Tim Hailes won The Legal 500 UK in-house award for Finance, for his work as associate general counsel and managing director at J.P. Morgan.
B U S I N E S S T H I N K I N G
EDITOR AND FEATURES WRITER
GC: Did you always want to be a lawyer?
Tim Hailes (TH): No, my first degree was history at King’s College London, which I loved. I graduated in 1990, and of course, you can’t actually time your arrival on the job market. So I emerged into what felt like oblivion, as many history students did in 1990. When I think of the 30 or so of us that graduated in the history class of that year, 23 of us ended up as lawyers. So there’s something about history graduates and lawyers or, at least, there was in 1990.
I was fortunate to get a very good training contract with Wilde Sapte [now Dentons]. It was very much a premier banking firm, strong both on the general banking transaction side and the litigation side. My first seat was, rather randomly, in shipping litigation which I nonetheless enjoyed.
My second seat was in the general banking department and I sat with a supervisor who was doing this rather niche practice involving stuff called derivatives, which I’d never heard of. Trying to explain derivatives to my parents when I was a trainee was an interesting experience. It was an early point in that market and I really enjoyed it, and it was made very interesting and intellectually engaging by the partner. I did a third seat in insolvency litigation, where Wilde Sapte acted for Coutts (then part of the NatWest Group). Coutts was being sued by the pop star Sting because a fraud had been perpetrated on his bank account by his accountant. Sadly, that is as close as I have yet come to show-business glamour in my legal career.
Finally, I went into corporate but half way through I was sent on secondment to the NatWest trading floor. That was in 1995, and it was the first time I had ever set foot on a trading floor. I absolutely loved it, and I was there for nine months in the end – three months as a trainee and six months as a qualified solicitor - after which I came back into the banking department at Wilde Sapte as a fully fledged member of the derivatives group. So I’ve been “doing derivatives” pretty much since the day I qualified. And now I’m 20-odd years long in the tooth doing derivatives, which are now of course very much a well-established product in the financial world. But did I know that it would turn out that way back at the time? Of course not - if you’d asked me as a history undergraduate in 1990 what a derivative was, I couldn’t have told you. And I couldn’t have told you what an investment bank was either!
GC: What made you go in-house?
TH: I’d done three secondments in private practice: I went into NatWest, Union Bank of Switzerland, and I was actually seconded to J.P. Morgan in 1998. But each time I decided that, much as I liked the trading floor environment, it was just too early in my career to move. I wanted the stability, and the general and technical support provided by a private practice environment - until I was at least four or five years qualified. I thought that the attractions of working in-house, at that point in my career, didn’t outweigh the benefits of having PSLs [professional support lawyers], structured training, and more experienced fee earners developing you as a solid technical lawyer in private practice. I’d also had the opportunity, through those various secondments, and indeed as a private practitioner working for a number of different clients, to see how different clients work. They were very different then and they are now – investment banks are not a homogenous group. They are actually quite diverse. You do detect different risk appetites and different cultures. Staying in private practice gives you an opportunity to see that through your interactions with a range of clients first hand. Whereas as soon as you go in-house, all you really see is that particular environment.
I suppose there were two reasons why I went in-house in 1999. Firstly, that was the point when I felt that I’d really got a solid technical foundation as counsel. Secondly, I really didn't want to go onto the partnership track, working every hour God sends and having no control over my life. And thirdly, I had caught the commercial bug from working on the trading floor and seeing it from the inside out. So that’s why I joined Morgan Guaranty Trust (MGT) [now J.P. Morgan].
I felt that it was culturally a good fit. I had left Wilde Sapte in ’97 and gone to Cadwalader, and that was almost a halfway house. Wilde Sapte was very “traditional London” and Cadawalader was a so-called "white shoe", traditional New York law firm. Having gone through the Cadwalader experience and then moving to an American investment bank, there was a hybrid, transitional process, and perhaps it would have been a little bit harder to jump straight out of Wilde Sapte and into MGT.
GC: What is the best thing about working for J.P. Morgan?
TH: I have never felt at J.P. Morgan that I’ve been without a voice. I’ve always felt that the lawyers at J.P. Morgan get listened to and are very much part and parcel of the decision-making process. In other words, we are treated professionally, with respect and as active members of the wider team. Certainly when I look out to the wider market in terms of the risk cultures that were prevalent pre-2008, I think that the lawyer’s function was not necessarily always as respected as it is in this institution. And I think that goes to the DNA of the place and the people. Although it’s a popular thing to say nowadays, it’s nonetheless true: I’ve been at J.P. Morgan for 15 years, probably first and foremost because of the culture of the firm.
The firm clearly has changed from the moment I walked in the door in 1999. I’ve been fortunate because my job has changed, generally speaking, every two or three years. So there have been growth opportunities for my career to go forward, either in terms of a broader technical remit, or in terms of title or responsibility.
GC: What’s your favourite part of the day?
TH: Unusually, I still physically sit on the trading floor and I do like the proximity to the business. It makes you very aware of the commercial drivers, you get to see the full picture, and it’s difficult for you not to be in the information flow. And I like that. It makes the practice of the law not an academic exercise, but a real, tangible, daily experience. I’ve always enjoyed the transactional lawyer role, being very much part of the team doing the deal, even though you’re bringing a particular perspective and a particular set of concerns to any given transaction.
The risk with counsel in that environment is that they lose sight of the nature of what their role is, and they “go native”. I’ve never really felt that - it’s a risk that I’m cognisant of but I think the upsides far outweigh the downsides of that kind of working relationship, although I think it’s something counsel need to be constantly aware of because, at the end of the day, you are there to bring legal skills and concerns into the equation. So provided you attract the right people, who know that’s the underpinning of the role, it can work incredibly well. It makes the lawyers more real and less remote as well, which I think is a good thing in terms of people relationships.
