Pret-a-lawyer: Off the shelf law services have arrived
Alternative Business Structures are turning law into a commodity. The Co-op is amongst the first to enter this new field
A revolution is sweeping through the lawyers’ profession. It could profoundly affect the way businesses seek and obtain legal advice. And, crucially, fees will be slashed.
The trigger to this process is a piece of relatively recent legislation that had almost total cross party support: The Legal Services Act 2007.
The law shatters the traditional structure of the legal profession by allowing solicitors and barristers to practise together in partnerships along with other professionals such as accountants and legal executives.
But perhaps most importantly, the legislation has blasted wide open the historic monopoly solicitors had on the ownership of law firms by creating what are known as ‘alternative business structures’ (ABSs).
As of the beginning of this year, when specific provisions of the 2007 Act were implemented, law firms could accept outside investment from the likes of private equity companies and potentially even members of the public through share flotation.
At first glance, these may seem like arcane points – of interest only to those directly affected. However, this restructuring of the potential ownership of law firms will impact significantly on individuals and SMEs alike.
The government hopes that impact will manifest itself in a much more open and competitive market for legal services. A market where legal practitioners are more transparent and competitive in their fee structures and generally more approachable in the way they go about offering and providing their services.
Still, as with all evolution in the legal profession, progress has been slower than some had hoped.
Currently, the Solicitors Regulation Authority is the main player in awarding ABS licences and both it and the wider legal profession establishment appear to have been taken by surprise by the enthusiasm for the new model.
Hundreds of ABS applications were received from law firms and other entities of varying sizes, arguably swamping the bureaucrats and bogging down their approval systems. The SRA didn’t help itself by repeatedly announcing the likely date of the first licences, only to postpone the historic moment.
Those delays earlier this year triggered considerable mutterings of discontent from prospective ABSs and investors, who suggested not too subtly that the SRA wasn’t prepared and might not be up to the task.
In its defence, the regulator reminded a keen market that it had to ensure that those queuing either to allow non-lawyer partners into their firms, or to take an injection of external capital, had to prove that all the parties involved were fit and proper. That they met stringent ethical standards.
The regulator was acutely aware of critics of the ABS model, who – perhaps with an air of over-excited drama – had forecast that the new breed of law firm would be a licence for organised criminals and international terrorists to get a foothold in the English legal profession.
Indeed, some had bandied scare-mongering phrases such as ‘mafia law’ and ‘IRA law’ during the bill’s passage to the statute books.
But by the end of March the landmark day arrived, with the SRA awarding the first three ABS licences, two of which went to what are in effect small businesses themselves: a now three-partner firm in Oxfordshire and a south London-based husband-and-wife practice.
However, the third licence granted on the day is the piece of paper that sparked dread in the hearts of the conservative legal profession, confirming the worst fears of traditionalists. It went to retail giant, The Co-operative, which has subsequently announced it intends to recruit some 3,000 legal sector-related staff and offer services from all of its 330 high street branches.
So far the Co-op has indicated that it wants to focus on private clients rather than SMEs, initially targeting the family law field and even going so far as to moot a ‘loyalty points’ scheme for customers using any of its legal services. But it is conceivable that the retailer could eventually jump into the small business advice market.
And there have been other developments more directly affecting SMEs since the regulator started doling out ABS licences.
Only last month, Sheffield-based national legal practice Irwin Mitchell, was given the nod for the first multiple ABS licence, covering, among other areas, the firm’s debt collection and claims management businesses.
And a few days later came arguably the most important landmark: the first licence for a private equity-backed law firm.
Others are lining up, with several boasting the type of overhauled service offerings to SMEs that the legislation’s original proponents had hoped for.
A prime example is Riverview, a business-orientated law firm launched in March that blends solicitors and barristers under one roof and, crucially, has committed itself to offering clients fixed fees and annual service contracts.
For example, businesses with up to five employees will be able to bag a deal for advice from the firm priced from £2,400 a year. That figure increases to just short of £4,000 for business with up to 24 staff, and to around £6,000 for those with up to 50 employees.
This is likely to be a trend that has the most impact on SMEs. Without doubt, one of the biggest problems smaller businesses have in seeking legal advice is uncertainty over costs. If the new model English legal profession can overcome that, then all the soul searching and rowing over the ABS revolution could be worthwhile.
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