25 Years of Partnerships: discussions with senior leaders

Hello.

My name's Andrew Lyon and I'm a Partner at TLT and the Head of our Financial Services sector. I'm joined today by Mark Johnson, who's the GC for the retail and wealth businesses at NatWest, a very long-standing FS client of TLT. Over the last 25 years, TLT has provided a wide range of legal services to NatWest, supporting the bank in managing commercial risk and tailoring solutions to tackle industry challenges. Mark's joining us today to talk about how much our respective businesses have evolved over the last 25 years, the changing role of in-house counsel and the law firms that they use and looking ahead as to how things might continue to evolve over the next five years.

So, Mark, just a very big question to start with. Over the last 25 years, how would you say the market has evolved from a NatWest perspective and how has that created opportunities for the bank and perhaps also for TLT? 

Mark Johnson

I think it's massive.

I mean 25 years is a very long time and I don't think you stop often enough to think about what has changed.

But, certainly from a NatWest perspective being just basic financial services where it was entirely different products, an entirely different focus on customers, a very technology driven world now that wasn't before. I think we talked about it before, but just the way that lawyers operate within that has changed. 

Certainly, when I started as an in-house lawyer, we were pretty much the same as a private practise lawyer just advising one client. I think now we're a lot more business focused, we're a lot more embedded in our businesses and customer focused. And that then reflects the changing need for how we partner with our law firms and how we get services. In a fast-paced world, things move so much faster now than they did 25 years ago. So, there are so many things that we could talk about that have changed over that time. But I think that the key theme in all that is change and pace of change. And I think the key challenge for all of us is that change isn't stopping. It's getting a lot faster and it's getting difficult to keep up with it.

So very interesting times, but I think interesting times for business, interesting times for banks, interesting times for lawyers and just how our service models will change and what we do going forward.

And just reflecting a little bit more on the rise of some of those competitors, particularly through a digital lens. With the rise of challenger banks and fintechs and neo banks, it was necessary to shake up the industry and I think it kind of drove a lot of the change that we're now seeing.

But at the same time, I don’t think it changed the legal support. I think we've made lawyers more embedded into how they support the business to grow, to do better, to evolve to, to innovate frankly and to experiment.

So, I think it really changed when I started. The competition in the sector meant that we had to think on our feet. We had to come up with new ways of doing things, had to engage with regulators more. That level of innovation, which in a highly regulated business involves lawyers, frankly, we have to be able to innovate along with everyone else. So it was, as I say, necessary and interesting. I think it's driven a lot of the market that we see today and a lot of the variety of products and services.  

If you look at Apple and Google and all these other people trying to play in that space and get into financial services, and in interesting places where maybe we're still the incumbents getting a little bit bogged down with this is how it's always been, I think other industries are coming in and saying: “well, hang on, you could change that, you could disintermediate that, you could play around with that particular part of the process.”

It's fascinating. And I mean, as I say, it kind of keeps us on our toes, but it also gives us new avenues to explore in terms of helping customers, making the systems and the process work more effectively and efficiently.

Andrew Lyon

And just reflecting on the journey that we've been on with you as a firm. We've known each other a fair few years now and we've worked with the bank for pretty much the 25 years that TLT has been the firm that it is. How has our relationship evolved, you know, and how we supported you over the years and how has that changed? 

Mark Johnson

It's a really good question actually. We've obviously talked about this before, but I think certainly when I started and probably going back 20 years, probably 10-15 years, in-house teams talked a lot about their partnership with law firms.

There was an aspiration almost to have law firms that really understood your business. As things have moved faster, as change has become more complex, that partnership aspiration has become a little bit more of a reality. Certainly nowadays a lot of the legal challenges that I face, that my team face, are not legal challenges, which have an answer. So, some of it involves dealing with regulators. Some of it involves thought leadership about how things should evolve. Some of it involves things where there is no law and we have to figure out what happens next. And that covers so many different disciplines that again, I think we would come along with a competition or question or a corporate law question or a financial services question or litigation question. Now all these things are so heavily embedded in each other that you come along with a composite challenge. What's this going to look like in the future? And you need this group of people with expertise and lots of different things to come together and figure out what happens next.