Now I’m a global practice head, I’m less in the weeds of specific deals. I don’t have my own portfolio of trades now and I'm not there from day-one at the initial structuring stage of every transaction. I now tend to get things brought in to me by the lawyers that work for me so that I can review a situation. I still find that role fascinating and I will get quite forensic in my questioning, straight into the nitty-gritty when needed. But I think that my job now is more setting the operating parameters and enabling my troops to get on with their job.
One of the things that I’m particularly focused on though is that lawyers aren’t just there to be lawyers. I want my people to be asking why a particular cash flow is in the structure, what the drivers are for putting a transaction together in a particular way, and to constructively challenge the business people. I want them to think of the end investor in the product, or how a regulator might see it - looking at a set of factors from a third party angle. I’m not saying that business people don’t do that, but I think part of our job is to see what the alternative arguments, angles, interpretations or drivers around a particular product or deal might be. I think that makes you more effective and enables you to see things coming down the pipe that perhaps were not intended at all. If you’ve looked at those things through those prisms, I think that’s a real added value activity. I think it is at the heart of a “trusted advisor” relationship.
GC: What has been the highlight of your professional life so far?
TH: Making managing director was a pretty big thing. And surviving the financial crisis of 2008! Actually, I think it was harder being in-house counsel in financial services in 2006 and 2007 than it was in 2008 or its aftermath. Across the market, 2006 and 2007 saw some irrational exuberance before the bubble burst, and as counsel you might have given cautious guidance about something in the future that might happen, and been perceived as a conservative lawyer and very theoretical. For many lawyers, that environment changed once everyone else had the benefit of hindsight.
GC: What legal issues or challenges are coming over the horizon for you in the near future?
TH: Regulatory reform is keeping us busy and there's still a lot to do, both for us and the industry. One of the things I’m personally quite interested in at the moment is “product governance” and “product intervention”, and I see that as an interesting emerging regulatory-legal topic both through the focus to date from the FCA in the UK and the crystallisation of legislation at the EU level through MiFID II.
GC: What do you look for in an ideal private practice lawyer?
TH: Transparency and straightforwardness are easily lost in the heat and noise of running around to get deals done. So I hate surprises, by which I mean I really don’t like being ambushed by cost management after the fact - it puts me in an impossible position with my business people. I don’t mind having an active conversation as the goalposts move around an instruction and therefore that the quote that was originally given changes – that’s fine. But I want a real-time dialogue on costs and I want a real-time proactive dialogue on the management of a deal.
I take technical excellence as read. I wouldn't instruct a firm if I didn’t think they knew their subject matter.
Given you can get that from a number of different firms, what are the differentiators? I think a synergy of culture and values between firms counts. I have often said that a commitment to diversity is relevant to my consideration of a firm. It’s not first and foremost - it would be disingenuous if I said that we instruct people solely on that basis - but clearly the overall package that a firm brings to the relationship is important.
GC: How do you measure diversity in a law firm?
TH: Certainly, that’s hard. When we did our first RFPs [request for proposals], which included a component around diversity and inclusion, I deliberately resisted making it a statistical exercise. And I always made it clear to firms that although we were asking whether they had an employee network, different support groups, or consideration of gender proportions and so on, statistics are not in and of themselves determinative in my assessment of a firm’s commitment in this space.
I think it really and fundamentally boils down, again, to culture - and culture is a difficult one to measure. What you can do is to litmus-test culture by those sorts of questions. I can’t really look inside a major law firm and gauge whether if you are a woman, or if you are from an ethnic minority, or if you are gay, how empowering a working environment really is for you, because I don’t work there. But I can certainly draw inferences from things like public positioning, statements from the partners, whether they support employee engagement groups, personal interactions and conversations with people. All those sorts of things are clearly indicative of a workplace environment that is sending out the right signals.
If we look at where the law firms were back in 2006 and where we are now, it’s been a massive change. In fact the law firms in benchmarks like the Stonewall Workplace Equality Index are often beating the investment banks themselves. So there’s been a real change in what the firms have been doing in this context, and I think that’s been enormously positive. What caused that change I think is debatable. I rather suspect that there was a lot of goodwill already there, and what I did (by going on the record at the right time about the importance of diversity), and what J.P. Morgan did by allowing me to say what I said in the press, was really to give some ammunition to partners in firms to be able to say: “Hey, the client is saying this is important”. And that is a powerful agent for change in a service-based relationship.
GC: What do you do in your free time?
TH: I’ve got a three-year-old labrador who makes me walk him, which keeps me fitter than I would otherwise be. And the boyfriend makes me do the walking - which keeps me fitter than I otherwise would be!
GC: What are you reading at the moment?
TH: I am a massive Tolkien fan; I’m secretly (not after this interview!) a giant Tolkien geek. I read The Hobbit when I was nine and I read The Lord of the Rings when I was 11; I even read The Silmarillion, although I only managed to crack that after I’d done my history degree. It’s not the kind of thing you pick up and read lightly. But I think that man’s imagination was just incredible. I tend to read historical fiction, or Tolkien genre literature, which I suppose is a bit escapist.
GC: Do you have a favourite film?
TH: I like The Lord of the Rings films. I think they do the written word justice. I think Peter Jackson did an amazing job with them. I also like The Hunger Games series, and I used to be terribly addicted to The West Wing. I like the US remake of House of Cards. So political thrillers, historical thrillers.
GC: What would you be if you weren’t a lawyer?
TH: I’d rather like to write a book, I suppose. It would have to be in the genres that I’m interested in – so historical or political fiction.
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