Unsurprising Bar research

There’s an air of disappointment in the Director of the BSB, Vanessa Davies’s foreword to its latest research on the Bar’s attitudes to “delivery models” (that is, the entities in which they practise).

Anyone knowing the Bar won’t be surprised that, overwhelmingly, respondents don’t see any need for change to their delivery models or that there’s a slight air of complacency about their approach.  Even so, you sense slight desperation as Davies enumerates the things that ought to make them less complacent – “The UK leaving the European Union, reform in the Courts and Tribunals service and the issues of unmet legal need and the lack of consumer understanding of the legal services market, which were highlighted in the Competition and Markets Authority’s (CMA) recent study of legal services – published after this survey had taken place – represent challenges for us all to meet.

Offhand, I can’t see what impact Brexit or reform to the courts service will have on delivery models but the comment about unmet legal need is revealing.  One of the great assumptions about ABS was that the additional freedom of who you could work with and the additional investment available would enable the market to address problems of access to justice by providing more competitive and accessible legal services.  I’m not aware of anything that suggests this is actually happening and, insofar as it’s the BSB’s remit to address this question, one can perhaps understand why there’s a sense of “where do we go from here?” in Dr Davies’s words.

The research

Essentially the research shows:

  • The overwhelming majority of barristers deliver their services through chambers – other methods are outliers;
  • Barristers don’t see any need for wholesale immediate change in business models – less than 10% intend anything heavy in the next year or so;
  • Most of them are adapting to client demand and new technology and have a flexible approach to fees;
  • New entities are likely to be more flexible than older ones but there’s not much in it;
  • They have an, understandable, suspicion of outsourcing;
  • ABS is an “enabler” of change but nobody particularly wants to change;
  • They don’t expect to change their marketing strategies any time soon.

No surprises here.  The research base was entirely of existing suppliers and 53% of them had been operating for more than 20 years: you’d expect them to be happy the way they are.

There has never been any doubt that the Chambers business model is a very suitable one for successful barristers – relatively low overheads, they can concentrate on their specialisms with no need to worry about conflicts and they leave the boring stuff to solicitors or the lay client.  There’s never been much demand at the Bar to change it: the arguments for ABS have never come from people actually supplying the services.

Many findings chime with my experience in my current role as a purchaser of barristers’ services.  They are increasingly client focused.  Most Chambers will provide fee arrangements that suit their regular clients, they will be flexible about when and how you meet and how quickly you need advice and, indeed, the sort of work they will do.  According to the report, this would even extend to the “if you need a bunch of paralegals, we’ll get them for you”, which would have been unheard of ten years ago (though one or two of the forward-thinking Chambers fantasised about it).  It shows suppliers in tune with their market.

Unmet legal need?

But it’s a limited market and, while the report talks about “unmet legal need” as a challenge, the discussion, if it can even be called that, is pretty naïve and low level.  There’s a suggestion that SMEs and individuals do not use legal services as much as they could but little in the way of ideas of how that could be addressed.  There’s a nod in the direction of working with accountants (though noting that the BSB doesn’t regulate such entities) and a suggestion that local authorities may be a source of work all of which suggests a very limited understanding by the respondents (and, indeed, the researchers) of the legal services market.   At one point the report has to qualify some comments by pointing out that these were the views of the supplier based, untested on the actual market itself.

So there is nothing to suggest that the Bar recognises unmet legal need as its problem (though a respectable number of them do pro bono work – even if the amount isn’t stated) and, that apart, I see no appetite to make their services more affordable.

Fee transparency?

Transparency of fees is also mentioned in Davies’s foreword and research does suggest that uncertainty about cost is a major factor in people not using lawyers.  Requiring publication of fee rates may not be the answer, particularly if this simply confirms that the fees are more than people want to pay.  And what’s the point of an hourly rate if you don’t know how long the work is going to take?  Moreover, the research here suggests that fixed fee arrangements were problematic because it might lead either to over- or under-charging.  This may be because Chambers simply aren’t used to working out sensible “swings and roundabouts” fixed rates for bulk or standard work, but there is also a good deal of non-standard work at the Bar.

The Bar (and, indeed, solicitors) can be very flexible indeed about pricing when dealing with interesting work and regular clients but most people falling into the “unmet need” category probably don’t have the sophistication to tap into this. So transparency of pricing may be objectively a “good thing” but whether it will actually lead more people to use legal services debatable.

Barristers’ work

There’s little discussion about the extent of the work that barristers do, which I found surprising.  Barristers generally limit themselves to advisory work and advocacy, avoiding the high risk activities and, as a result regulatory and insurance costs are lower.  It also left the boring transactional stuff to solicitors.  There’s now a lot more flexibility about this and it would have been interesting to see whether respondents felt any urge to move into areas more traditionally done by solicitors – if only because it takes them closer to their clients and aren’t at the mercy of solicitors for the instructions they receive. I am pretty sure that we can infer that answer is likely to be that the appetite is limited but it’s interesting that it doesn’t appear to be on the radar.

