TLOMA Today

Get ready for the warm humid nights, humming AC units and relentless, pesky mosquitos. Let the countdown to summer begin!   

On a personal note, June is very special to me. Being a father of 3, it allows me to be the center of attention and admiration on the third Sunday of the month. Who could turn that down? It also allows me to remember my dad, who was my mentor in life.

We have  lots of upcoming events in June for TLOMA. We start the fun with our summer networking event on the June 5^th at the Local Public Eatery located at York and Adelaide followed by the annual golf tournament on the 12^th at Royal Woodbine Golf Club (registration still open). Looking forward to seeing you all at both events!

Sprinkled with the fun we have 3 educational SIG’s (HR on the 7^th, Facilities on the 18^th and Finance on the 26^th). Please review the TLOMA website for specific topics and registration information.

There is also a summer lunch networking event planned for August 22 at the Lena Restaurant.  Watch your inbox for details!

Finally, don’t forget to register for the annual conference and tradeshow set for September 25^th-28^th in Niagara Falls. We have some great events and speakers ready to make the 3 days something to remember!

Breaking News:  The Early Bird deadline is now extended to June 30th.  Don't forget to register!

In today's rapidly evolving legal landscape, law firms of all sizes are increasingly recognizing the immense value of data as a vital asset for growth. Traditionally, larger firms have been at the forefront of leveraging data analytics to drive strategic decision-making. However, for smaller and mid-sized firms aspiring for growth, embracing data-driven insights is no longer optional—it's imperative for staying competitive and achieving sustainable success.

Data has the power to revolutionize various facets of a law firm's operations, ranging from the selection of legal specialties to case decisions and resource allocation. By harnessing the power of data analytics, law firms can gain deeper insights into market trends, client preferences, case outcomes, and internal performance metrics. These insights not only enable firms to make more informed decisions but also enhance efficiency, productivity, and ultimately, client satisfaction.

Nevertheless, transitioning to a data-driven approach is not without its challenges, particularly for firms accustomed to traditional practices. Introducing new technology and processes often entails significant investment, time, and effort, and may be met with resistance from team members who are wary of change or unfamiliar with data analytics.

Three Key Strategies to Enhancing Law Firm Performance through Technology:

Garner Partner Support

Securing buy-in from partners is paramount. Introducing major technological advancements demand budget allocation and resource dedication. Partner advocacy not only facilitates resource allocation but also garners support from staff members throughout the firm.

• Leadership Buy-In and Vision: Leadership must champion the adoption of data analytics and articulate a clear vision for how it will drive growth and innovation within the firm. By demonstrating a commitment to leveraging data as a strategic asset, leaders can inspire confidence and enthusiasm among team members.
• Collaborative Approach: Involve team members in the decision-making process and encourage collaboration across departments. Soliciting input and feedback from various stakeholders can help address concerns, identify opportunities, and foster a sense of ownership and accountability.
• Education and Training: Providing comprehensive training and educational resources is essential for ensuring that team members feel empowered to embrace data analytics. Investing in workshops, seminars, and online courses can help demystify data and build a culture of continuous learning within the firm.

Highlight the Advantages

Building consensus for a new technology solution is more manageable when you articulate its benefits clearly. Understanding potential financial and resource efficiencies upfront, even before implementation, establishes a clear path to return on investment. Communicating these advantages effectively aids in gaining support from senior partners and relevant teams.

• Emphasize the Human Element: While technology plays a crucial role in data analytics, it's essential to remember that people are at the heart of any successful transition. Foster a supportive and inclusive culture that values innovation, creativity, and collaboration, and recognize and reward team members who embrace data-driven practices.

Align with Growth Objectives

While your law firm may currently operate at a smaller scale, it's crucial to recognize and align with partner aspirations for growth. Understanding these goals ensures that your performance management program, supported by appropriate technology, contributes to the firm's expansion ambitions. Investing in robust FP&A capabilities and technology platforms distinguishes ambitious firms from those merely striving to progress.

• Start Small, Scale Gradually: Rather than attempting to implement sweeping changes all at once, start small and focus on targeted initiatives that demonstrate immediate value. This could involve pilot projects or proof of concepts aimed at showcasing the tangible benefits of data analytics in specific areas of the firm's operations.
• Continuous Evaluation and Improvement: Monitor progress, gather feedback, and adapt your approach based on lessons learned along the way. Continuous evaluation and improvement are essential for ensuring that the firm's data strategy remains aligned with its evolving goals and objectives.

Embracing data as a strategic asset entails more than just recognizing its importance; it requires a fundamental shift in mindset and approach within the firm. By acknowledging data as a cornerstone of their operations and committing to leveraging it effectively, law firms can unlock a myriad of opportunities for growth and success.

Investing in the necessary technology and infrastructure is a critical first step on this journey. This includes implementing robust data management systems, analytics tools, and other technological solutions that enable the collection, processing, and analysis of data in real-time. By having access to accurate and up-to-date information, law firms can make more informed decisions, identify emerging trends, and respond swiftly to changing market dynamics.

Recognizing Benefits & Championing Value

However, technology alone is not enough. Cultural changes are equally essential for fostering a data-driven mindset within the firm. This involves cultivating a culture of curiosity, experimentation, and continuous improvement, where team members are encouraged to explore new ideas, challenge existing assumptions, and embrace data-driven approaches to problem-solving. The reluctance to embrace change often originates from firm leaders, whether due to a fear of disrupting established organizational knowledge, a reluctance to compete, or a comfort in maintaining the status quo with the mantra "that's how we've always done it." Leadership is pivotal in driving cultural transformation by advocating for the value of data, allocating resources, offering support, and demonstrating a commitment to change through personal example.

The journey towards becoming a truly data-driven firm may not be easy, and it will undoubtedly require time, effort, and resources. There may be obstacles along the way, including resistance to change, technological challenges, and cultural barriers. However, the rewards of this transformation are well worth the effort - just look to any firm recognized as, 'Big-Law' and size up their investment in technology. 

Enhanced efficiency is one of the most immediate benefits of embracing data-driven practices. By streamlining processes, automating routine tasks, and optimizing resource allocation, law firms can operate more efficiently and effectively, freeing up valuable time and resources to focus on high-value activities.

