Auckland legal firms profit up due to buoyant property market
Auckland’s buoyant property market and the resulting legal work arising from transactions, and unitary plan, resource
management and environmental requirements, has helped Auckland legal businesses improve profitability over the past few
years; and for some the bottom line increase has been substantial.
According to the latest survey released by accountancy firm, Moore Stephens Markhams Auckland,
equity partner net incomes are significantly higher across the board, with the top five firms ranked by profitability
reporting net equity partner incomes ranging from $624,000 to $1,070,000 ($487,000 to $613,000 in 2013) and nearly half
reporting net equity partner incomes in excess of $500,000, a significant increase over the 2013 survey.
The growing trend of firms to have non-equity partners (NEPs) is also helping to boost profitability, according to Sam
Bassett, a director with the accountancy firm that has been running the financial performance survey amongst Auckland
legal firms since 2006.
“Over the last few years we have seen from our work with legal firms and reinforced by this survey, that the lock step
partnership formula is still a popular choice not only for succession planning but for expanding the business.”
He cites that nine participants who have submitted their results since 2011, had increased their total number of
partners from 33 to 40 partners (including NEPs) over the four-year period.
“Successful firms in terms of profitability, appear to be getting their succession planning right with keen younger
members responding to the carrot of profit sharing and helping to increase the size of the cake overall. It seems to be
rejuvenating firms,” says Mr Bassett.
He did caution that NEPs were aware of the economic contribution they were making and were prepared to leverage that.
“We are seeing non-equity remuneration increasing as this group gains leverage from their increasing economic
contribution and there is the risk that these non-equity partners could walk and take their clients with them if the
pathway to equity partnership does not materialise, but that is not often the case.”
The survey also highlighted there had been a switch in fortunes between suburban and central city located firms.
Auckland surburban legal firms fared better during and after the Global Financial Crisis but it would appear that now
there was “a quite marked” reversal. Central city firms were attracting a higher level of more profitable work with
specialist litigation firms “the real star performers”, says Mr Bassett.
This central city profitability was tempered by location however, with those firms spending more on “swanky premises”
not achieving as well on the profitability front as those with more modest abodes.
“In this more modern economy, clients are viewing relationships and communication as being more important than big
boardrooms and water views,” he says.
An initiative of a legal industry business development unit of the chartered accountancy group, the regular Moore
Stephens Markhams survey, conducted in the Auckland marketplace, covers topics such as practice profitability,
efficiency, work type, hours, salary comparisons, and professional indemnity insurance.
The survey report is made available for a fee to industry participants and copies can be sourced from Moore Stephens
Markhams Auckland office.
ENDS