More work?

So, if it’s expecting the market to respond to unmet legal need, the BSB seems to be looking in the wrong part of it.

However, it seems to me that we need a much more sophisticated debate about unmet legal need and what this means.  I’ve no doubt that there are many situations in life where a bit of legal advice would be appropriate or useful but it may not be the end of the world if you don’t get it.  Most of us have things we would rather do with our money than spend it on lawyers and the LSB’s research tends to show SMEs at least using a number of cheaper options than lawyers.  I don’t blame them for this.

And is it really the BSB’s role to encourage access to justice?  How far can a regulator of commercial entities, in an environment where people are free to choose what work they do, serious expect to solve the problems of ignorance and lack of money that are all part of the problem?

It can’t solve it, but there are two areas where it might want to look.  First, it might want to cross check the suppliers’ assumptions with potential users: not those of us are used to it and work with Chambers, but those people who are intimidated at the thought of using a barrister.  Whether those it regulates will care, is another question.

And might it not also look at people other than the existing supply base?  Each year nearly 2000 people qualify as barristers but less than 500 go on get a pupillage.  Might increased supply reduce price and find more innovative ways of solving the problem?  Possibly, though you would need to  get the infrastructure right to support them and ensure that they have the competence to do the work.  Or would they simply find that there wasn’t the market to make the living they want and go off to do something else?  But it seems to me that a far greater catalyst for change than ABS would be a thorough, open-minded view of the qualification and practising rules.

So the research provides an interesting snapshot of a group of suppliers being successful on their own terms and comfortable with its position in its existing market.  If you’re looking for something which seriously addresses unmet legal need, these aren’t the people who are going to provide it.  The research shows the extent of the task.

The CMA Market Study: What might it look at?

Very shortly after the Government’s announcement of its review of regulatory barriers for ABS firms and independent regulators last year, the CMA has announced a market study into the legal services market.  Should lawyers worry about it?

This is a market study, so an early stage. It could lead to a clean bill of health, informal encouragement for the industry bodies to improve the quality of information etc, recommendations to Government to change policy or formal action. In the absence of significant evidence of a cartel, a formal referral seems unlikely.

The CMA will be looking at:
• whether customers can drive effective competition by making informed purchasing decisions
• whether customers are adequately protected from potential harm or can obtain satisfactory redress if legal services go wrong
• how regulation and the regulatory framework impact on competition for the supply of legal services.

Supporters of the Legal Services Act 2007 hoped that independent regulation would abolish rules restricting the market and that ABS firms would enable lots of innovative new businesses to flourish. As a result, empowered consumers could make informed choices between a range of suppliers, prices would fall and access to legal services improve.

Most of us would be hard pressed to find any access to justice benefits flowing from the reforms. So will the CMA’s study address this?

Consumers making informed purchases

Consumers rarely use lawyers. This doesn’t help them judge whether they’ve got the lawyer they need, are getting a decent service at the right price or a good outcome. And there is very little information to help them.

The LSB consumer panel’s tracker survey, cited by the CMA as a prompt for the review, suggests that few consumers shop around for their legal services and their methods for choosing lawyers don’t go much beyond “phone a friend”. Many aren’t aware of the difference between regulated and unregulated providers and probably assume that one provider is pretty much the same as the other. That doesn’t suggest that they’re exactly driving change.

Regulators and LeO can provide basic regulatory information but don’t run to the sort of qualitative information consumers need to make a rational judgement, let alone “drive effective competition”. So far, an effective Trip Advisor-type site hasn’t materialised (assuming this would help) – partly because of cost and partly because there’s absolutely no enthusiasm in the industry for the risk of bad reviews. And, lawyers, unlike, say, cars are profoundly unsexy: I don’t see a monthly glossy entitled What Lawyer? appearing any time soon.

So I suspect that the CMA may be pressing for the professions to do more to provide information. Whether this can be achieved in a way that consumers will trust or find useful is another question.

Consumer protection and redress

Most lawyers will be surprised at the CMA raising this. It points to that tracker research indicating that 10% of users felt that the services were poor value for money. Given that this is an inherently complex area where consumer satisfaction is influenced by the outcome, 10% dissatisfaction looks quite respectable to me.

LeO may have its problems, but nobody seems to be saying that it’s not providing suitable redress. There’s better protection in the event of solicitor dishonesty than if a bank collapses. It’s even arguable that these protections are a barrier to competition or, at least, a disproportionate burden on business (LeO costs around £19m and a similar amount goes into the Compensation Fund). How will the CMA grapple with this basic tension between competition and consumer protection?

