rates. It's crazy.

 

Well, this is the problem when you consolidate any industry into just four major players. Kudos to the accountants for understanding the power that comes from being an oligopoly. The major law firms should've merged into just four global firms a long time ago, instead of competing with each other all the time. But talk about a difficult exercise, it'd be like herding cats (who are constantly trying to rip your throat out)!

 

I keep waiting for someone in the business media to pick up on the fact that with the demise of Arthur Andersen, the government literally could not allow another major accounting firm to fail, no matter how messed up the firm was. If I was chairman of any of the Big 4, anytime I wasn't happy with the SEC or some other governmental entity, I'd just threaten to dissolve. The government would have to cave in!

[Zonker]

The major law firms should've merged into just four global firms a long time ago, instead of competing with each other all the time. But talk about a difficult exercise, it'd be like herding cats (who are constantly trying to rip your throat out)!

 

This off-topic discussion is about to veer off even moreso: Hang On!

 

Working in high tech, globalization is a constant backdrop to every decision we make. Used to be, an engineering degree was a pretty good meal ticket, but with the rise of Internet tech and the well-educated English speaking technical population in India, many of those jobs are inevitably migrating. If it weren't for the language barrier, China would be accelerating this trend, and that language barrier is becoming less and less an insurmountable problem.

 

So I've been thinking, what professions are more immune to off-shoring? Well, those professions where physical contact is either necessary or a big advantage: medicine being the obvious example. With law, you have the localization issue-- 50 different State bars in the US alone. And you have lawyers savvy enough to create additional barriers to those jobs moving overseas. Accounting? Well, I know GAAP is different in different countries, but I wonder if it is similar enough that you might see a big push towards getting accounting services done wherever labor costs are lowest.

 

What about other professions?

[tth2]

This off-topic discussion is about to veer off even moreso: Hang On!

 

Working in high tech, globalization is a constant backdrop to every decision we make. Used to be, an engineering degree was a pretty good meal ticket, but with the rise of Internet tech and the well-educated English speaking technical population in India, many of those jobs are inevitably migrating. If it weren't for the language barrier, China would be accelerating this trend, and that language barrier is becoming less and less an insurmountable problem.

 

So I've been thinking, what professions are more immune to off-shoring? Well, those professions where physical contact is either necessary or a big advantage: medicine being the obvious example. With law, you have the localization issue-- 50 different State bars in the US alone. And you have lawyers savvy enough to create additional barriers to those jobs moving overseas. Accounting? Well, I know GAAP is different in different countries, but I wonder if it is similar enough that you might see a big push towards getting accounting services done wherever labor costs are lowest.

 

What about other professions?

 

Parts of the medical profession are already being offshored. There are now companies that transmit x-rays and MRIs to India for doctors there to review and provide a diagnosis. And there`s another form of offshoring going on, where people in countries with expensive medical care will go to countries with cheaper medical care. Thailand, which has some topnotch private hospitals, is one of the major beneficiaries of this trend, with people from various countries going there for medical procedures (most cosmetic, but some for medically important procedures).

 

As for accounting, the Philippines has already become a major outsourcing center for accounting services, both for the daily bookkeeping that companies need to do, and also for some of the real grunt work required in doing audits.

 

Could I see legal work being outsourced too? Potentially, yes, because there is some basic stuff that could be farmed out. Strangely, the main reason why legal services may always be relatively immune from outsourcing is that very few countries in the world produce large quantities of lawyers, whether because of the limited number of law programs in schools or the limited number of bar admissions. The two main providers of English outsourced services, India and the Philippines, do not produce many lawyers, whereas they do produce lots of accountants, doctors, nurses, programmers, etc.

[dam60]

Since this is totally off topic, what do you guys think of the culture at law firms? From friends of mine that have done either paralegal or low level associate work at some of the major corporate law firms in NYC the culture seems to suck. Every minute spend, well, not working, is a lost billable minute. Every time you want to make a phone call, make a copy, send a fax, etc. you need a cost code.

 

Furthermore, for the top levels how is the compensation structured, i.e. what's the exit strategy? So let's say that you are a senior partner at a decent sized firm (not a Wachtell Lipton but a decent player). How do you get cashed out at the end of the year? I never understood how that worked in any partnership: lawyers, doctors, etc. What happens when you want to retire? Do you sell your client list? I can imagine that would be tough and valuations would fluctuate wildly . . . .

 

DAM

 

let me edit this to better flesh out the last paragraph. I am particularly interested in the exit strategy for partners in the following situations:

1 - small practices with no more than 5 total partners (a "mom and pop")

2 - mid sized practices with perhaps up to 100 total partners and different tiers of partners

3 - "bulge bracket" practices such as the W&L, Sullivan & Cromwell, etc.

