By: Samantha Whitsel
On February 27, KPMG became the first of the Big Four (EY, Deloitte, PWC, and KPMG) accounting firms to receive approval to establish a law firm in the United States: KPMG Law US. The Arizona Supreme Court licensed the firm as an alternative business structure (“ABS”), a model first adopted by England. KPMG Law US will operate as an independently managed subsidiary of KPMG that will maintain “strategic alignment” with KPMG’s Tax Practice to offer “integrated professional services.” This development raises questions about competition with traditional law firms and the potential impact on the legal profession’s structure and ethics.
KPMG’s move into the U.S. legal market highlights the increasing convergence of non-legal practitioners and the law globally. The Big Four have already been providing legal services in jurisdictions with more flexible regulatory regimes. In the United Kingdom, for example, accounting firms have been active in the legal space since 2011, benefiting from ABS models that allow non-lawyer ownership of law firms. ABS were authorized in England and Wales through the Legal Services Act of 2007 to encourage competition and improve access to justice through the collaboration of lawyers and non-lawyers. Similar arrangements exist in Australia, Canada, Germany, the Netherlands, and Brussels that allow for some form of multidisciplinary law practice signaling the influence of globalization in an international shift toward integrated professional services.
In contrast, U.S. regulations have historically restricted non-lawyer ownership and fee-sharing, making KPMG’s approval a notable shift. In most states, only lawyers may practice law, own firms, and share legal fees. However, in 2020, Arizona became the first state to remove those laws prohibiting non-lawyers from holding economic interest in law firms. Today, the state has over 100 approved ABS entities, including personal injury firms, an estate planning business, and subsidiaries of online legal service providers like LegalZoom and Rocket Lawyer. Proponents of Arizona’s ABS program commend the state for expanding the legal market to non-lawyers, which they say is making legal services more affordable, innovative, and accessible.
Nevertheless, critics of Arizona’s law fear the increased potential for ethical malpractice if these non-lawyers are not bound by the same professional rules of responsibility as lawyers. Global ABS regulatory frameworks may offer useful guidance. A key component to regulating these international ABS in the UK and Australia is proactive management-based regulation (“PMBR”), which holds the business entity accountable for ethical noncompliance. In PMBR, the entity must designate a practice manager who regularly interacts with the regulator to ensure proactive systems are in place like random audits and required self-assessments. Vital to addressing non-lawyer accountability is that in PMBR, the entity, in addition to individual attorneys, may face sanctions for non-compliance. While KPMG’s ABS license was conditioned on it refraining from doing legal work for any of its audit clients and it has pledged adherence to the high ethical standards of traditional law firms, implementing PMBR measures could further strengthen its compliance posture and build public trust.
From the standpoint of traditional firms, the implications of KPMG’s entry are significant. KPMG’s law firm will have the unique capabilities only a large accounting firm could offer. With approximately 275,000 employees operating in more than 142 countries, KPMG’s reach dwarfs even the largest global law firms, which at the most employ only several thousand lawyers. KPMG’s vice chair for tax emphasized the firm’s goal of leveraging this position “to transform the delivery of legal services, [and] by combining cutting-edge artificial intelligence and advanced technology solutions with legal services, we are proud to be a first mover with this capability and to offer the most holistic range of tech-enabled services in the marketplace for our clients’ evolving needs.” From a logistics standpoint, this level of scale, coupled with an aggressive pricing model, could give KPMG a distinct edge over traditional firms operated by lawyers alone.
Quoting Richard Susskind, a future of law thought leader, in his discussion of the future of law firms in chapter 8 of Tomorrow’s Lawyers, “if a major new force (such as a ‘Big 4’ accounting firm) emerges, and brings a new proposition to the market—a credible brand at half the price of its competitors, for example—then this could fundamentally and irreversibly change the market, and not just for the elite firms but across the entire profession.” KPMG’s entry, driven by professionals with MBAs and consulting expertise, may serve as a wakeup call for traditional firms, run by lawyers with legal expertise but who may not be as versed in strategic business efficiency.
KPMG Law US marks a pivotal moment in the evolution of legal service providers in the United States. As the line between legal and non-legal professional services continues to blur, Arizona’s ABS experiment may serve as a proving ground for what a reimagined legal market could look like if business and legal professionals band together. Whether this shift leads to a more competitive, accessible, and innovation-driven industry or exposes new vulnerabilities in ethics and accountability will depend not only on how firms like KPMG operate, but on how regulators respond. For now, the door is open, and the legal profession must decide whether to resist or adapt to this new reality.