Informed decision-making is another significant advantage of a data-driven approach. By basing decisions on empirical evidence and data-driven insights rather than intuition or gut instinct, law firms can minimize the risk of errors and improve the likelihood of success. Whether it's selecting the most promising legal specialties to focus on, identifying the most lucrative client opportunities, or making strategic investments in technology and talent, data-driven decision-making empowers firms to make smarter, more informed choices that align with their long-term goals and objectives.

Maximizing the Data-Driven Approach

Finally, a data-driven approach can provide law firms with a competitive edge in today's dynamic legal marketplace. By staying ahead of the curve, anticipating market trends, and adapting quickly to changing circumstances, firms can differentiate themselves from their competitors and position themselves as industry leaders. Whether it's delivering more personalized client experiences, offering innovative legal services, or optimizing pricing and billing strategies, data-driven firms are better equipped to meet the evolving needs and expectations of their clients and stay ahead of the competition.

From working with leaders in the legal finance space, it is no surprise embracing data as a strategic asset and investing in the necessary technology, infrastructure, and cultural changes is essential for law firms seeking sustainable growth and success in today's dynamic legal marketplace. While the journey towards becoming a truly data-driven firm may present challenges, the rewards—including enhanced efficiency, informed decision-making, and a competitive edge—are well worth the effort. By committing to this transformation, law firms can position themselves for long-term success and thrive in an increasingly data-driven world.

Today, lawyers are increasingly transferring funds electronically from their Trust accounts. Specific requirements must be followed to ensure the security and integrity of these transactions. Lawyers can use wire or email transfers for these electronic fund transfers, provided they adhere to the procedures established by the Law Society of Ontario (LSO). Section 12 of the LSO’s By-Law 9 outlines the necessary steps and precautions for compliance. Let's explore these requirements in detail.

Wire Transfers

1.  Initiation with Form 9A: The process begins with a requisition form (Form 9A) signed by the licensee.

2.  Transaction Confirmation: The transfer system must generate a transaction confirmation, which the licensee must compare with Form 9A to ensure accuracy.

Email Transfers

Email transfers into Trust accounts are straightforward, while transfers out require additional steps:

Client Authorization: Obtain the client's preferred email address for transferring funds.

1.  Form 9A Details: Include the recipient’s email address and method of payment on Form 9A, noting the reference number in the email message field for reconciliation.

2.  Recordkeeping: Save or print the email confirmation of the transfer, attach it to Form 9A (or keep it electronically), and maintain these records for at least 10 years.

Considerations for Trust Account Deposits

While depositing funds into a Trust account electronically is permissible, several factors need consideration:

1.  Account Information Security: Be cautious about providing your Trust account details (e.g., financial institution name, branch number, account number) to clients or third parties to prevent unauthorized deposits or withdrawals.

2.  Clearance Period: Determine an appropriate clearance period before disbursing funds, considering the transmitting, and receiving financial institutions' guidelines.

3.  Service Fees: Ensure that any service fees are drawn from your General account, not your Trust account. Discuss with your financial institution how these fees will be handled.

Recordkeeping and Compliance

To meet your financial recordkeeping obligations, ensure that the client or third-party payor provides a copy of the confirmation documents when funds are transmitted. These documents should detail:

1.  Source and Destination Accounts: The financial institutions and accounts involved in the transfer.

2.  Transaction Amount and Timing: The amount deposited and the date and time of the transmission.

Wire Transfer Fees

Understanding and managing wire transfer fees is crucial for compliance:

1.  Outgoing Transfers: Fees for sending wire transfers are typically deducted from the sending licensee’s account.

2.  Incoming Transfers: Fees for receiving wire transfers are usually deducted by the receiving institution in transit, reducing the transferred amount.

Steps for Managing Wire Transfer Fees

• Fee Assessment: Determine the fees associated with wire transfers and how they will be deducted.
• Account Services Agreement: Review your agreement with your financial institution to understand the fee structure.
• Client Communication: Inform clients about any wire transfer issues and potential fees.
• Compliance: Ensure that wire transfer fees are deducted from your General account. If this is not possible, consider charging the fee to your client as a disbursement or switching financial institutions to ensure compliance.

Special Circumstances

• EFT Restrictions: A lender cannot execute an EFT to withdraw Trust funds. However, lawyers can transfer Trust funds electronically to a lender if they comply with Section 12 of By-Law 9.

In conclusion, while electronic transfers from Trust accounts offer convenience, they require meticulous adherence to prescribed procedures and careful management of associated risks and fees. By following the guidelines set out in By-Law 9, lawyers can effectively leverage modern banking technologies while maintaining the integrity and security of their Trust accounts.

The pandemic threw a wrench into normal law firm proceedings with many professionals having to work exclusively from home. With lockdown in the rear-view mirror, law offices have once again become a tool firms can use to stimulate connectivity across the business and with clients.

Getting the most out of an office hinges on the effectiveness of a firm’s meeting spaces. Booking conflicts and a lack of logistical support can lead to disorganized client meetings in the office and frustrating employee experiences. The office should be a destination for collaboration between colleagues and clients—not chaos.

We’ve put together 5 tips to help you better manage the meeting spaces and conference rooms in your law office.

Let’s dive in. 

5 Tips for Better Meeting Room Management in Your Law Office

With the rise of in-person meetings, client visits and a more flexible approach to work, it is essential for law firms to invest in efficient tools and processes to streamline their meeting room management. 

So, how should you go about improving the process for your teams? Here are a few quick tips.

1. Plan for Client Visits

Research shows that client visits are on the rise, with a 147% increase in guest visits since January 2023. So, planning for in-person visits is crucial. There’s nothing worse than having a client on-site only to find out there are no meeting rooms available. For better management of your meeting rooms, make sure to have visitor management plans in place that prioritize booking availability for client meetings. 

Don’t forget to consider other details that impact the overall visitor experience too. For example, automated notifications for employees when guests arrive or email communications regarding check-in instructions for guests can help make your client’s experience hassle-free—and it makes your employees look good.

2. Build Clear Policies

With 83% of law firms documenting meeting room management as part of their return to office plans, according to Forrest Solutions, having clear policies for teams is essential.

Establish guidelines on how to reserve rooms, expectations for maintaining cleanliness and order, and instructions on how to use meeting room scheduling software effectively (more on that later).