 

thanks,

[dam60]

Parts of the medical profession are already being offshored. There are now companies that transmit x-rays and MRIs to India for doctors there to review and provide a diagnosis. And there`s another form of offshoring going on, where people in countries with expensive medical care will go to countries with cheaper medical care. Thailand, which has some topnotch private hospitals, is one of the major beneficiaries of this trend, with people from various countries going there for medical procedures (most cosmetic, but some for medically important procedures).

 

tth while I do acknowledge that this is happening I always wonder about the QUALITY of care that you will be given by someone who hasn't been certified by the AMA. Speaking from personal experience I can say that anyone who is a doctor in the US has undergone some very rigorous and comprehensive training.

 

I think that people that have money will always go to the best docotrs and pay whatever the price for their health. Down the line I can see -x-rays and MRIs being fed out to India for people on medicare, etc. Not that I condone that but the whole medical system is a can of worms that if you gave me 48 straight hours I couldn't even begin to scratch the surface,

 

DAM

[Jeffreykli]

let me edit this to better flesh out the last paragraph. I am particularly interested in the exit strategy for partners in the following situations:

1 - small practices with no more than 5 total partners (a "mom and pop")

2 - mid sized practices with perhaps up to 100 total partners and different tiers of partners

3 - "bulge bracket" practices such as the W&L, Sullivan & Cromwell, etc.

 

I'm not a partner, but have been looking into some of these situations. As a little background, I've been at a small firm (3 attorneys), a medium (80 attorneys) and a large (800 attorneys).

 

With #1, the small firm, you basically need to find someone to buy the practice. But, this gets tricky because most of the firm's clients have intimate personal relationships with the original lawyers. So, usually, the firm will bring an additional partner on, then transition slowly out of the practice. Very difficult to value the leaving partner's interest, but it can work.

 

With #2 and #3, the firms will continue after the partner leaves. The residual client list is still of value, as is the leaving partner's interest in the firm. I believe that the leaving partners continue to receive some payments after s/he retires, but I think that those payments are the buyout of the partner's interest.

 

Hope that helps a little.

[dam60]

let me edit this to better flesh out the last paragraph. I am particularly interested in the exit strategy for partners in the following situations:

1 - small practices with no more than 5 total partners (a "mom and pop")

2 - mid sized practices with perhaps up to 100 total partners and different tiers of partners

3 - "bulge bracket" practices such as the W&L, Sullivan & Cromwell, etc.

 

I'm not a partner, but have been looking into some of these situations. As a little background, I've been at a small firm (3 attorneys), a medium (80 attorneys) and a large (800 attorneys).

 

With #1, the small firm, you basically need to find someone to buy the practice. But, this gets tricky because most of the firm's clients have intimate personal relationships with the original lawyers. So, usually, the firm will bring an additional partner on, then transition slowly out of the practice. Very difficult to value the leaving partner's interest, but it can work.

 

With #2 and #3, the firms will continue after the partner leaves. The residual client list is still of value, as is the leaving partner's interest in the firm. I believe that the leaving partners continue to receive some payments after s/he retires, but I think that those payments are the buyout of the partner's interest.

 

Hope that helps a little.

 

Jeff - I really appreciate your response.

 

For #1, I can't see a client list being worth very much at all - after all it is the RELATIONSHIP that I would value, hence bringing a junior partner on. Would partnerships ever bring on a junior partner at a discount to market for a few years with the intent that after the specified time period the junior partner would take over the firm and the senior partner would retire? I have also head that in situations where the partners own the real estate they will get a new mortgage on the property and use that $$$ as their exit package. Is that relatively common?

 

For #2 and #3 do the retired partners get basically a "pension"? I am curious to see if they get something more to reflect their (assumed) equity interest.

 

Thanks,

 

DAM

[Jeffreykli]

DAM,

 

Actually, a client list with an established, albeit short, relationship is worth a ton. Remember, in the situation we're talking about, the primary lawyer is retiring. So, if you're a client, would you rather go out and look for a new attorney, or stay with someone that your old attorney recommends, and that you've worked with for a year or two? Assuming the client is satisfied with the new attorney, the new attorney should have an income stream from the client's annual work.

 

Regarding the real estate aspect, if they owned the building, then they could lease out the property to the firm, but that would be the same with or without transferring ownership. I'd see it as a separate transaction, but that would be more money to the retiring lawyer.