For TLT, being so amenable to understanding our business and coming in and getting to understand what we're trying to achieve, what our clients are trying to do, what our business is trying to achieve, what ultimately what our customers want and not almost stepping back and saying: “well, we're just a supplier, we're here to give you legal advice.” The going beyond that has been really, really powerful. And I think for any in-house team, you kind of need that on tap understanding of how your business works.

Again, I think a lot of people talk a good game in this space, but it really takes that embedding and that cultural alignment to make it work properly. So, it's not a you give us the advice and then we'll blame you if it goes wrong. It has to be a partnership, right? How do we think about this going forward? How do we evolve that?

So, I mean, in that sense, I think it's been, it's been really powerful over the years. But I do think that relationship has changed and evolved and got stronger, frankly.

Andrew Lyon

And just digging a bit more into the way in which law firms can embed themselves in the bank and truly understand the bank's business and your evolution and your ambitions but presenting their offering in a much more cohesive way. Because as you say, so many of these issues are cross disciplinary. Where do you think that is at from a law firm perspective in its evolution? 

It feels to me like relative still relatively early days, but you obviously work with a lot of law firms. How much better are they getting at the way in which they're presenting that sort of cohesive cross disciplinary offering?

Mark Johnson

It's a really good question. I think again, all of them talk a good game, but fundamentally, I think this ties in a little bit with how in-house legal teams are involved. As I said, when I joined, an in-house legal team was effectively a private practise firm just attached to one client. I think now our role is different and therefore the firms have to be different.

And often a lot of the things that we're dealing with require an understanding of the personalities and the pace and all kinds of things which don't come from occasionally turning up for our own meetings or I've no going along sporting event, all those kind of things.

You can develop that relationship with the lawyer. But actually understanding the geopolitical environment, the economic environment, the things which are exciting the executives of a bank in terms of that 5/10 year strategy, the existential threats and what the economy is going to look like, that takes a level of interest and curiosity, which I think a lot of law firms have an aspiration to be, but almost don't have the experience to understand what that looks like.

Law firm business models and bank business models are very, very different. I think a lot of firms are talking the game, I think there's a few, you guys included, who genuinely are curious about how do you get into that space.

And I'm not saying it's easy because I think in-house legal teams struggle to get in into those rooms and to be involved in those conversations and speak to them as peers and almost lose the concept of “I'm not the lawyer in the room. I'm another senior person who's helping to figure out what strategy looks like.”

That mindset shift is coming. So, I mean, it's definitely better than it has been, but it's still, I think we're all still on the journey in that space. 

Andrew Lyon

A really interesting comment you made was about how the in-house legal team used to be effectively an internal sort of law firm for the business. But now the in-house team is much more an integral part of the business with the law firms themselves fulfilling what was previously that internal law firm role. Can you talk a bit more about that and that interaction with the business? 

Mark Johnson 

I think in-house teams originally tended to be where there was enough work in the business to require a lawyer to be doing it 100% of the time. It makes sense obviously to employ your own lawyers.

I think that spread and lawyers are naturally quite useful to have, but not necessarily just answering the same questions day in day out. And as businesses have become more efficient, more focused on value, technology driven and looking into processes, that leans itself to lawyers playing a slightly different and more strategic role.

I mean, there's a lot of talk at the moment about general counsels being strategic advisors, crisis managers, all these kind of things beyond just being the lawyer in the room, which I think is true. And I think our skill sets naturally lends to that.

We're talking a lot at the moment about the threat of technology companies coming into banking, the opportunities and threats of AI. There's a whole load of stuff which is just really big picture. How does this affect banking and the economy going forward? And so much of that is tied up in law. And so you kind of need to be part of those conversations, but it isn't as it used to be. And is this illegal? Tell me what the legislation says about this. It's very much like a where's this going to go? How do we talk to the regulators, the government about this? What are the opportunities like? What products can we build that tap into some of these things? I think that is really, really healthy for in house legal teams. But as you say, it kind of means that we then need law firms that can plug into that and deliver services and pays and across that whole range of different disciplines.

