2013 - A challenge ahead

2012 not only saw the first full year of the Legal Services Act and the launch of a number of new legal service providers but also the implementation of an entirely new compliance regime. 2013 brings the introduction of a ban on referral fees payable by lawyers to the introducers of work. We asked a select number of small law firms to participate in a survey at the end of December and the results have helped us to form our opinion on the challenges that face them for 2013. The survey is still available at http://www.surveymonkey.com/s/RWD77JF

Every firm has by now had to nominate it's COLP and COFA. Such compliance officers will have to deal with Outcomes Focussed Regulations. Where previously a set of hard and fast rules governed the compliance of law firms, partners now have to interpret guidelines and make judgements of their own decisions. It is unsurprising therefore that about 250 firms have not yet nominated their COLP/COFA before the 31 December deadline http://www.legalfutures.co.uk/latest-news/hundreds-delinquent-firms-move-closer-colpcofa-action. In our survey, half of our respondents informed us that they were taking on both the COLP and COFA role.

Each week seems to see the launch of a new marketing initiative for legal services. Google backed US company Rocket Lawyer launched in the final quarter of 2012 and it's rival Legal Zoom is also dipping its toes into the UK legal market. Various comparison sites now exist and there is now of course TV advertising of legal services.

In 2012, more firms joined the Law Society's Conveyancing Quality Scheme and various lenders have now made CQS accreditation a requirement for membership of their panel. Without CQS, firms will simply not be able to act for certain lenders. Over a third of firms we surveyed admitted that they had to turn work away this year as they were not on a certain panel. From April 1 this year, firms without CQS will not be permitted on Santander's panel. Of the firms we surveyed only 40% had received CQS accreditation, although a further 40% intended to apply.

100% of our respondents would consider applying for accreditation of a probate scheme if The Law Society were to introduce one. Although firms are not exactly embracing these schemes there is a reluctant acceptance that to protect their ability to work, firms will have to carefully consider membership of as many schemes as possible.

Small, successful high street firms who wish to remain as such need to use the coming year to capitalise on their strengths and remove the effect of their weaknesses. Ironically, the fundamental strength of being a small law firm is paradoxically also its weakness. Because of their size small law firms have great local knowledge, years of experience often having acted for families or businesses for many years and the potential to give great customer service and be very caring towards their clients. Conversely, their ability to compete in marketing terms with larger organisations is stymied, even ridiculed by their size. With the same compliance regime for every firm, regardless of size, small firms will use up a far higher proportion of potential fee earning time with management and compliance issues. Marketing budgets of small law firms are dwarfed by those of large new market entrants. The only effective way to counter such competition is for smaller firms to take advantage of some kind of collective marketing, deciding first on whether social media, TV or price comparison is the forum to attack.

Of our surveyed firms, almost 70% had a Twitter and a Linked In account. 60% are actively sending enewsletters and approximately 40% are still sending brochures. At this rate, there must be a huge amount of material being sent by small firms to potential customers. How do firms distinguish themselves, especially when a lot of the material is fairly generic?

My prediction for 2013 is that lots of small law firms will find the challenges too much to face and will look for the chance to be taken over or leave the market. Small law firms should focus this year on existing client bases and not blow in the wind trying to attract new clients. Getting to grips with the effect as well as the cost of compliance will also be a great benefit. My hope is that small law firms play to their strengths and realise the great head start that that they have on new market entrants but accept the fact that that reducing cost bases and outsourcing back office functions may be necessary and productive. My new years resolution is to work with the firms that wish to remain strong, profitable and competitive.

Gary Yantin 
Gary Yantin is the founder and Managing Director of HighStreetLawyer.com, the consumer facing legal brand and umbrella group for small high street law firms. 

Freedom of Choice? Freedom of Solicitors

As soon as Janice walks through the door she knows it’s the one. The spectacular view of the garden from the master bedroom, the sparkling marble kitchen worktops she has dreamt of, and the playroom which is perfect for the kids. All she needs to do is speak to her solicitor and he’ll sort everything out. The one in the office round the corner. The one who helped her buy her first flat, wrote her will, and sorted out her cousin’s divorce. But wait, she needs a mortgage from HSBC, and her local solicitor isn’t on their list.

What list? Well, HSBC have recently revealed their plans to reduce the number of solicitors on their residential mortgage conveyancing panel. Usually, when moving house, a conveyancing solicitor will manage both the mortgage documents and those concerning the transfer of the property. HSBC’s decision means that the mortgage part of the transaction can now only be handled by one of the 43 members of their conveyancing panel. Many high street solicitors are up in arms about the decision, lobbying the Law Society to protect them from this action which they believe may put them out of business.

The Chief Executive of the Law Society, Des Hudson has encouraged solicitors to write to their MPs to complain about the HSBC’s ‘heavy handed and arrogant decision’, but HighStreetLawyer believes this is missing the point. Whilst such restrictions may adversely affect the legal industry, the biggest loser in the equation is the consumer. 

Buyers wishing to take out a mortgage with HSBC must use a solicitor from their panel for the mortgage conveyance, but are given the option to use their own solicitor for the conveyance of the property. Using a panel solicitor for the entire transaction will be highly incentivised by the bank, and many may be unaware that using another solicitor is even a possibility. Furthermore, customers choosing their own conveyancing lawyer will have to pay twice for this time-consuming ‘choice’, since the work is ordinarily done by one lawyer, and many checks will have to be repeated. Taking into account the cost of buying a house in the current market, and the proportion of people struggling to get onto the property ladder, this option is unlikely to appeal.

Limiting the approved conveyancers to 43 flies in the face of everything the Legal Services Act sought to achieve; competition; access to justice and better service for consumers. HSBC’s decision means that property transfers will be done by a select few legal companies, impeding consumer choice. A home is the most important and costly purchase most people will ever make, so they want to use a solicitor they know and trust. For conveyancing, locality and reliability is key. A little research into Countrywide, the administrators of HSBC’s panel gives the impression of a faceless property machine; impersonal and remote.

As if restricting borrowers to a narrow list of solicitors wasn’t enough, other worrying issues arise. HSBC have chosen Countrywide as the agents of their conveyancing panel; responsible for choosing the remaining firms and distributing work. Unsurprisingly, Countrywide’s own licenced conveyancing firm has made it onto the panel, creating an obvious conflict of interest which has been strongly criticised by the Law Society. Although Countrywide has not disclosed its selection criteria for the panel, it seems that small, local firms will not be chosen. With such a limited number of solicitors, it is anticipated that only larger firms able to churn out conveyances in bulk will be included. Is this what a buyer wants?

The Legal Services Act intended to champion consumer rights and access to legal advice. Banks requiring conveyancing solicitors to be accredited in some way is an understandable precaution, but anything more than that creates a bias which restricts consumer choice. Buying a house is an important and life-changing decision, and the consumer should be put first. What we should be asking is not ‘How will this affect solicitors?’ but ‘How will this affect Janice and other consumers?’ 

By Judy Benmayer of HighStreetLawyer.com