 

In all of these cases, the lawyers should have separate pensions. When I was in a small firm, we had SEP-IRAs, where 10-15% of the annual salary was contributed. In large firms, they have separate 401(k) plans, although the firms don't contribute to the plan, only the employee does. So, all of the other money would be in addition to their existing pension plans.

 

Jeff

[Foolkiller]

dave:

 

I'll echo the above sentiments and just say that a client list is one of your most valuable assetts. Most people in firms will bring on an associate or younger partner into the firm so that their work can be passed along later to other members of the firm.

 

Most small firms have named partners that eventually retire and the rest of the partners absorb the work. In many firms, just because one lawyer is hired doesn't mean that a whole team isn't working on a case, project or transaction. In fact, at many law firms, someone might be bringing work in (a rainmaker) and others might be repsonsible for doing the work.

 

The culture at most large law firms is very tough. It's very competitive and high stress. But most large firms specialize in corporate or defense (as in insurance or civil litigation defense) as well as a wide variety of other civil aspects. While that means they have a steady deep pocketed client, it also means billing hours or losing money for the firm. They choose to bill.

 

Being an ADA in Philly was the best kind of legal job: courtroom excitement, constant trial work, exciting cases -- except one huge problem: You made no money. So when I switched to civil, I wanted to enter an environment where billing wasn't emphasized but you could still make money -- hence going with a plaintiff's firm. I think you have to have a certain mentality to work in the big firms -- it's definitely not ideal for me.

[dam60]

thanks FK.

 

Hey, FFB - what are your thoughts?

 

Thanks,

 

DAM

[tth2]

Since this is totally off topic, what do you guys think of the culture at law firms? From friends of mine that have done either paralegal or low level associate work at some of the major corporate law firms in NYC the culture seems to suck. Every minute spend, well, not working, is a lost billable minute. Every time you want to make a phone call, make a copy, send a fax, etc. you need a cost code.

 

Furthermore, for the top levels how is the compensation structured, i.e. what's the exit strategy? So let's say that you are a senior partner at a decent sized firm (not a Wachtell Lipton but a decent player). How do you get cashed out at the end of the year? I never understood how that worked in any partnership: lawyers, doctors, etc. What happens when you want to retire? Do you sell your client list? I can imagine that would be tough and valuations would fluctuate wildly . . . .

 

DAM

 

let me edit this to better flesh out the last paragraph. I am particularly interested in the exit strategy for partners in the following situations:

1 - small practices with no more than 5 total partners (a "mom and pop")

2 - mid sized practices with perhaps up to 100 total partners and different tiers of partners

3 - "bulge bracket" practices such as the W&L, Sullivan & Cromwell, etc.

 

thanks,

 

DAM, I could go on and on about this topic for days. The NYC firms (Davis Polk, S&C, Cravath, Wachtell, Skadden, etc.) are notorious for their horrible cultures. The term commonly used by associates is "sweatshop". The attitude is "We pay you a huge amount of money, and in exchange will give you the opportunity to work on the best and biggest deals and get the best training. However, you'll be expected to have no life and work around the clock. For those of you willing to endure this for 10-14 years, we MIGHT make you a partner, in which case your life will still continue to suck, but you'll be compensated much better." Other big firms in NYC and other cities can range from this bad to okay, but none are a bed of roses.

 

I do think you make a bit much out of the accounting for time, and requirement of codes to make copies, make phone calls, etc. It's really not that big a deal, and becomes second nature to most lawyers, although just about every lawyer hates filling out their time sheets. Believe it or not, at most of the biggest NYC firms there is actually not much direct pressure to generate huge billable hours, or to make you feel bad about lost time. The reason is that the workflow is so huge and so intense, and the billing rates so high, that the partners know that one way or another, you're generating huge amounts of income for them. Admittedly, this may not have been the case during the downturn of the last few years, I can only speak of the years from 1993-2000 (and the legal profession was just starting to come out of a recession in 1993-94). As illustration, Skadden is not even close to being one of the most profitable NYC firms in terms of profits per partner, but their profit margins are still approx 50%. Wachtell, who actually are not a very big firm (except in terms of revenues and profits) are off the scale in terms of profitability (probably 70-80%).

 

I can't really answer your questions about exit strategy, as I got out before that became relevant to me. But I agree with what some of the other posters have said. In the big firms, there are usually pensions of some sort, and of course the partners usually made so much money while in practice that it's just not that much of an issue. I've never known whether they get some or all of their capital contribution back when they quit or retire.