But it is less as it used to be in the old days with lawyers saying I need to manage this piece of litigation, I need to manage this particular piece of lending documentation or whatever. It needs to be a place it needs to plug into what's going on. And it's often in these areas that are less kind of clear cut, less black and white. So I think that that has really changed. I think that the role of the lawyer changing is fascinating. We spent a lot of time now talking about how we evidence our value internally. Our business obviously has to make money and so it's measured on its efficiencies. It's kind of what our income drivers are, all those kind of things. Lawyers aren't exempt from that. So we look at that and then we look down into a law firm. So where is the value of these things?

So that whole shift is again, really, really fascinating and I think we're probably going to touch on it in other parts of the conversation, but things like AI and even just working from home, the shift in terms of how we work is actually shifting a lot to that as well.

Lots of interesting stuff in this space, which keeps me, and I expect you, busy alongside the daily job as well trying to figure out what happens. 

Andrew Lyon 

Now you mentioned there this whole concept of law firms not just providing legal services but being more the sort of business advisors. And because they're more embedded in your business, they understand your business, they can help you with lobbying for regulatory change and changes to policy and so on. That is a big part of it, isn't it? In terms of how your external law firms can play that business advisor role? Because I think we all grapple with what we really mean by that.

Mark Johnson 

Until you've really been up close and discussing the stuff, it's really hard to frame it. As in what does it mean? 

But yeah, I think fundamentally law firms, as in-house teams are full of bright people, very articulate people who get what's going on from a geopolitical perspective. Sometimes maybe they draw a line for themselves in their own heads about I'm a lawyer, I give legal advice or I don't want to step over and speculate into what happens next or, and I think I've probably done this in the past as well, almost not having enough skin in the game. I think lawyers have a tendency to stand back and admire a problem rather than feel the full weight of I have to make a decision and that has financial real-world impacts. 

Again, I think it's shifting. I think that personality type is starting to come through and start to see more of it. But that really is where I think in-house teams have evolved to and where any private practise firm that's saying we want to be strategic advisors and mean that in the context of giving actual advice on what's going to happen in the future. ‘How can we help you advice’, as opposed to ‘strategic advice’ just means, I know not just giving legal advice. We'll also provide staffing solutions, all these other things. Then I think that really involves that kind of thought leadership.

Lawyers are very good at catastrophising and thinking what could happen if you tweak that slightly into taking all the facts and having some ideas of where things might go and where you might want to nudge, whether it's regulators, government, internal people, whoever to kind of change that direction. That's really what the skill set of a strategic advisor is. And we're starting to get there. As I say, I think law firms are starting to get there as well. But it is quite, it's a rarefied skill.

The evolution of this whole relationship piece and the importance within that framework of good relationship management and development. You know, what value do you place on that as a bank in terms of those interactions with your panel firms and how embedded they are and how much they lean into the bank?

I think it's very valuable. Inevitably in an organisation of our size, there will be relationships with law firms which are entirely transactional, entirely based on cost and value because of the kind of work that we have. We don't quite know where it's going to go. Can we sit down and have a conversation about it? Can we pick your brains on how you think it's going to go?

And moving on, you mentioned AI and the advancements in technology. We can't ignore that.

It's just how you've seen that evolve and the impacts that technology has had on these interactions, these relationships, obviously partly in the way that legal services are provided. And you expect that kind of technological advancement from your law firms, but also, I mean that the bank is, you know, uses a lot of AI as big tech teams and it's constantly evolving in that sense as well. I suppose first and foremost that interaction with the law firms and technological advancements and how that's impacted and improved things or not.

I'll start with AI and come back to that, because I think AI is a really interesting case study. There's lots of stuff that we're playing with in that space. And obviously in a non-legal space, the bank is using AI in so many different ways and we kind of expect that now from our suppliers and certainly from our law firms. And so, but I think in that context of how do you make this faster? How do you make this simpler?

I think that challenge, because we're facing it as well, is there's a mixture of people who struggle with the concept of technology and are quite slow adapters or adopters, while there's some people who love it and race on ahead. 