Make sure whatever system you use to manage your meeting aligns with the policies you create for your firm. Determine booking maximums, room privacy settings, and other permissions to maintain a balance between open access and controlled usage, reflecting your firm's specific needs. Set rooms to be released if no one has checked into the space or limit access to certain spaces as needed.

3. Find the Right Software

You want to give your teams the tools they need to effectively collaborate in-person, whether it’s with clients or colleagues. When selecting room meeting room booking software for your law firm, prioritize solutions that offer seamless experiences for your teams. Consider factors such as user-friendliness, integration with existing systems, and support for virtual meetings.

Implementing a meeting room scheduling software can revolutionize the way law firms manage their meeting spaces. The software enables centralized scheduling, allowing staff to easily book, modify, or cancel meeting room reservations from a single platform. 

The best meeting room software also comes with visitor management functionality. Those guest arrival notifications and check-in instructions for guests? The right room software can power that and more.

4. Use Room Displays for Easy Access

Utilize room displays outside meeting spaces to showcase booking status, upcoming events, and room resources. This helps employees and guests know what’s available at a glance and make instant reservations if needed.

Make sure room displays include information about the room’s resources so people can choose the best space for their needs. Some examples of information to include:

1.  Room capacity - how many people can comfortably fit?
2.  Number of seats - will there be standing room?
3.  Meeting technology - what tech do you have on hand in the room? 

5. Monitor Meeting Room Utilization

To capitalize on real estate cost savings, continuously track room utilization data and identify trends. Leverage these insights to optimize office space and improve cost-effectiveness. 

These data insights can also help you better plan for future resource needs. Are certain types of rooms being used more than others? Are other spaces left sitting empty often? Identify what makes the most popular spaces and consider using that layout and tech in other rooms. On the other hand, take note of which rooms and spaces aren’t used very frequently. If you’re consistently seeing spaces being underutilized, it could make sense to change those rooms or even consider downsizing.

With real estate being a significant cost factor for law firms, workplace software can be a worthwhile investment to maximize office space usage. Tracking room utilization patterns and data empowers firms to make informed decisions, leading to substantial cost savings.

Prepare Your Law Offices for the Future of Work

Meeting the needs of modern legal customers and preparing for the future requires a client-centric, technology-enabled approach for law firms. The right spaces, policies, and software in place helps law offices transform into efficient and productive spaces. 

Embracing this technology not only enhances client experiences and team productivity but also empowers law firms to make informed decisions about real estate usage, leading to substantial cost savings.

Navigating the world of hybrid work is still new to many law firms. Preserving the office as a space for connectivity and collaboration with colleagues and clients through effective meeting rooms strategies will pay dividends for law firms big and small.

A few years ago, a group of North American lawyers responded to a survey about legal practice management. It revealed what most of us knew all along: over half of the duties involved in managing a practice has nothing to do with the law itself. In fact, three-quarters of respondents stated that they spent at least 20 hours a week on tasks such as court filings, legal research, and administrative work.

The message is clear: it takes more than legal knowledge to manage a law firm. It also demands a sharp focus on multiple aspects of business management, including but not limited to operations, technology, and professional development,

This is where a legal practice management consultant can be invaluable. This type of consultant helps law firms navigate through various business challenges while fostering growth and enhancing efficiency. If you’ve never worked with one, here are some of the many benefits involved.

Streamlined Operations

One of the main roles of a legal practice management consultant is to streamline operations. Law firms often face operational inefficiencies that can hinder their ability to serve clients and grow the business. A consultant examines these processes to identify bottlenecks and areas for improvement. This strategic input ensures that firms are well-positioned for both current needs and future growth.

Better Technology Integration

To stay competitive, law firms must stay up-to-date with the latest digital tools. Legal practice management consultants help firms select the right software for their specific needs. Their vendor-neutral, transparent approach ensures that technology solutions are not just state-of-the-art but also right for the unique demands of the firm.

Improved Professional Development

Professional development is a cornerstone of the legal industry. Legal practice management consultants provide crucial training and development opportunities to elevate the skills of team members. Through accredited teaching sessions, staff learn to use the increasingly complex technological tools used in modern legal practices. The result is a knowledgeable team that can adapt to changing demands.

Competitive Advantage

Working with a legal practice management consultant provides a competitive advantage. The consultant’s insights into industry trends and best practices enable law firms to innovate and stay ahead of the curve. By adopting improved operational, technological, and development strategies, firms can enhance their service offerings, which in turn attracts more clients and retains top legal talent. This not only elevates their market position but also bolsters their reputation within the industry.

Choosing the Right Consultant

When selecting a legal practice management consultant, look for a team that aligns with your firm’s values and vision. The right consultant should understand the specific challenges and opportunities within your practice area and offer tailored solutions that drive your firm forward.

Conclusion

There are many benefits to hiring a legal practice management consultant. They help law firms improve efficiency, integrate technology, and grow staff capabilities, all of which contribute to a competitive edge in the market.

At Inderly, we are proud to provide Ontario law firms with tailored and effective legal practice management consulting services. Our dedication to transparency, tailored strategies, and easy implementation makes us a trusted choice for any law firm aspiring to thrive in today’s demanding business environment.

For more information about how our services can transform your practice, head to our website for short informational videos.

Four pillars of legal service business excellence enable achievement of the key objective – to win – and support professional and personal happiness.

Aldous Huxley’s ground-breaking book, “Brave New World” was written in 1932. It explores the perils of a society that prioritizes stability and efficiency over individuality and emotion.

Are we there now?

In March 2023, Artificial Intelligence brain trusts called a six-month all-stop on further development of artificial intelligence. The timing was a tad late since the genie was out of the hard drive never to be coerced back inside. However, this daunting proposition was one of the reasons for the AI moratorium and the “mind how you go” message.

Minding how you go is serious business in the risk-averse legal services realm especially when anyone who works with lawyers knows there’s one sure fire way to get their attention: Scare them. Scare tactics are often effective because lawyers are trained to be aware of risk, avoid it like the plague, and tend to be world-class worriers.

So, is it any wonder that for years, lawyers have been scared to death that technology will take over their jobs? It is true that technology has been and will continue to be injected into work of all kinds – including legal services – but being scared solves nothing and only causes inertia and retreat, which are career-limiting moves in themselves.