If, however, the CMA were to look at the unregulated sector, that would raise some really interesting questions. It’s reported that it’s going to be studying will-writing in particular. So maybe that debate will be reopened. I would expect them to raise the question of whether LeO should have jurisdiction over the unregulated sector.

There could be an interesting debate between the “no more burdens” group and the consumer protectors over whether there should be greater regulation of the unregulated sector. This isn’t necessarily something for the profession to feel confident about. The last time the question of regulating will-writing was raised, solicitor will-writers didn’t come brilliantly out of the comparison.

Regulation and competition

The CMA refers to LSB research suggesting that only 13% of small business users thought that lawyers were a cost-effective way of resolving disputes while 50% said they regarded using lawyers as a last resort.

More worryingly, under 25% of businesses thought they could access affordable legal services if they needed them. Even where the respondents had actually used lawyers only just over 50% felt they could access affordable services.

The figures for consumers would probably be even higher. Aside from those areas where there’s a steady flow of reasonably commoditisable work, often where there’s a lot of someone else’s money involved (conveyancing, wills and probate, some employment and (subject to further fall-out) personal injury), significant legal action is out of the reach of most of us.

Is this because of regulation? The default position of the competition authorities has been that failure of markets to develop is down to professional rules inhibiting competition, rules made by those professions. How long can that position run?

Regulatory and representational functions have been separated. It’s very hard to argue that the Law Society exercises any influence over the SRA. The CMA might dislike the fact that BSB is taking a fairly conservative approach to ABS licensing, but that’s as likely to be a result of a realistic assessment of its organisational abilities as of any undue influence from the Bar Council.

A good many restrictive practices have been abolished in the last thirty years. Barristers can accept work direct from the public. Very few do: is this because the permitted business models aren’t apt for this or because most barristers would have become solicitors if they’d wanted to work directly with consumers? Solicitors can exercise higher rights but, except in crime, this doesn’t seem to have seriously dented the Bar’s hold on this market.

ABS firms are now permitted. But, my impression is that firms adopt new models to improve the running of their business, to compete better in existing markets or to make a quick buck for the owners. Few have targeted areas where access to justice is a real problem.

The SRA’s processes for authorising them have been criticised but if there had been a real business opportunity there, I suspect businesses would have lived with those. Indeed, might not traditional law firms have moved in there?

It feels rather like a horse being led to water but refusing to drink because it has a perfectly decent source back home.

Small business and consumer research

Looking more closely at the LSB’s research and at earlier research on consumer behaviour by Pascoe Pleasance and Nigel Balmer, you have the impression that businesses and consumers positively don’t want to use lawyers. Businesses try to resolve the problems themselves first, then talk to contacts and then their accountants or other professional advisers – and apparently 73%(!) of disputes were resolved satisfactorily. These look like pretty rational business decisions to me.

Consumers, faced with legal problems, again, usually find other ways of dealing with them – either because they’re not important enough or because they can be sorted out without lawyers.

Culture rather than regulation?

So lawyers are called in irregularly, don’t get a relationship with the client and are less able to do interesting things with prices.
So this looks like a problem which has become cultural and which goes beyond regulation: consumers don’t want to use lawyers unless they have to; lawyers have developed models which work for them and which compete against each other but don’t seem good at creating appealing models for consumers to use; and consumers don’t have the power to alter this. Outside investors can see money in helping firms compete in some existing markets but not, apparently, in developing new ones.

What might the CMA look at?

This isn’t to say that there aren’t things for the CMA market study to look at. The fact that there are large numbers of part-qualified barristers and solicitors out there at a time when using lawyers is out of the reach of most consumers and small businesses, must raise questions about whether something can be done about the supply side – particularly given that it’s the existing members of the profession who control whether an individual qualifies or not. There isn’t a cartel here but might it not inhibit innovation and competition if you can only qualify by being part of an existing business model?

Is it appropriate for there to be a single dominant qualification covering ever-expanding number of branches of law – particularly when the regulatory model doesn’t assess competence in the overwhelming majority of them? Would a single regulator, authorising activities rather than granting titles be a better answer and provide greater opportunities for innovation in the market?

That LSB research might prompt questions about the extent to which people who aren’t primarily trained as lawyers (accountants etc) in practice provide legal advice and about the relationship between regulated and unregulated legal services. Does the concept of reserved work have any relevance at all?

There are lots of other aspects: to do with maintaining professional standards and the reputation of the profession abroad. You might also ask whether, in fact, changing regulation will work when there are profound cultural and financial questions here: if there’s no money in providing legal advice on, say, housing repairs, there won’t be much commercial supply of that advice.

Effect on the profession

So will it affect the profession? Probably no more and no less than the reforms arising out of the previous enquiries, commissions and legislation. However, if I were a managing partner I might well muse about the finding in the LSB’s research that small businesses are more likely to go to an accountant for legal help than to a solicitor and more than 5 times more likely to have an accountant than as a solicitor as their main external adviser. A