[tth2]

Parts of the medical profession are already being offshored. There are now companies that transmit x-rays and MRIs to India for doctors there to review and provide a diagnosis. And there`s another form of offshoring going on, where people in countries with expensive medical care will go to countries with cheaper medical care. Thailand, which has some topnotch private hospitals, is one of the major beneficiaries of this trend, with people from various countries going there for medical procedures (most cosmetic, but some for medically important procedures).

 

tth while I do acknowledge that this is happening I always wonder about the QUALITY of care that you will be given by someone who hasn't been certified by the AMA. Speaking from personal experience I can say that anyone who is a doctor in the US has undergone some very rigorous and comprehensive training.

 

I think that people that have money will always go to the best docotrs and pay whatever the price for their health. Down the line I can see -x-rays and MRIs being fed out to India for people on medicare, etc. Not that I condone that but the whole medical system is a can of worms that if you gave me 48 straight hours I couldn't even begin to scratch the surface,

 

DAM

 

DAM, I don't disagree with you. But it is happening. The only comment I would make is that you might be putting a bit too much faith in the quality of US doctors. The best are absolutely the best, and they've got the best resources and technology in the world to support them. But a lot are absolute [!@#%^&^].

[jhumd-migration]

 

But a lot are absolute [!@#%^&^].

 

What constitutes 'a lot', in your opinion?

 

Do you feel this is a significant percentage? Just curious.

[tth2]

 

But a lot are absolute [!@#%^&^].

 

What constitutes 'a lot', in your opinion?

 

Do you feel this is a significant percentage? Just curious.

 

30-40%. Dunno if that's "significant" or not. No bedside manner, no ability to communicate and most important no ability to listen, which reduces ability to diagnose, often times poor skills.

 

And what's with the hours they force residents and intern to work? It's just a medical profession hazing ritual because all the current doctors had to go through it, meanwhile they endanger our lives by having "doctors" who can still barely think straight after being up for 24 hours or longer work on us.

[dam60]

30-40%. Dunno if that's "significant" or not. No bedside manner, no ability to communicate and most important no ability to listen, which reduces ability to diagnose, often times poor skills.

 

And what's with the hours they force residents and intern to work? It's just a medical profession hazing ritual because all the current doctors had to go through it, meanwhile they endanger our lives by having "doctors" who can still barely think straight after being up for 24 hours or longer work on us.

 

My GF is in med school right now and she hates the fact that everyone is very anti social. I told her - hey, what do you expect? The people who get into Med School are the same people who spent their four years of college rat holed in a dorm room / library studying!! There is absolutely no emphasis on social skills or communication. That's why all the doctors get sued. People (myself included) feel like their doctors don't communicate the issues in a way that both parties understand.

 

I heard the expression "20 / 20" being used to describe that you should see 20 patients before lunch and 20 patients after. Now, in that short period of time MAYBE you can make an accurate diagnosis or what not but I don't feel that you have the quality of care that you deserve. Another reason why if something ever happened to me I would see my primary care physician in court in a heartbeat,

 

tth2 - I do not approve or agree with the hazing ritual that you describe but would say that those people are not really "doctors" (although this is where I get a bit hazy). Even though you would be a MD after your 4 years of med school you must pass three levels of national boards (the third stage is done after your residency) to see patients. At least I think that's the case . . .

 

Anyways,

 

DAM

[drbanner]

Parts of the medical profession are already being offshored. There are now companies that transmit x-rays and MRIs to India for doctors there to review and provide a diagnosis. And there`s another form of offshoring going on, where people in countries with expensive medical care will go to countries with cheaper medical care. Thailand, which has some topnotch private hospitals, is one of the major beneficiaries of this trend, with people from various countries going there for medical procedures (most cosmetic, but some for medically important procedures).

 

tth while I do acknowledge that this is happening I always wonder about the QUALITY of care that you will be given by someone who hasn't been certified by the AMA. Speaking from personal experience I can say that anyone who is a doctor in the US has undergone some very rigorous and comprehensive training.

 

I think that people that have money will always go to the best docotrs and pay whatever the price for their health. Down the line I can see -x-rays and MRIs being fed out to India for people on medicare, etc. Not that I condone that but the whole medical system is a can of worms that if you gave me 48 straight hours I couldn't even begin to scratch the surface,

 

DAM

 

DAM, I don't disagree with you. But it is happening. The only comment I would make is that you might be putting a bit too much faith in the quality of US doctors. The best are absolutely the best, and they've got the best resources and technology in the world to support them. But a lot are absolute [!@#%^&^].

 

I heard a snippet on NPR this am that they are going to discuss off-shoring of some aspect of healthcare this afternoon at 4. Didn't catch all the specifics, but I usually listen so if there's anything pertinent I'll summarize here later...