This is why if ever there was a time to sharpen your market strategy, narrow niche your practice, deliver value consistently, and be your true self, it’s now.

That’s because strategy, niche, value, and authenticity are the four pillars of legal business excellence that enable achievement of the key objective – to win – and support professional and personal happiness.

Only you can do this. AI can’t, at least not yet.

Market Strategy

High-performance law firms and legal service providers focus on three success factors extraordinarily well, and act and manage accordingly:

1. Commit to long-term objectives, mid-term strategies, and short- term tactics, and execute on them ruthlessly within time boundaries.
2. Attract targeted clientele, and continually grow and retain key client relationships.
3. Hire and nurture client- and firm-aligned talent, and cull with speed and respect those who don’t meet the mark.

Lawyers provide legal service; service being the operative word. Service is a business of caring for others. If, within your target markets, you consistently foster:

• Marketing – building profile
• Business development – nurturing relationships
• Client retention – ongoing care

Then sales and referrals can happen more readily and easily.

This is an easy lesson in theory and hard learned in practice. While these are fundamental factors in the business of law, for some unfathomable reason they have yet to be embedded in law school curriculums and often not learned in practice.

This is why law school is rudimentary. Learning the business of law is critical and the first step is to understand that transformative growth hinges on market strategy and that development of market strategy is the critical key to achieving your objective to win.

Narrow Niche Practice

Successful narrow niche practices require wall-like boundary setting, barnacle-like adhesion, and intestinal fortitude to decline work that is not in your wheelhouse.

This strategy is effective because walls enable doorways, adhesion underpins resolve, and declining suboptimal work opens opportunities for referrals and reciprocity.

Anyone who knows me is fully aware that I advocate for a narrow niche practice and industry alignment because this strategy works every time.

For example, professional engineering friends of mine who have narrow niched into select manufacturing sectors have been attracting the very work they want for over 30 years. Medical professionals who specialize in niche facets within select areas of health care become go-to’s, often receiving and accepting offers to practice in lucrative markets.

I have seen this level of success with my own 25-year legal market practice that has become more narrowly niched over time. And lawyers I’ve coached into a narrow niche practice attract more work from a better class of clientele, and enjoy healthier work styles and more leisure time, which is the true measure of wealth. They have also seen revenue jump by 1,100 per cent – no, that’s not a typo, – make better business decisions more easily, fast-track to the bench, etc.

This is because a narrow niche practice enables you to be one of one and therefore, the go-to for exactly the type of work you want and in which you excel.

Deliver Value Consistently

Technology is fast catching up to impact lawyers, especially those who churn paper for a living.

Still, technology and artificial intelligence are soulless. At least so far. Some of humanity’s best qualities, such as empathy, consideration, humour, fairness, and care plus the peculiarities that are part-and-parcel of our own personality traits are not apt to be found in tech or AI.

This is where value comes to the fore.

Not so long ago the phrase “value proposition” was all the rage. Was it a fad? No. Providing value is the key to unlocking new opportunities and nurturing relationships you want to retain and grow. The key is to demonstrate and deliver consistently on the value you propose.

Run of the mill value-adds such as thought leadership articles, social events, complimentary CLE sessions, staffing solutions, and discounts can be on offer until the twelfth of never, but still not deliver value according to clients.

This is because value and price are not as related as you might think.

For example, a client firm of mine charges eye-watering fees, but clients tell me they’ll never leave. Why? Because even though this firm has always been the most expensive on almost every company’s law firm roster, the humanity and care extended by every person with whom clients deal – receptionists, lawyers, paralegals, assistants, couriers, you name it – is thoughtful and genuine, goes above and beyond every client’s expectations, and therefore, provides ongoing value that results in continuous loyalty, goodwill, and referrals.

Value is subjective and emotional. It is intimate and often best delivered on a one-to-one basis. This is because value is perceived differently by every individual and changeable on every matter over the duration of a firm/lawyer/client relationship.

Even though value is based on perceptions, it’s also provable. This is why keeping communication channels open consistently and by design, and not by accident or when working on an active matter, is a critical factor to delivering value when on task and, often more importantly, when off.

Clients want to be listened to – not just to be heard, but also understood. Failing to execute on this simple facet of exemplary value and sterling client service can have severe ramifications.

Such was the fate of three major firms who were fired from a roster of eight Canadian law firms by a mild-mannered General Counsel friend of mine with whom every law firm in the country wanted to work. And why were these firms fired? Because they didn’t listen. Once the dust settled and we talked about replacements, active listening was priority one.

That’s because clients want a proactive partnership with professionals who care about their welfare and provide ideas and paths to success.

Fulfilling this expectation is not hard, but it takes time and thoughtful consideration of needs, wants, and wishes, as does assisting a client to get where they need to go by proactively sharing vision, ideas, and experience that can help smooth their path.

The key to delivering value consistently is to always remember the cardinal rule: It’s never about you.

Be Your True Self

The strengths and limitations of AI are set out in its name. While it’s intelligent, it’s also artificial.

You are intelligent and real. And, yes, if you sense you have the personality of a turnip and all the sparkle of a wet Kleenex, AI tools can draft or buff up your bio. But still, it’s better to inject humanity into all areas of your practice since the authenticity of you being you will eclipse AI every time and for the better.

This is why sharpening your market strategy, niching your practice, and providing evidentiary value are key elements of legal business excellence that only you can do.

Easy to accomplish? Oftentimes, no. Life-changing? Absolutely. I’ve seen it happen successfully time and again with law firms and lawyers with whom I’ve worked over the years especially when they are fueled with curiosity, determination, and grit, and supported by experience and patience.

But authenticity – a rather overused word of late – is critically important personally as well as professionally. That is because you are enough.

Shakespeare got it right in Polonius’s speech in Hamlet, “to thine own self be true.” This quote has always been my north star to the point where it appears on a small plague by my front door. Glancing at it when going out into the world reinforces this pledge to stand in my own power.

As mentioned in my article, One and Only: “‘You are you – whether you are an individual, law firm, or legal service business. Never copy. ‘Imitation is the sincerest form of flattery that mediocrity can pay to greatness,’ said Oscar Wilde who, to simplify his point stated, ‘Be yourself; everyone else is already taken.’”