It's really figuring out what are we trying to do, what technological solution is going to be the best thing to fix that, and then what that actually means in terms of downstream. So we've talked before about AI doing the jobs of junior lawyers that you kind of need to teach them to do, so they're capable of being senior lawyers in due course. But at the same time, there's a huge amount that AI can do which will make things faster and make things cheaper and should revolutionise the model.

So it’s steering a path between the evangelists who want a better technology in their space and the naysayers, because I don't think either of them are necessarily right. It's getting that balance right between what tools do we have that can genuinely shift it up? And it might be really simple, it might be really basic, but those are the things that we really need to focus on getting that agreement on how it works and which ones are the ones that we prioritise and fund.

I think there's still that kind of just connection problem between how do we use technology to properly solve the problems that we have as opposed to either going, oh, I can never work or buying up everything in the market because it's a shiny new thing. And then sitting there with a pile of tech going, well, this isn't really shifting anything from me. That's where I think we're at the moment, that space and trying to really understand how it works. But I'm maybe being dismissively evangelist, it will come and I think it will radically shift the industry. It's just figuring out how to make it work for us as opposed to maybe not working the way that we expected. As you said earlier, there's a lot of change coming.

Andrew Lyon
In terms of what's coming down the line, but just trying to look ahead about how the collaboration with your law firms might evolve over the next five years. Do you see different types of panels depending on the kind of services that you're looking for? So perhaps touching on some of those themes, just trying to project ahead as to what you're talking about now and what you think might change in the next few years. 

Mark Johnson

My personal view of panels is, I think there are lots of competing reasons which dictate the structures of panels. And some of that really goes to the heart of what you're using law firms for. As I alluded to, I think for commoditised transactional work, it kind of makes sense to have a few firms and mileage costs and all those kind of things. I'm not sure that's how we necessarily use all the firms on our panels now. And so that, that makes it hard.

If you've got a small number of firms and there is a firm out there that's the thought leader on our cryptocurrency or something like that, they're not on your panel. So how do you access that? There's a whole load of competing complexity, I suppose. And my sense is over the next 5-10 years, change is just going to get faster.

And clearly, we've hit a period of geopolitical instability that doesn't look like it's going to stop anytime soon. So that pace of change isn't going to change. But I think a lot of the law and regulation is quite static certainly in financial services. And I think the government is struggling to keep pace with what's going on in the outside world. So, it means we as lawyers are going to get busier because there's going to be more areas where frankly, there isn't an answer. The regulation, the legislation doesn't keep up with the reality of what's going on outside that window. So, our role in trying to navigate that, come up with good solutions in a real-world context, I think it's key and it's going to be really crucial to what we do. But as I said, I think that also goes hand in hand with massively changing areas of focus. So whether that's things like Apple Pay or open finance or even into the, I mean, we touched on AI before, but even into kind of what it's used for. The prevalence of financial crime and all the different ways to scam people. Now AI is going to kind of massively impact that as well.

So all of these things are just going to mean there's a massive array of things, new things that we haven't thought about yet. And how to engage is one of the things that keeps me up. How to engage well enough with law firms so that you have the right people at the right time to really help figure out what we do next in these places. And as I say, I think sometimes panels get in the way of that. Sometimes they work really well. It's difficult to predict where that goes.

I think law firms that adapt well are going to be the winners because some are very good at the transactional stuff and want to be in that space and that's profitable. The thought leadership space maybe is less profitable. And this is where I think all of us are going to struggle to figure out what the business model looks like.

The lawyer’s role will change, as I alluded to before, into the kind of role of crisis manager or kind of strategic advisor. And that involves our skill sets playing different roles in different times and that takes different lawyers and different firms. 

So, yeah, I mean, I'm nervous about the future. I think it's more uncertain than it has been at any point in my career. I'm also quite excited though about from a career perspective, from what we talk to our junior lawyers about breaking out of some of those restraints of historically being a lawyer. And it's quite exciting. You know, there's also a whole load of things that haven't been within our gift before that can be uncomfortable. Change always is. But it'll be interesting to see how it works. And as we've been talking about, I think that that wouldn't require an evolution of the law firm model. It'll require an evolution of the enhanced team model.

