The business models for lawyers have expanded in the last five years and look set to continue to do so.
Alternative Business Structures (ABS)
Until 2011, regulated lawyers could only run law firms with each other: no non-lawyer ownership was permitted. That changed in 2011 when ABS were permitted. If they could meet the regulators’ suitability tests and other criteria, then they could be licensed to provide reserved services. The CLC was the first body to become a licensing authority followed by the SRA. The BSB has an application to become a licensing authority with the LSB at the moment and CILEX Regulation has plans to join the fray.
The SRA has licensed around 500 bodies (just under 5% of the firms that it regulates). The CLC just over 50.
The new rules in theory allow:
- a non-lawyer to be a partner or owner or manager of a firm otherwise offering traditional legal services;
- a multi-disciplinary practice offering a wide range of professional services (e.g. accountancy and legal services);
- a supermarket or other entity to own a law firm;
- a firm to be listed on the stock market.
The idea was that this would increase competition in the market and improve access to justice. There’s limited evidence that this has actually happened, though there is some to suggest that these firms are more adventurous in trying new things.
There’s obviously disappointment at the quiet response to the ABS opportunity with the Government looking to reduce barriers to entry for ABS firms.
Separate Business Rule
The SRA have recently relaxed the rule which prohibits solicitors from having separate, unregulated, businesses which offer unreserved legal services. They won’t be able to use the title “solicitor” when doing this but the argument is that unregulated firms ought to be able to use solicitors’ expertise when providing unreserved services.
A bit early to see what the effect is, but firms may well be weighing up how much of their work actually needs to be regulated and whether any savings would in fact be worthwhile.
The fact that you can cover a good deal of legal services without being regulated is one of the interesting features of the landscape. Research suggests that there are at least as many unregulated people in the legal services industry as there are regulated.
However, it’s not quite clear what this means. It seems likely that a substantial number of these people are employed by regulated firms. However, there remain a proportion offering services as will writers, employment consultants and claims handlers (though those will have an element of regulation from the Claims Management Regulator).
While a number of firms will be respectable and hold insurance and provide a good service there are a number of others, particularly will-writers, where some firms are incompetent, bordering on the dishonest.
There is also the question of the boundary between different professions: accountants and lawyers both provide tax advice, for example; planners and surveyors need legal expertise. Most of these will be regulated by a professional regulator. In dealing with applications for ABS licences, the SRA has deliberately restricted the extent to which it will look at work, which might be legal work, but which is also subject to the jurisdiction of another regulator.
It’s too early to say how far the CMA and the Government will address these issues. Indeed, it’s not obvious how far they need to: outside will-writing, there’ limited evidence of problems.