Gravy train continues on merry way but will Brexit prove to be a buffer?
There has been a flurry of financial results issued by City law firms over the last few days and, as expected, they make for deeply satisfying reading for anyone lucky enough to be an equity partner in one of the following outfits. In descending order they show the following profits per equity partner (PEPS):
Whichever way you cut it quite a few lawyers are about to be handed out some significant chunks of change.
Exactly how much, however, depends on what lies behind the figures as Richard Tromans, a strategy consultant for law firms, explains:
The actual payments to each equity partner can vary widely. The starting figure is all the pure beautiful profit that is left after all salaries and operational costs have been paid. This will then be divided between the equity partners with most firms combining a points system with some performance element. The latter being determined by a remuneration committee who, rather like the Treasury, hold the purse strings.
Law firms traditionally divvy up the whole pot rather than saving for a rainy day and make several payments to their partners during the year and then a big chunk at the end comprising anything owing and bonuses. A reward which can on occasion be so dizzyingly large as to go their heads. Tromans says:
There are stories of partners in the past having blown an instalment in just a week or so, then having to scrimp until the next instalment of their profit share.
But they are a very small minority with the vast majority trousering substantial sums year after year. And if you happen to be in the inner circle of the magic circle that can be a seven figure PEP for, say, a couple of decades which adds up to career earnings of a cool £20 million.
Even all the current uncertainty is unlikely to derail the gravy train. As Tromans explains:
If you look at the last period of financial crisis the top firms’ PEPs may have been flat or even dropped a bit but they were still taking home over a £1 million.
Crisis? What crisis?