Andrew Lyon 

Just in terms of the roles that we play, we often say as an external law firm that we would like to get closer to the business and that plays to that point about being more embedded with the client and with the bank as a whole. How do you see that playing out? Is that really feasible? Does there need to be the in-house team playing the middleman if you like? Or is it, is it possible to, I'm not saying, I'm not saying law firms go directly to business because I, I don't think that would be right. But that's sort of working alongside in house legal with that interface with the business. Do you think that might play through a bit more? 

Mark Johnson

So having external firms coming in and managing our kind of parts of our client relationships isn't useful in many ways. I think the challenge that we have is really experience and the capability to handle that because obviously the ability to face off, get things right. And again just the model of not charging by the hour carries a cost which people in the business aren't used to. So there are various hurdles along the way that I think can make that difficult. Conceptually, I don't think it's a bad idea, but I think there are ways to do it and sometimes it works and that's it. But equally, I think some of the transactional stuff, some of the low-level stuff where you can set in place clear kind of instructions for this goes here and this is how it is handled. I think that works phenomenally well. And we do that in various places across the group. I think some of the strategic stuff works phenomenally well if you have the right lawyers in the room. It's difficult to have a kind of one-size-fits-all.

You can bring any law firm in and plug them into your business because I think there's some of that which is personality driven and some of that which is, I suppose, part of our role as in-house lawyers is to have that really big picture view of what's going on, which is hard to kind of drop in and out of you. Either you're either embedded fully or you're not. And so without that context, sometimes the decision making isn't as a factor, which again is the whole reason why you've got an in house team. So I think it's definitely something which is going to, we have more, has to have more with pace and all the rest of it. You can't let an in-house legal team be the blocker between getting the right legal services if there aren't enough of us to kind of manage the three flow.

But it's figuring out the best ways to do that so that everyone wins and you don't end up with things falling overall clashes between cultures or just, I don't know, things not quite going the way that either side don't first play.

Andrew Lyon

I think that's a nice segue into the final point really, Mark, which is about culture and values and how important that whole cultural alignment and that those shared values really are. Can you just touch on that? 

Mark Johnson
I think it is really important. I think NatWest and TLT are the same. I think got a lot of store and culture and kind of how we want our people to behave, how we want them to feel about being in the organisation. And I think it's really noticeable when you can deal with other organisations that don't have that same cultural focus and maybe don't have the same values. In that sense, things are just a little bit kind of more, I know, crunchy than they are normally. And I think you can recognise it just in terms of how things work. So having cultures that are at least complementary or at least having respect for each other's cultures, I think in that sense is really helpful. I mean, my sense and you can talk about this a bit more, but I think TLT and NatWest Group have similar cultures in that way.

And I think we're quite focused on experimentation and autonomy, including getting people to do stuff right, to give people the ability to get out and change what they're doing and improve what they're doing and improve themselves. 

That's really important to us as a cultural point and something that we're trying to get our lawyers really on board with. So again, coming into contact with firms or other organisations which are a little bit slower and a little bit more, I have to ask X number of people this before it happens leads to friction. So there's definitely an element in that of having that cultural alignment helps with any relationship with it. Yeah, I think that's sort of kind of cross pollination if you like. And that experimentation in terms of the way we work together and the evolution of that is going to be really important.

And you and I have talked a lot about, you know, the secondments and so on and you know people swapping their roles for periods across our respective businesses is one aspect of that. And I'm sure there are many other ways that will evolve, supporting each other on social mobility initiatives and all of that good stuff.

So the other one that I see kind of playing through a little bit is customers. So given the organisation that we are, we're really focused on customers. It's quite hard as a lawyer to think through the lens of what the customer needs and how we focus on them. And that's really important to us and getting that mindset shift into think about what this actually means in the real world.

Andrew Lyon
Mark, we can talk for hours. We probably shouldn't. But thank you so much for that for your time today. I really look forward to seeing how we continue to grow this relationship. It's a very long standing one. And long may it continue. Thank you very much for joining us. 

Mark Johnson