And while you’re focused on being you, get out from behind your desk, pull your face out of your phone, and connect with real live people every day and as often as humanly possible.

Doing so along with developing a legal market strategy, narrowing your practice niche, and delivering value consistently will make all the difference to winning your professional objectives and nurturing your personal happiness, especially in our brave new world.

Our technological landscape is changing. The convergence of information governance (IG) and artificial intelligence (AI) marks a pivotal point for enhancing operational performance, managing risk, and driving innovation. As legal practices grapple with the growing complexity of data management, adopting clear and comprehensive IG strategies is essential. IG, which includes a range of policies, methods, and technologies for information management and protection, lays the groundwork for effectively utilizing AI. The integration of AI brings opportunities for efficiency improvements, better decision-making, and the automation of mundane activities. Yet, this blend of AI and IG presents its own set of challenges, requiring a careful balance between embracing innovation and adhering to regulatory requirements. This discussion will explore the relationship between IG and AI within legal firms, highlighting the need for a well-thought-out strategy to make use of their combined advantages while minimizing the risks involved. By exploring this interaction, we hope the reader will understand the critical importance of IG in enabling the successful deployment of AI technologies and how AI, in turn, can bolster IG initiatives, leading to a legal practice that is not only more efficient and compliant but also more progressive.

Transitioning from a general discussion on the significance of AI and IG in legal settings, it becomes important to understand information governance's essential role. Serving as the core structure for managing legal data, IG ensures the reliability of data while preparing the organization for AI's effective application. Recognizing the fundamental value of IG is the first step towards assessing its influence on the operational effectiveness and regulatory adherence within law firms.

The imperative of information governance in law firms

Information governance refers to the comprehensive set of policies, practices, and technologies that organizations use to oversee, organize, and safeguard their data across its lifespan. This includes establishing benchmarks for data quality, regulatory compliance, confidentiality, and security to ensure data is both accessible and accurate, safeguarding it against unauthorized access and potential breaches. Information plays a dual role in law firms: it acts as a strategic resource, supporting informed decision-making, improving client service, and driving business growth, while simultaneously posing a risk in terms of compliance, necessitating careful navigation of increasingly nuanced legal and regulatory landscapes to safeguard data privacy and security, thereby avoiding data breaches and the resultant penalties.

The absence of a comprehensive IG plan subjects firms to various risks:

Data security breaches: Without strict security protocols, sensitive information becomes vulnerable to unauthorized access.

Operational inefficiencies: Poor data management practices can lead to delayed information retrieval and decision-making processes.

Compliance risks: Non-compliance with legal and regulatory obligations can lead to hefty fines and reputational harm.

Embracing a comprehensive approach to information governance is necessary for law firms. Effective IG practices not only help in mitigating risks related to data security and regulatory compliance but also enable firms to effectively utilize their data as a strategic asset. By emphasizing the management, protection, and strategic application of data, law firms are better positioned to improve their operational efficiencies, strengthen client trust, and successfully navigate the legal sector's complexities.

No matter one's stance on adopting AI technology, the critical nature of proficient data management remains undeniable. For law firms beginning to explore the integration of AI into their daily workflows, the underlying data quality and its readiness plays a key role. The success of AI applications in the legal field, ranging from the automation of standard tasks to supporting legal analysis, is largely dependent on both the integrity and the easy availability of data. Bearing this in mind, it's important to highlight the significant impact that precise and readily accessible data has in unlocking the full capabilities of AI for legal practices.

Importance of accurate and accessible data

The significance of maintaining accurate and easily retrievable data cannot be understated. At its core, information governance is about managing and safeguarding information to make sure it serves its purpose and follows laws and rules. The essence of these efforts is reliable data, which enables law firms to execute decisions based on solid information, deliver superior client services, and stay ahead of the competition. Equally important is the ease of data access, which boosts operational effectiveness by allowing for fast data retrieval and analysis. This, in turn, enables quick decision-making and improves responsiveness to both client requirements and regulatory obligations. Together, the precision and availability of data strengthen the IG framework, significantly reducing the risks linked to data inaccuracies and operational inefficiencies, such as compliance violations, financial consequences, and reputational damage.

Making sure data is reliable and easy to access helps law firms protect their information, follow rules better, reduce risks, and support their strategic goals and overall success. This highlights the need for law firms to maintain high standards for accurate data. To improve data quality, firms may adopt various approaches, including (a) performing consistent data audits to uncover discrepancies; (b) establishing strict data input and verification protocols; and (c) investing in technologies that improve data consolidation and ease of access. This makes collecting and evaluating information easier.

Understanding the synergy between AI and information governance

Artificial intelligence efforts within legal practices are fundamentally connected to the management, availability, and control of data. As highlighted previously, information governance sets the stage by assuring data accuracy, ease of access, and security, critical elements for the development of dependable AI models. This connection shows that AI works best with a strong foundation in information management, letting AI reach its full potential.

Looking closely at what drives AI in law, we focus on the key parts of information governance essential for AI projects to succeed. The key components—data quality and integrity, data accessibility, compliance and privacy, and data security—form the bedrock for AI's efficiency and trustworthiness. These elements support the optimal functioning of AI systems as well as their compliance with legal and ethical standards. As we examine each part, it's clear that careful setup and continuous management are crucial for law firms using AI to make better decisions, manage risks, and increase efficiency.

Data quality and integrity: Ensuring data is of high quality, accurate, and consistent is critical for the development of dependable AI models. The presence of poor-quality data risks leading to skewed results and operational inefficiencies, highlighting the importance of strict data management protocols.

Data accessibility: For AI technologies to perform effectively, they need structured and readily available data. The establishment of organized data storage and efficient metadata management is necessary for achieving this goal.

Compliance and privacy: Following legal rules, especially for sensitive client data, is essential. Good management is needed to make sure AI tools follow privacy laws like the GDPR and CPRA.

Data security: The protection of data from unauthorized access and breaches is a critical component, ensuring the secure operation of AI applications. This is fundamental in preserving client confidentiality and trust.

