MDPs Are Dead. Long Live MDPs.

By Chris Kelleher, JD

MDPs are dead.” Or so said the American Bar Association (ABA) when it killed off the multidisciplinary practice (MDP) concept during the summer of 2000. On the surface, the ABA accomplished its mission: All appears quiet on the MDP front. The Big Five (the main MDP cheerleaders) haven’t made an overt move to expand into the U.S. market for “legal services” beyond the lonely legal outpost McKee Nelson Ernst & Young, and no state bar association has formally approved—much less implemented—the MDP concept by changing its professional ethics rules.

To paraphrase Mark Twain, however, reports of the death of MDPs are greatly exaggerated. And therein lie four lessons for accountants.

The good news: Legal MDPs are still “sleeping.” While the ABA may believe its MDP silver bullet stopped the Big Five in their tracks, the reasons MDPs appear to be moribund in the U.S. can best be summed up in three letters: “SEC” and three words: “low-hanging fruit.”

Overseas, the Big Five have been adding lawyers and law firms to their organizations at a blistering rate. In fact, Andersen Legal may have already overtaken the traditional firm of Baker & McKenzie for the title of world’s largest law firm in terms of number of practicing lawyers worldwide.

In the United States, however, a large monkey wrench in MDP expansion was the recent SEC crusade against the Big Five’s lucrative consulting practices. Given the proposal’s disastrous implications, the Big Five decided not to push the issue of legal services.

Another reason why MDPs have not expanded rapidly in the United States is that accounting firms simply have too many other lucrative expansion options that are easier to integrate into existing practices, entail less regulatory risk, and don’t require dealing with contentious lawyers and unruly law-firm politics.

The bad news: You won’t have time to catch up. When legal MDPs do finally enter the U.S. marketplace, accounting firms that have not laid the groundwork for integrating new practices will likely be unable to catch up for one simple reason: Adding legal services is not easy.

The Big Five, even with their immense resources, have struggled and, by some reports, are still struggling to profitably integrate legal MDPs into their overseas operations. After 10 years of Big Five MDP experience overseas, no one has found a magic formula that will work to smoothly integrate lawyers or law firms into an accounting practice.

Beyond the economic issues, accounting firms must be prepared to solve the immense people problems that will result from the many cultural, economic, and practical differences between lawyers and accountants. So immense is this gap that the managing partner of a large law firm has publicly predicted that law firms will be able to remain independent because accountants won’t be able to resolve the many expected culture clashes.

The bottom line is that accounting firms that try to play catch-up in the MDP field will find themselves at a significant disadvantage.

Underground MDPs are already here. Lawyers and accountants are smart people who like to solve problems for a living. So it should come as no surprise that these same smart people are already teaming up to form so-called underground MDPs. Here are three short examples:

Example One: The entrance to a financial services firm displays the name of all of the CFPs in big brass letters. About one foot below the name of the last CFP hangs a big brass plate reading “Law Offices of Joe Smith.”

Example Two: A financial planning firm, an accounting firm, and a law firm decide to “buy a building together.”

Example Three: An accounting firm with “excess space” subleases the space to a law firm that specializes in estate planning.

Law firms now want to steal your clients but that’s okay. Before feeling sorry for lawyers in MDPs, remember that 10% of the top 200 law firms are already trying to steal clients from accounting firms by cross-selling “ancillary services” to their legal clients. Law firms (either in-house or through separate subsidiaries) are now offering their clients nonlegal services such as investment banking, technology consulting, environmental consulting, human resources and personnel outsourcing, and financial planning services.

Here’s a question for readers: What would you call an accounting firm that purchases 50% of a law firm’s ancillary services business?

No, you can’t call it an MDP, because MDPs are dead. Long live MDPs.

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