Transcript Document

Opportunities
in the Legal Market
Ian Muirhead
Director, SIFA
Agenda
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Legal Services Act
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Business structures
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Opportunities
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Points to Consider
Legal Services Act objectives
–Greater competition - development of new and
innovative ways of meeting demand
–Access to justice for all consumers
–Better empowered consumers, receiving the
right quality of service at the right price
–An improved customer experience with
effective redress if things go wrong
–Greater innovation and partnership between
lawyers and other professionals
Changes under the English Act
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New overarching legal regulator – the Legal Services
Board
10 frontline regulators have applied to be recognised
as licensors
“Alternative Business Structures” need only one
qualified and practising lawyer
LSB has decreed that FSA-style principles-based
regulation should apply
Licensees can access external capital
Changes under the Scottish Act
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Law firms can be controlled by lawyers and
“other professionals” (= only accountants and
surveyors?)
So no access to external capital
A better outcome for small firms but less good
for larger firms; hence cross-border mergers
or migrations
Unlikely that dual FSA/ Law Society of
Scotland regulation will be possible
The result in England
• Many non-lawyers are adding legal services to
their existing businesses
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On-line services are opening up the bottom
end of the legal market (US firms Legal Zoom
and Rocket Lawyer)
Many law firms are merging but not thinking
outside the legal box
25% reduction in the number of law firms
predicted
‘ABS’ business models in England
• Co-op adding legal services to banking and
funeral activities
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Saga adding legal services to insurance and
elderly client services
Accountancy bodies applying for approval to
license Probate business
Personal injury firms merging with claims
management companies
Also, Direct Line, Eddie Stobart, Connells
Combining legal and financial
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Dual regulation probably OK in England
But is the law firm the right vehicle? Most
solicitors lack management skills
Some IFAs are employing solicitors
Others are considering hub and spoke
structures:
‘Hub and spoke’
The umbrella company:
Holding co
Law firm
IFA
Accountant
The writing on the wall
“The Legal Services Board has begun work on
moving towards regulating lawyers based on
the work they do, rather than on their
professional title” (Legal Futures report,
August 2012).
The result would be “a situation where
lawyers are not automatically authorised to
practise a particular area of law simply
because they have achieved a general
qualification”
JVs – a half-way house
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A “solicitors’ separate business”, in which
solicitors have a financial interest but does not
provide legal services
Enables solicitors to delegate compliance but
be rewarded financially
Many SIFA members see JVs as the natural
progression from arms-length client referrals
Get properly drafted documentation
Arms-length client referrals
• Appropriate for establishing a relationship and
for larger more specialist firms
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Cannot be remunerated financially - solicitors
can no longer retain commission
Most effective if reciprocated by crossreferrals or e.g. client data
Are usually confined to individuals
But always open to competition
Client referrals and independence
3 options proposed in SRA consultation:
1.Maintain the prohibition against referrals to
non-independents
2.Remove the prohibition but flag the virtue of
independence
3.Remove the prohibition but require solicitors
to justify to clients which financial advisers
they recommend
SRA favours option 3
Ex-FSA David Severn’s response
“SRA has allowed itself to be hoodwinked by
those who claim the current rules do not
accord with an outcomes-focused approach”
“Biased advice, contingent on making sales,
would offer less protection to clients”
“Solicitors could suffer reputational damage if
the clients they refer experience an inferior
service”
The likely outcome?
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Some combination of options 2 and 3?
The onus would be on solicitors to justify their
recommendations
So they would need to conduct and record due
diligence for compliance
Independents would be able to promote the
advantage of conflict-free advice
Providing the comfort factor
The SIFA Directory of
Professional Financial Advisers
is endorsed by the Law Society
Why solicitors need IFAs
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To reduce reliance on transactional business
and provide the basis for regular client contact
To build client data and start client segmentation
To present an holistic client proposition and
avoid the “necessary evil” view of legal services
To differentiate them from traditional law firms
Making the IFA/ solicitor connection
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Solicitors specialise, so match your
specialisations to theirs
Avoid the one-way-street of client referrals the key is working together
Some IFAs organise their advisers so as to
reflect law firm specialisations
Financial advice complements trust, tax,
probate private client work
Which services are complementary?
Re-position your own web site
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Categorise e.g. by reference to private clients,
corporate clients and professional connections
Carry technical factsheets, client newsletters,
legal news (see www.legalfutures.co.uk)
Flaunt e.g. the STEP FS certificate and SOLLA
accreditations
Create a portal for referrals and feedback
Look for business hooks
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Cashflow projections for divorce, older clients,
redundancy, PI awards
Risk assessments for trust portfolios
Due diligence in selecting DFMs
Cash management services
Assistance with compliance
‘What every COLP needs to know’
Providing an audit trail:
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Criteria for selection of IFAs
Due diligence (stress independence)
Risk Register (inappropriate referrals)
ATP Agreement and ToB
SRA disclosures
Assisting with client marketing
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Provide material highlighting the relevance of
money matters to legal advice
Include legal questions in IFA factfinds for
reciprocal business opportunities
Offer a legal + financial healthcheck
Hold joint client seminars
Getting down to business
• Hire a venue and invite individual solicitors to
business meetings with an agenda of possible
topics for solicitors to select
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Create a business plan for FS – people, types
of business, minimum values, volumes,
revenue, review
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Hold up-date briefing meetings with firms’
management committees
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Invite solicitors to receive your e-bulletins
The last word
“The past two years have witnessed …. a
desire for holistic advice from advisers, as
opposed to individual services in silos
delivered on a transactional basis.
This means that law firms must re-shape their
relationships with their clients so that they
become trusted advisers”
Sir Nigel Knowles, DLA Piper
Daily Telegraph 25/10/2010
Legal + Financial
= Trusted Adviser