Understanding the key elements of information governance for artificial intelligence success, we now focus on building an IG framework that supports AI in legal. Moving from theory to action is an important exercise for law firms wanting to fully use AI. By following a step-by-step approach to create or improve their IG processes, law firms can create a setting where AI supports the organizational outcomes. This includes clear steps like getting everyone involved, checking the data, improving data quality, and making clear rules. Each step is designed to make AI projects work better on a strong IG base, improving their effectiveness, compliance, and security.

Implementing a governance framework to support AI

For law firms aiming to harness the potential of artificial intelligence, adopting a methodical approach to developing or enhancing their information governance framework is essential. This guide provides an overview of the key steps needed to incorporate AI into legal work. It encourages leaders and executives to adjust these steps to fit their firm's specific way of working and values:

1. Stakeholder engagement: Initiate the process by forming a multidisciplinary team, including members from IT, legal, compliance, and business sectors to secure diverse insights and organization-wide support

2. Data audit: Perform a thorough review of current data holdings to map out data types, sources, and quality, identifying inconsistencies, duplications, and areas needing improvement.

3. Data quality improvement: Use audit findings to start projects that clean, remove duplicates, and correct data, improving its quality. Set up ongoing checks to keep data quality high.

4. Policy and standards development: Craft clear guidelines and standards focused on data management, retention, privacy, and security, custom-designed to support AI projects. This step involves outlining data stewardship responsibilities.

5. Data classification and metadata management: Use data categorization systems and metadata rules to organize data well, making it easy to search and find. This helps AI algorithms quickly use the right data.

6. Technology infrastructure evaluation: Examine and enhance the technology infrastructure as needed to support the demands of IG and AI, with an emphasis on advancing data storage, processing, and security capabilities.

7. Compliance and privacy framework: Align the IG strategy with applicable legal and regulatory mandates, inserting safeguards for data protection, ethical AI application, and client privacy.

8. Training and awareness: Deploy education programs to ensure all personnel  understand their role within the IG ecosystem and its significance in underlying AI initiatives.

9.Implementation and monitoring: Roll out the IG plan, carefully tracking its performance and making necessary adjustments based on feedback to refine data management practices continuously.

10. Review and adaptation: Regularly update the framework to keep up with new laws, technology advances, and changes in AI, making sure policies stay effective and legally sound.

Measuring the impact of good information governance on AI performance

Law firms have the ability to measure the effectiveness of their information governance practices on artificial intelligence through various performance indicators such as the speed and accuracy of decision-making, as well as client satisfaction levels. Beyond these basic metrics, it would be wise to also consider the wider effects of healthy IG on AI applications.

Data quality metrics: These metrics check how accurate, complete, and consistent the data used by AI systems is. Better data makes AI more efficient and reliable. Firms can see how their data quality has improved with IG efforts and connect this to better AI results.

Operational efficiency: This metric looks at how IG practices save time and resources in managing data, like cleaning and combining data. Being more efficient lowers costs and frees up resources for bigger AI projects.

Risk mitigation metrics: This measures how IG helps reduce problems like data breaches, breaking compliance rules, and privacy issues. Showing that strong IG leads to fewer risks proves that IG supports safe and ethical AI use.

Innovation and adaptability: This checks how IG helps firms use new AI technologies and methods. Good IG means firms can quickly start using new AI, staying competitive in the legal field.

In conclusion, Part I has laid the foundational understanding of the interplay between information governance and artificial intelligence within the legal sector. It highlights the importance of maintaining high-quality, easy-to-access data as the cornerstone for leveraging AI effectively. By prioritizing data integrity and availability, law firms can work more efficiently, ensure compliance with legal and regulatory standards, and secure a competitive advantage. We’ve also outlined some basic steps in developing an IG framework that helps to support AI and how to measure the impact of good information governance on any AI initiative.

Looking ahead to Part II, we will examine the potential of AI in strengthening information governance practices, highlighting how advanced technologies can offer innovative solutions for data management, privacy, and compliance to help firms innovate, follow rules, and maintain a competitive edge.

To find out more about the synergies between information governance and AI watch the LegalRM webinar series:

ILTA Masterclass: Unlocking AI success through a strong information governance framework
ILTA Masterclass: Leveraging AI for information governance
ILTA Product Briefing: Empowering AI success through advanced information governance technology

The 2024 federal budget (Budget 2024), entitled Fairness for Every Generation, was delivered by the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, on April 16, 2024.

This article will comment on five measures from Budget 2024 that will impact professionals, including:

     - The increase in the capital gains inclusion rate from 50 percent to 66.67 percent
     - The increase to the lifetime capital gains exemption (LCGE)
     - Further changes to the Alternative Minimum Tax (AMT)
     - The introduction of the Canadian Entrepreneurs’ Incentive, and
     - Proposals relating to employee ownership trusts (EOTs)

The information contained in this article is current to April 30, 2024. It is important to note that, with the exception of the AMT and EOT proposals, no draft legislation has been released to date with respect to the measures mentioned above. In terms of the capital gains inclusion rate, the government was clear that additional design details are forthcoming and that other consequential amendments would also be made to reflect the new inclusion rate.

Furthermore, any planning undertaken in respect of these measures should also take into consideration the pending changes to other tax measures, including AMT and the General Anti-Avoidance Rule. 

Capital Gains Inclusion Rate

The capital gains inclusion rate for capital gains realized on or after June 25, 2024, will increase from one-half (50 percent) to two-thirds (66.67 percent) for trusts and corporations.

The capital gains inclusion rate for capital gains realized on or after June 25, 2024, will also increase from one-half (50 percent) to two-thirds (66.67 percent) for individuals on the portion of capital gains realized in the year exceeding a $250,000 threshold.

The $250,000 threshold would effectively apply to capital gains realized by an individual (not a corporation), either directly or indirectly via a partnership or trust, net of any:

• current-year capital losses
• capital losses of other years applied to reduce current-year capital gains, and
• capital gains in respect of the LCGE, the proposed Canadian Entrepreneurs’ Incentive exemption, or the proposed EOT exemption

The change in the capital gains inclusion rate is significant for a professional as it may result in more income tax being paid when capital gains are realized. Capital gains typically accrue on savings that are invested for retirement purposes (e.g., stocks, bonds), in real property that is utilized for the practice (or for investment purposes), and in private company shares.

For many professionals, their net worth (except for personal assets such as a principal residence) often accrues within a corporation and not always at the personal level. This occurs because the corporation is an effective way to save for retirement or invest in business assets.

