Finance to Law: Breaking into Law with a Finance Background

Finance and legal departments are simultaneously similar and different. They’re similar insofar as both play a supporting role in an organization, yet they’re different in terms of tools, mediums, and applicable skills.

Lawyers are text-oriented thinkers whereas finance professionals look at numbers and financial statements. The good news is that they share fundamental cognitive skills: logic, critical thinking, corporate governance and strategic awareness. This is why most professionals consider it entirely possible to move between finance and law.

That said, it’s usually easier for a finance professional to become a lawyer, since lawyering requires less specialized accounting knowledge. But ultimately, it depends on what kind of law you want to practice.

This article will help you understand if it’s possible for a finance professional to turn lawyer, if it’s worth it, and how to do so.

NOTE: this article discusses how finance professionals can go into corporate and securities law. It does not discuss becoming an attorney in a non-financial field, such as insurance or human rights.

Is it possible?

To figure out if it’s really possible to go from finance to law, I spoke to two people who did it. One of them, who we’ll call James for reasons of confidentiality, got an MBA and moved straight into corporate financial reporting (FP&A) before going to law school. He later became an M&A attorney in a private firm.

The other, who we’ll call Jill, had a bachelor’s degree in business administration. She later became an accountant in New York, and went to law school thereafter. She became a securities lawyer in Frankfurt, Germany.

It goes without saying that it’s certainly possible to move from finance to law. Many people, such as James and Jill, have done it. What I learned from them, however, is that there are certain conditions you generally have to meet to do so. Here’s a list:

• You almost always have to get the JD degree (or country equivalent). Whereas in finance you can succeed without getting the degree, law is not the same. You need to have a JD to be seriously considered. Part of this has to do with the standard nature of law: every attorney gets the same degree. Finance is vast enough, between accounting and financial reporting, that there isn’t a single expectation for your credentials. However, you do not necessarily need to pass the bar in order to work in a corporate setting. This is up to the company to decide. If you have an idea of the company in which you would like to work, consider looking at job applications to determine if this is a requirement.
• You need to stay in corporate or securities law; if not, you will have to “start over” in some sense. It’s possible to move from finance to law, but not any field of law. You need to stay in a business setting if you want to progress in your career. This does not mean other fields are unavailable to you, but you may have to “start from the bottom” again.
• You need experience as a finance professional with the legal topic you want to specialize in. We’ll talk more about this under the “How do you do it?” header, but you need to have some experience with the type of law you want to practice. At a high level, this means corporate finance specialists and accountants can become corporate attorneys. Alternatively, financial analysts working with financial markets and securities could work for a securities law firm, but they would have a hard time moving into a corporate setting.
• You cannot be a high-ranking finance professional in an organization because it’s unlikely you keep your elevated status as an attorney. James told me that he was smart to make the career change at a young age (27). He explained that he knew an accounting team manager with 25 people under him who had done the same, but with much more regret. The challenge is that this person had amassed many years of specific accounting knowledge, and his managerial position was linked to this experience. However, when he joined a law firm after going back for a JD, he found himself at the bottom, with few prospects for growth. This may have been different if he had stayed in a corporate setting as an in-house attorney, but the challenge remains: when you change professions radically, it’s difficult to maintain your status.

Is it worth it?

The simple answer to this question is, as any good attorney will say, “it depends.” Both James and Jill were happy with their choice, but they share something very important: a keen interest in verbal reasoning. If you’re not a fan of texts, instead preferring to “talk out” problems and create financial models around then, then lawyering may not be for you.

In addition, depending on the company, the hours can be more extremes for attorneys. The reason is that in most projects, legal documents are needed at multiple steps along the way.

In an acquisition for example, you need a letter of intent, a shareholders agreement, a share purchase agreement, new articles of association, a new shareholder register, and a thorough review of all corporate documents. In finance, you simply need to review audited financials that the company has already prepared, and potentially create a valuation model.

