No one looking at the legal profession over the last few years will have failed to notice that ‘Tesco Law’ is coming soon to a high street near you. Tesco Law will open up the provision of legal services to grocers, banks and outsourcing companies. With the full implementation of the Legal Services Act coming into effect in October, it has been said that the traditional high street practice is doomed. Whether this is reality or scaremongering is a matter of interpretation. However, there can be no doubt that times are changing for solicitors and that much heralded deregulation is only one of a handful of issues creating the perfect storm for the legal profession.
By October each of the 10,000 or so law firms in England and Wales will have to renew their mandatory professional indemnity insurance. Firms that fail to obtain cover will be chucked unceremoniously into the Assigned Risks Pool, a Law Society overhang from the days when all law firms were collectively indemnified. Climbing out of the Assigned Risks Pool is at best difficult, as firms have to convince insurers they are no longer an unwanted risk.
With little fluidity in the lawyer’s insurance market, more firms are expected to enter the pool or face a hike in their premiums as insurers pick and choose firms with the lowest risk profiles. Whilst a couple of new insurers have dipped their toes into the market this year, others have decided to limit their books of new business. In my discussions with small law firms across the country over the last few months, some firms are already paying up to 10pc of their turnover in compulsory professional insurance at a time when many are already victims of a reduction in revenues.
With the general economic downturn, and a decline in bread and butter work such as conveyancing, some firms have found that they have had to lay off support staff and fee earners recently. Various firms have moved previously salaried staff including partners to an “eat what you kill” remuneration structure. Not such a great situation if there is no killing to be done.
Clients are also becoming more savvy when negotiating fees. The impending Legal Services Act has encouraged a proliferation of comparison and auction sites for legal services. While these sites provide a great service for consumers looking for cheap legal fees, they encourage solicitors to slash prices in order to win work. Slashing prices must not mean slashing attention to detail or expertise but many firms will need to take on work at whatever level they can to meet their overheads. Avoiding another few quid in fees may be the difference between winning and losing work. Some lenders are even culling the firms they already approve to carry out mortgage work, making it almost impossible to act for a house buyer if the law firm is not on the lenders panel.
Another change coming to all law firms this October is the introduction of ‘outcomes focused’ regulations. Solicitors have until now sought comfort in the black and white style of interpretation of their regulatory rules. However, they will soon have to negotiate through a field of grey in their approach to work and how they deal with their clients. At the very least, all firms should be looking at their client care letters to make sure that they will comply with the new rules.
Although Tesco are keeping their powder dry on whether they will sell legal services alongside their groceries, other new entrants are already well developed and ready to engage with the high street consumer of legal services. The prospect of the availability of legal services in banks (Co-op), in newsagents (Quality Solicitors and WH Smiths) and shopping centres and train stations (Lawyers 2 You and others) is already a very real one.
While a small delay is expected before alternative business structures can be regulated by the Solicitors Regulation Authority, local independent law firms should consider this as no more than a bit of breathing space before the competition for clients really heats up.
Although the perfect storm is brewing for lawyers, it’s not all bad news. The changing legal landscape has forced many firms, both large and small to rethink their strategies in marketing, business development, costs base and structure, which will be beneficial in the long run. Solicitors who are prepared will be able to develop a niche in the market, whether it is for the work that they do, or the way in which they do it.
Ultimately they stand to benefit far more than those not fit enough to weather the conditions.
This article first appeared in the Business Club on telegraph.co.uk
By October each of the 10,000 or so law firms in England and Wales will have to renew their mandatory professional indemnity insurance. Firms that fail to obtain cover will be chucked unceremoniously into the Assigned Risks Pool, a Law Society overhang from the days when all law firms were collectively indemnified. Climbing out of the Assigned Risks Pool is at best difficult, as firms have to convince insurers they are no longer an unwanted risk.
With little fluidity in the lawyer’s insurance market, more firms are expected to enter the pool or face a hike in their premiums as insurers pick and choose firms with the lowest risk profiles. Whilst a couple of new insurers have dipped their toes into the market this year, others have decided to limit their books of new business. In my discussions with small law firms across the country over the last few months, some firms are already paying up to 10pc of their turnover in compulsory professional insurance at a time when many are already victims of a reduction in revenues.
With the general economic downturn, and a decline in bread and butter work such as conveyancing, some firms have found that they have had to lay off support staff and fee earners recently. Various firms have moved previously salaried staff including partners to an “eat what you kill” remuneration structure. Not such a great situation if there is no killing to be done.
Clients are also becoming more savvy when negotiating fees. The impending Legal Services Act has encouraged a proliferation of comparison and auction sites for legal services. While these sites provide a great service for consumers looking for cheap legal fees, they encourage solicitors to slash prices in order to win work. Slashing prices must not mean slashing attention to detail or expertise but many firms will need to take on work at whatever level they can to meet their overheads. Avoiding another few quid in fees may be the difference between winning and losing work. Some lenders are even culling the firms they already approve to carry out mortgage work, making it almost impossible to act for a house buyer if the law firm is not on the lenders panel.
Another change coming to all law firms this October is the introduction of ‘outcomes focused’ regulations. Solicitors have until now sought comfort in the black and white style of interpretation of their regulatory rules. However, they will soon have to negotiate through a field of grey in their approach to work and how they deal with their clients. At the very least, all firms should be looking at their client care letters to make sure that they will comply with the new rules.
Although Tesco are keeping their powder dry on whether they will sell legal services alongside their groceries, other new entrants are already well developed and ready to engage with the high street consumer of legal services. The prospect of the availability of legal services in banks (Co-op), in newsagents (Quality Solicitors and WH Smiths) and shopping centres and train stations (Lawyers 2 You and others) is already a very real one.
While a small delay is expected before alternative business structures can be regulated by the Solicitors Regulation Authority, local independent law firms should consider this as no more than a bit of breathing space before the competition for clients really heats up.
Although the perfect storm is brewing for lawyers, it’s not all bad news. The changing legal landscape has forced many firms, both large and small to rethink their strategies in marketing, business development, costs base and structure, which will be beneficial in the long run. Solicitors who are prepared will be able to develop a niche in the market, whether it is for the work that they do, or the way in which they do it.
Ultimately they stand to benefit far more than those not fit enough to weather the conditions.
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