For example, in British Columbia (B.C.), one dollar of earnings not required for personal spending typically results in $0.89 of after-tax money (assuming the small business deduction applies) to invest in the corporation.

If this same dollar was earned in the absence of a corporation, the professional would only have $0.465 of after-tax money to invest (assuming the highest marginal rates of tax apply). The large difference in after-tax funds available for either corporate or personal investment plays a significant role as to why there is a preference for net worth to accrue in a corporation.

Corporate investment portfolio (retirement savings in the form of stocks, bonds, etc.)

Consider a doctor who resides in B.C. and has been saving and investing in the professional corporation for many years because they do not have a pension plan. This doctor is subject to the highest marginal tax rates and the professional corporation currently has an unrealized capital gain of $100,000.

If the doctor’s professional corporation sells the investment and incurs a capital gain before June 25, 2024, and pays a tax-free capital dividend and taxable dividend to the doctor, they would have $70,440 of after-tax personal dollars.

If the doctor’s professional corporation realizes the $100,000 capital gain on or after June 25, 2024, and pays a tax-free capital dividend and taxable dividend to the doctor, they would have $60,691 of after-tax personal dollars to spend.

The after-tax dollar difference is significant at the personal level. If the doctor requires $70,440 to meet their personal needs, they would need to draw another $21,000 from the professional corporation. They would have to draw this amount via a salary or a $20,000 non-eligible dividend to meet the personal cash shortfall of $9,749 ($70,440 less $60,691).

In short, if a capital gain was realized and the amounts were distributed via a tax-free capital dividend and a taxable dividend, the doctor would have to remove approximately $121,000 (including an extra bonus) on or after June 25, 2024, from the professional corporation to meet the after-tax targeted amount of $70,440.

In contrast, the doctor would only need to withdraw $100,000 from the professional corporation if the current capital gains inclusion rate of 50 percent was the relevant rate when the capital gain was realized, and the dividends were paid. 

Notably, a $100,000 capital gain would result in the doctor’s professional corporation having to recognize $50,000 of adjusted aggregate investment income (AAII). The same gain realized on or after June 25, 2024, would require the professional corporation to recognize $66,667 of AAII.

AAII is significant because each dollar of AAII that exceeds $50,000 reduces the doctor’s ability to utilize the small business tax rate (11 percent in B.C.). Instead, it requires a corporation to pay taxes at 27 percent, which may diminish a corporation’s ability to defer taxes on future earnings.

MNP Insights:

- Understand whether the change in the inclusion rate will materially impact retirement planning, as more tax will be payable when assets are sold to fund lifestyle needs or retirement
- Consider whether it is advisable to realize gains (or rebalance the portfolio) prior to June 25, 2024, in order to save tax.
- Consider whether the capital gains will have an impact on the small business deduction available in future years.

In the context of realizing an accrued gain, a professional should consider whether their net wealth is enhanced or diminished. In some cases, the analysis will be clear, and gains should be realized prior to June 25, 2024, and capital should be distributed from the corporation. In other cases, the analysis will indicate that the professional should leave the accrued gain and realize the gain later.

If a professional requires personal cash from their professional corporation soon, there could be some urgency to consider the implications of the change in the capital gains inclusion rate and whether there are opportunities to reconsider their compensation planning.

Real property

Real property owned by a corporation (in B.C.) would be subject to the same tax results as an investment portfolio as it relates to a capital gain. For example, the following table outlines the tax difference if real property was sold with a $1 million capital gain before June 25, 2024, versus a capital gain realized on or after June 25, 2024.

For simplicity, the table above does not consider capital cost allowance (tax depreciation).

A capital gain of $1 million realized in a corporation holding a building will result in $97,489 of additional tax after June 24, 2024.

MNP Insights:

The change to the capital gains inclusion rate will result in a higher income tax liability on or after June 25, 2024. as a result, professionals need to:

  - Consider whether it is advisable (time value of money, property transfer tax, GST) to
    realize a capital gain by removing real property from a practice and transferring it to a
    holding company prior to June 25, 2024.
 - Seek advice if you have a capital gains reserve from an earlier sale of capital property.

Private company shares and personal property

The sale of private company shares is more relevant in certain professions when compared to others. For example, a dentist and optometrist often sell the shares of their professional corporation when a practice is sold. For physicians, this is seldom the case as a market generally does not exist for buying and selling medical practices.

When an individual sells shares on or after June 25, 2024, the inclusion rate will be 66.67 percent. However, unlike a corporation, an individual will have access to an annual $250,000 threshold which allows the individual to include the first $250,000 of the capital gain in their income at a rate of 50 percent and not 66.67 percent.

MNP Insights:

- A person who died is considered to have disposed of all the property immediately before death. For example, a dentist's net capital gain is included in their income, unless a spousal rollover applies. The net capital gain will be included at 66.67 percent (subject to the $250,000 threshold) rather than 50 percent. The change in the inclusion rate may have a material impact on a dentist's estate plan
- Investment properties or recreational properties will also be subject to this new change to the extent the principal residence exemption does not apply.

Lifetime Capital Gains Exemption

Budget 2024 proposes to increase the LCGE to $1.25 million (from $1.016 million) of eligible capital gains. This measure would apply to dispositions that occur on or after June 25, 2024, and is welcome news for professionals that have a market in which they can sell their private corporation shares.

The LCGE is available only to individuals who sell shares of a qualified small business corporation (QSBC). In addition to the enhanced exemption of $1.25 million, an individual can also benefit from the $250,000 capital gains inclusion rate threshold. In most provinces, before considering AMT, the increased exemption (fully utilized) will translate into approximately $423,500 of tax savings when compared to paying taxes at the highest marginal rates assuming the $250,000 threshold applies.

MNP Insights: 

-The increase to the capital gains inclusion rate creates further emphasis on the LCGE’s importance. Shares that are not QSBC shares will be subject to the 66.67 percent inclusion rate (over and above the $250,000 threshold) rather than being exempt from income tax where the LCGE can be utilized.
-If a professional has a market for the shares of their professional corporation, the professional should ensure that the shares qualify as QSBC shares.
-The professional should ensure that, where appropriate, family members are holding shares that accrue value so that the LCGE and the threshold can be accessed by each in the event of a sale.