The point here is not to understate the value of finance in an acquisition. On the contrary, it’s usually the information on which decisions must be made. But it requires less time. Writing documents requires a large amount of time putting words and ideas on paper.

From a money making perspective, there’s no easy answer. If we look to the top of the pyramid, meaning big NYC law firms and investment bankers, the bankers usually earn more. However, there’s a whole world of industries and roles outside New York in which legal and financial salaries vary, and very little raw data to help us decipher it.

James, for example, took a small pay raise as an attorney, whereas Jill took a pay cut when she moved to Germany. However, European social security played a role there as well, since gross and net salaries are lower, but vacation days, transportation, and healthcare are already taken care of with social security.

In other words, moving from finance to law is worth it when:

• You like working with text and writing.
• You don’t mind spending more time at the office working of legal documents.
• You aren’t aiming to make top-dollar in big finance in NYC and are OK working in smaller outfits

How to do it?

So what are some concrete steps to move from finance to law?

1. Get a juris doctor degree (JD).
2. Practice reading legal texts to familiarize yourself with the logic and idea structure.
3. Discuss with attorneys in your current job to better understand how they think.
4. Get familiar with corporate legal documents, such as
   • Shareholders agreement – outlines the rights, options, and decision-making procedures for shareholders in a company.
     • Share valuation procedures – usually led by a third party
     • Minority protections – clauses that protect the minority shareholder in the case of disagreement, includes:
       • Tag-along rights
       • Dividend rights
       • Right of first refusal
       • Payment waterfall
       • Share transfer limitations
       • Shotgun clause
     • Majority protections – clauses that protect the majority shareholder in the case of disagreement, includes:
       • Drag-along rights
       • Non-compete clause
       • Right of first refusal
   • Share purchase agreement – outlines the assets and/or shares to be sold, the sellers, the buyers, and the valuation, among others
     • Share purchase vs share issuance – share purchase is a transaction concerning shares that already exists. A share purchase leads to a gain for existing shareholders. Share issuance, on the other hand, is the creation of new shares, in which a buyer injects capital into the company for operational growth, thereby diluting the total share of existing shareholders.
     • Number of shares – the number of shares to be sold depends on whether the deal is a share purchase or share issuance. In the former, the number of shares does not change. In the latter, a pre-money valuation of shares will determine how many new ones are issued, and thus what percent ownership each shareholder will have.
     • Sale of shares – this shows how many shares are outstanding, and how many will be sold.
     • Valuation of shares – the valuation of shares depends on a lot of factors, many of them on the finance side. However, the legal explanation of this valuation is important, as it could impact the methodology used in future valuations.
   • Partnership agreements – similar to SHAs, but for B2B relationships, they outline the terms of an arrangement between your company and another. They’re common for use with suppliers with whom the company has complex relationships, such as revenue share.
   • Service agreements – service agreements outline the service that one party provides to another. They are commercial agreements in the simplest form.
   • Letters of intent – proof that two parties have discussed and intend to engage in a commercial transaction, purchase or sale of an asset or company, or joint venture.
   • Non-disclosure agreements – also known as NDAs, they simply protect a party from the counter party’s sharing of confidential information, often disclosed during preliminary discussions.
   • Confidentiality agreements – similar to non-compete and non-disclosure agreements, confidentiality agreements protect sensitive business information that may be disclosed in discussions.
   • Employment contracts – governs the working relationship between employees and the company.
   • Memorandums of understanding – similar to a letter of intent, MoUs are not legally-binding documents, but serve as a way for two parties to formally agree on a project.
   • Non-compete agreements – non-compete agreements are legally-binding arrangements in which 1 or more parties withhold from entering into a working relationship that could coerce them to share privileged information.
   • Terms and Conditions – standard conditions that a company employs around the use of its services and/or products.
   • Purchase orders – a commercial document showing the type, quantity, and price of a good or service that a buyer and seller exchange.
   • Company bylaws – the company bylaws necessitate a board of directors, who makes decisions about how the company will make important decisions, such as how to fund major capital expenditures.