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Retiring Boomers Pose Big Challenges For Firms
In 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, CO, 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. Benedict's age puts him in the leading edge of the largest wave of retirements that law firms have ever experienced. The aging-out of the generation, which began when the first baby boomers turned 65 in 2011, has been picking up speed ever since, with heavy ramifications for firm business. “There's been this looming tsunami of generational change confront the profession for a long time,” says Altman Weil Inc. principal Alan Olson. The changeover “is happening now, and over the next five years.” Until recently, Olson was on a lonely campaign to warn firms about the crisis. Now, a growing number of consultants and firm leaders have turned their attention to the issues that the graying of The Am Law 200 poses to firms already reeling under years of anemic growth, eroding realization rates and an overheated lateral market.
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% per year in head count; from 2000 to 2008, by 5%; and since 2009 by just 1.2% on average annually, according to Am Law 100 data. In the next five years, one in six — 16% — of current partners will retire, and 38% in the next decade, according to the preliminary results of legal search firm Major, Lindsey & Africa's 2016 Partner Compensation Survey.
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