Retiring Boomers Pose Big Challenges for Firms

Source: The American Lawyer

By Julie Triedman

On June 30, securities litigator James Benedict, 66,walked out of his office at Milbank, Tweed, Hadley & McCloy for the last time as a partner and caught a plane to Vail, Colorado, to begin the next chapter of his life.

Benedict, who had been responsible annually for $35 million to $40 million in billings defending investment advisers in their biggest lawsuits, had been planning for this day since 2004. That's when he, then Clifford Chance's litigation head, convinced a first-year partner, Sean Murphy, to join him in a move to Milbank with the understanding that Murphy would eventually take the reins of the practice, then $10 million to $15 million. Over the past 12 years, Benedict has made good on that promise: In January, Murphy, 46, first-chaired the defense for insurer Axa Financial Inc. in an excessive-fee derivative claim involving $1 billion in investment advisory fees, the first of several upcoming trials defending new clients that the two originated together.

The boomer generation—75 million Americans born between 1946 and 1964—and a tiny cadre of over-70s Silent Generation lawyers currently make up just under half of partners at Am Law 200 firms. As partners with the greatest seniority, they constitute a majority in the equity and management ranks, and control an outsize share of client relationships. The impacts of retirement are amplified because a long surge in hiring and promotion that began when boomers entered law firms has halted since the financial crisis. From 1985 to 1999, for example, Am Law 100 firms grew by 4.75 percent per year in head count; from 2000 to 2008, by 5 percent; and since 2009 by just 1.2 percent on average annually, according to Am Law 100 data. In the next five years, one in six—16 percent—of current partners will retire, and 38 percent in the next decade, according to the preliminary results of legal search firm Major, Lindsey & Africa's 2016 Partner Compensation Survey, which will be published later this month.

This generation's approach to retirement has been informed by their experience of cataclysmic changes in the legal industry. As young lawyers, they assumed—wrongly, for all but a tiny minority of firms—that they would follow in the footsteps of senior partners, who were expected to gradually hand off clients to younger partners while winding down their hours and being paid very handsomely. But 20 years ago, "all the rules changed," says Jeffrey Lowe, global practice leader at Major, Lindsey & Africa. "Unlike the people who came before them, they're being told that 'you're not originating much business anymore, so we're going to pay you less.' They're finding that they really need to hold on to their relationships, because that's the only thing giving them power."

That emphasis on origination has been amplified by firms struggling to preserve or increase market share since the recent financial crisis. "Rather than easing off, the more senior you are, the more hours you are billing," Lowe says.

Read more of this feature at The American Lawyer.

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