Alternative Minimum Tax

The 2023 federal budget introduced amendments to significantly change the AMT calculation. AMT is calculated in parallel with an individual’s regular income tax liability, but it allows for fewer tax credits, deductions, and exemptions when compared to the ordinary personal income tax rules. Taxpayers pay the higher of the ordinary tax or the AMT liability.

MNP Insights:

- Budget 2024 proposes several technical amendments to the AMT legislative proposals from 2023.
- AMT only applies to individuals (no corporations). Individuals will need to consider the impacts of AMT when capital gains are realized, or donations are made.
- Details are forthcoming. It appears that the increase to the capital gains inclusion rate may negate the application of the AMT liability as forecasted by the government in 2023.

Canadian Entrepreneurs’ Incentive

Budget 2024 introduces the Canadian Entrepreneurs’ Incentive to reduce the tax rate on capital gains resulting from the disposition of qualifying shares of a corporation by an eligible individual.

This new tax initiative allows a one-third capital gains inclusion rate on up to $2 million of capital gains. However, this program does not begin until 2025 and it will be phased in at a rate of $200,000 per year.

Specific conditions apply, including that the claimant was a founding investor at the time the corporation was initially capitalized. The assets of the business will also have to pass certain tests.

MNP Insights:

- Professional corporations are specifically excluded from this incentive.

Employee Ownership Trusts

The 2023 federal budget proposed tax rules to facilitate the creation of EOTs. The 2023 Fall Economic Statement proposed to exempt the first $10 million in capital gains realized on the sale of shares to an EOT from taxation, subject to certain conditions. Budget 2024 provided further insights into this proposal.

MNP Insights:

-Professional corporations are specifically excluded from this incentive.

*Article artwork created by Microsoft Copilot image generator using DALL-E 3.

Imagine that you would like to get advice from a friend. This friend is always ready to listen and offers great suggestions. However, enlisting help requires divulging some sensitive personal information. Would you hesitate to share if this friend was known to gossip, ready to pass along your information to others? No matter how beneficial the advice, confidentiality matters. Our friend can only be trusted if sensitive information is kept private.

Generative Artificial Intelligence (Gen AI) is like that friend. It has the potential to be incredibly helpful, in ways that boggle the mind. And it is only getting smarter. This article will consider how to make Gen AI work for your firm and how to mitigate the risks involved. A comparison of a few currently available technologies is also included.

How to Make Gen AI your Friend

Identify Tasks

Many modern law firms are looking to improve productivity and internal efficiency. Consider your law firm’s most common tasks, especially administrative. Might an AI process be able to handle all or part of the task? When writing a letter or brief, Gen AI can create a first draft, instead of having to start with a blank page. Research and document review can be done in a fraction of the time. And, meeting minutes and transcription can be done before the meeting adjourns.

Your clients can also benefit when you integrate AI into your workflow. Legal professionals have found Gen AI to be useful for updating clients on changing legislations and improving the readability of client communications.

Learn How to Prompt

With this new technology, a new soft skill has emerged: Prompting. Prompting refers to the process of providing an AI system with specific instructions, or input, that guides it to generate a desired output. Learning to prompt is helpful because the quality of the results depends directly on the instructions you give. When prompting, be specific. Provide detail about the content you are requesting, the audience and the tone you would like.

Give Your AI access to Relevant Information

The more relevant information the AI has access to, the better the results. This is called “grounding” the AI. Is there a specific style you use for your briefs? Upload a copy and instruct the AI to create in a similar format.

… And Not Your Foe

Limit Information Access

The Law Society of Ontario regulations state: “Licensees must be mindful of what information they input or upload into a generative AI system. Depending on the AI tool used, this information can easily find its way into the public domain resulting in a potential breach of the licensee’s duty of confidentiality.”

Limit information access, even within your firm. AI tools can regurgitate information that the staff member using it has access to. For instance, if an assistant prompts “Give me a brief bio on my co-workers”, and a payroll spreadsheet is accidentally saved in a location they have access to, the result could provide everyone’s salary information.

An IT expert can ensure implementation of segregation, which refers to separating users and processes based on different levels of privilege. This is an IT security best practice that should be followed in every law firm.

Review Everything

View any output from AI as a first draft from an intern. AI has been known to produce erroneous information called “hallucinations”, such as incidents of fake precedent.

Make a Policy for your Firm

You may have taken the time to understand the benefits and liabilities of using AI. However, has everyone in your firm done the same? It is important to have a workplace policy on the proper and improper use of AI.

Current Available Technologies

Microsoft Copilot Pro

Copilot Pro integrates with the Microsoft Tools you may already use, such as Microsoft Office Suite and Teams. For example, if you arrive late to a Teams meeting, you can ask Copilot to give you a summary of what you missed. Copilot is based on the most recent release of GPT. However, your information isn’t shared with the public because it does not use your information to train its AI. There is an added cost of $30 per user/month.

Google Gemini

Gemini is Google’s version of Gen AI. For those using Google Workspace, Gemini can provide the most relevant information. It has faced some criticism for odd “hallucinations”. However, it does well at producing documents in natural language. It does not use your information to train its AI. There is an additional cost of $25 per user/month.

ChatGPT (Free version)

This is the most used Gen AI because it is free and widely available. That is where the danger lies. Information given to ChatGPT is used for training and can be regurgitated to the public. Recently an ‘opt out of training’ option has been introduced into the privacy portal. However, concerns have still arisen about sensitive data leaks.

ChatGPT (Team & Enterprise)

GPT 4.0 is well regarded as the best AI generator currently available to the public (with the exception of Microsoft Copilot, which is based on GPT 4.0 technology). The business versions of ChatGPT do not use your information to train its models. These versions cost $25 per user/month or more.

With all the options available and the potential risks, deciding to integrate Gen AI tools can be daunting. Guidance from an IT expert is invaluable when strategizing implementation. The foundation for risk management, is proper IT security. Ensuring that the firm’s IT provider is implementing IT security best practices is an important protection.

A recent Thomson Reuter’s report concluded that “although GenAI’s true impact may seem a proposition for far in the future, planning for its impact needs to begin now”. Begin your law firm’s AI journey by making it your friend, not your foe.