Is your Legal Firm getting the most out of your banking relationship?
||What does a perfect banking relationship look like for a legal firm? How do you know that you are getting the right advice and expertise to ensure the firm is benefitting from its relationship with its bank? With the streamlining of settlement processes does this really matter? Merv Rowe from Westpac’s specialist Professional Services Team talks about banking to the legal sector.
Legal firms can have unique opportunities and challenges in the way they operate, as well as distinctive characteristics in their banking requirements. As a customer there are three questions that we would encourage you ask to ensure that you are receiving all the benefits that your firm deserves.
Does your banker understand the unique requirements of a Legal Firm?
Both legal and accounting firms operate under ownership models that are unique to those industries. Whether it is a traditional partnership, or the firm is incorporated, the funding structure of the firm and partners can vary from a traditional trading company.
It is important to understand the key elements of the partners’ personal funding which in many cases will remain separate from the firm’s banking. The working capital and long term funding needs of the firm, and how these are structured, ensure that the firm can fund its ‘lock up’ requirements, as well as meet its ongoing capital expenditure.
Lock up is the main asset of a legal firm, and the management of this presents a key challenge. As the firm’s banker it is important to ensure that we understand the firm’s cashflow cycle, which can be seasonal, and have sufficient working capital facilities in place to support the firm during the peaks.
Long term funding assists a firm with meeting its capital expenditure requirements, which might include fit out costs, new IT and telephone equipment, or even motor vehicles. In most cases legal firms will look to repay long term loans over the life of the asset, and ensure that those loans are spread evenly to provide equality between current and future partners.
The firm’s banker should also place importance on the personal banking of the partners and staff. A partnership is effectively a coming-together of individual partners, and so a compelling personal banking offering is equally important. There should be emphasis on structuring the partners’ personal banking to align with regular drawings, and ensuring there is flexibility to enable lump sum repayments in the event of a special draw.
An attractive banking package for the partners and staff can assist a firm in recruiting and retaining key staff, while a partner buy-in loan could assist new partners to buy into the practice, and help with the firm’s succession planning.
Does your banker understand the settlement process?
The settlement process, and ensuring that a legal firm can manage this efficiently, is a key concern of most legal practices. The firm’s banker should have a thorough understanding of how the settlement process works, what a genuine Same Day Cleared Payment is, and be able to assist should there be a hold up in a settlement.
If your banker is managing only one or two legal firms in their portfolio of clients, do you consider they are dealing with settlement requests on a regular enough basis to be able to assist, in what is often a time critical issue? Furthermore, is your banker available at 4.30pm on a Friday afternoon in the event you need their help?
In most cases the partners can assist in educating their bankers on the settlement process, but it is also the banker’s responsibility to ensure that they remain up-to-date with any changes and have the appropriate skills to assist in a potentially stressful situation.
Does your banker provide benefits outside the normal banking products and services?
Banks have a vast network of staff and specialists who are regularly talking to your clients in various capacities, as well as unearthing opportunities to refer potential clients to your firm’s business.
Is your banker sitting down with you to understand your firm’s skills and identify the type of client that would benefit from your expertise? The ability to uncover mutual business opportunities provides that extra benefit from a partnership between a legal firm and its banker.
It is important that a banker is always looking to add value to their client relationships, and access to legal advice from a trusted lawyer can provide a real benefit. Is there an opportunity to interact with your banker’s internal network to:
1. Provide education on the legal aspects relevant to bankers
This is also a great way to form relationships with a wider network of bankers and potential referral sources.
2. Promote your services when talking to clients
This could include the local home loan mortgage lenders offering your conveyancing services to clients looking for a trusted lawyer, or an opportunity to speak to the bank’s high net worth individuals seeking estate and trust planning advice.
3. Arrange a joint client seminar
A seminar is a great opportunity to provide you with exposure to your banker’s wider client base, and promote your firm’s ability to add value to the wider business community. An example could be a joint property seminar co-hosted by a trusted Banker, Lawyer, and Accountant.
4. Provide a point of contact within the bank to assist with legal matters
Having a point of contact within the bank may be valuable should there be any questions or concerns when processing legal documentation with that bank. Often, a dedicated relationship can save you time trying to track down the appropriate people within that bank.
An open and transparent relationship with your banker, who understands the legal sector, can provide benefits that go beyond the provision of standard banking products and services.
There are wider benefits for both parties if you are both focussed on discussing the three questions above.
Merv Rowe is National Manager at Westpac Professional Services. He can be contacted at firstname.lastname@example.org