Boiling frog syndrome

Solicitors might understandably feel threatened by changes which now allow accountants to offer non-contentious probate services. After all, these have been
an important and exclusive pillar of the legal profession for generations.

But it would be quite wrong to see this solely as competition. It is part of a flourishing merger of law and accountancy, to the benefit of both industries and their clients, in a landscape where common ground is increasingly evident between the two.

In August, the Institute of Chartered Accountants in England and Wales (ICAEW)
was granted approval to be a regulator of non-contentious probate services, the latest stage in the gradual deregulation of some legal monopolies over recent years.

Many chartered accountants, including my firm, intend to undertake such probate work.
In future, it is likely that other reserved legal activities will also be deregulated, and I am sure the ICAEW and other professional bodies will want to increase the range of such services their members can offer. But this is not a cause for alarm among lawyers.

Burdensome competition

While this might seem to be burdensome competition that will inevitably drive down the cost of such services, my belief is that it will also open up greater cooperation between accountants and lawyers.

In many instances, and for many years, lawyers and accountants have worked together to solve client problems or to implement family or business planning. Depending on the skills within each practice, there are already a number of services that overlap - particularly in specialist tax planning, corporate finance and insolvency work.

I see this trend continuing. Both lawyers and accountants bring different perspectives to problems. The deregulation of probate activity does not alter the fundamental necessity of that close cooperation of the two professions, or its benefits for clients.

Under the latest changes, licensed ICAEW members are only able to handle non-contentious probate matters. Lawyers are, rightly, not being required to surrender exclusivity over contentious matters, which invariably require greater expertise and possibly court experience.

The changes fairly recognise the skills of each group of practitioners. Chartered accountants are skilled in the administration of tax and accounts in straightforward cases. Lawyers are better at handling contentious matters, which take maximum advantage of their skills and training. This division must bring cost benefits to clients in the longer term.

We are now witnessing alternative business structures (ABSs) being formed to combine accounting and legal expertise, with accountancy practices apparently embracing the potential of ABSs faster than law firms. Accountants have been employing lawyers for some time to handle particular aspects of client work. Only recently, KPMG and Kingston Smith became the first ABSs to be registered with the ICAEW. This trend for accountants and lawyers to work together in
a combined practice will doubtless continue
to grow over the next few years.

Better together?

Of course, not every client wants a one-stop shop, and many will demand a separation. But I have seen instances where clients have appointed both their lawyer and accountant as executor, expecting them to work together for the benefit of their beneficiaries. Such arrangements can and do work well and acknowledge the expertise of each profession.

However, a client may prefer to use their accountant rather than a lawyer to deal with straightforward probate matters.

This could be due to familiarity. Chartered accountants traditionally offer individuals a recurring tax or accounting service based on annual accounts and tax returns. This gives
them a unique opportunity to build high levels
of personal trust with clients and their family.

As a consequence of such trusted adviser status they are often asked to act as an executor. This intimate professional relationship gives accountants the ability to offer a range of financial advice, including wealth management. Probate and executor roles are now added to that list, and logically so.

Of course, lawyers are trusted advisers,
too, but they tend to only become involved occasionally - possibly when there is a need
for 'brain surgery' legal or tax advice. Typical transactions such as property purchases do give an opportunity to discuss will-writing or financial advice, but these are occasional, not annually recurring. Legal firms that build relationships with accountants undoubtedly benefit from the referral of this type of business. Indeed, generally it seems that there is more opportunity for accountants to refer work to lawyers than the other way round.

We intend to embrace the opportunity to
offer probate services. Since the summer my firm, which is based in London and the South East, has trained 16 accountants in basic probate law and practice. Four partners have taken the ICAEW probate exam and will shortly be licensed. We will not be writing wills or, naturally, dealing with contentious matters, but we will be offering our clients an alternative in straightforward cases. We see a significant demand for this from our personal client base. This is merely an extension of our existing tax, wealth management and personal financial planning work.

The changes build on history as well as revolutionising opportunity. Partners in my firm have acted as executors and trustees for clients for a long time, as have chartered accountants generally. Consequently, I think it is a further benefit that this activity is now regulated by the ICAEW. Their members will now be required to undergo a formal test of basic competence before being licensed. They will also need to maintain their competence through continuing professional education. For example, my firm's probate activity, procedures and practices, will now be subject to external review and oversight which I hope will give clients confidence in the quality of work performed.

In many instances, I can actually see my firm continuing to undertake probate work hand-in-hand with lawyers, particularly in relation to complex estates, property and family financial planning. Legal expertise will continue to be essential. Wills, deeds of arrangement and other documents will still need to be prepared properly and we will not be undertaking this work. To that end, we will be continuing to work with, and rely on, lawyers for such expertise. 

Distinct specialist skills

The practice environment is continuing to change for us all - a further common purpose. Those who adapt will survive and thrive. There will also always be a demand for the distinct specialist skills and expertise of both lawyers and accountants. Both professions will need to focus on building and maintaining their client relationships and adding value to their services, while simultaneously ensuring that basic administrative procedures are undertaken as cost efficiently as possible.

Will the deregulation of non-contentious probate work help drive this type of change? Maybe - but only if firms focus on what they
do best.

In the short term, we will not feel a professional earthquake from the probate changes. For example, chartered accountants have always acted in many cases jointly with lawyers as executors for family clients, and that will continue.

But it must be an advantage for clients that accountants are now formally trained in probate law, needing to be licensed if they extend their services into the preparation and execution of grants of probate.

It is also a positive step that those accountants licensed to undertake such work can be identified through qualification, and that there is an obligation for them to undertake continuing professional training in the area.

Despite no immediate earthquake, we are certainly facing upheaval through a longer-term consolidation of professional service firms, and the emergence of ones that cross-over services to give a broader range to their clients. In a changing climate for professional services, lawyers and accountants may increasingly come together
in ABSs.

However, they will still need to focus on the demands of their client base and this applies to
all types of practice whatever their nature - not just those undertaking probate for personal clients.
We are, as solicitors and accountants, all in this together. SJ

Clive Stevens is executive chairman of accountancy firm Reeves

This isn’t necessarily a revolutionary change – the market hasn’t been just for lawyers for a good ten years. There have been lots of other entrances already, so the accountants’ arrival won’t necessarily change things, certainly not in the next 12 months anyway. It’s realistic to recognise that if the particular circumstances of a given client mean they could be best served by an accountant, or another non-lawyer, then as a profession we should embrace the competition and move forward.  To say non-probate services have been monopolised by the legal profession in the last ten years is not necessarily correct. The market has broadened considerably already and there have been various other entrants. The work has, historically, been undertaken by solicitors. Nevertheless, accountants have always administered estates, sometimes in conjunction with lawyers. There is a tendency to view probate as either complex or non-complex, and then to view the non-complex cases almost as transactional. In our experience, it’s not always obvious from the outset whether an estate administration is going to be complex or not. Issues can arise and it can develop complexity. The level and quality of services provided by solicitors should not be disregarded, but we recognise that the work can potentially be undertaken elsewhere, so long as those administering the estate know the limits of their expertise and are able to spot when issues could become difficult; it’s then that it needs that ‘brain surgery’ type of work. We have always referred work to accountants and will continue to do so; it’s been a fairly mutual and reciprocal relationship. There will always be people who go to solicitors and will continue to do so because they’re the parties who traditionally undertook probate work. There are those who will look elsewhere. There is already a range of other providers of probate services, and accountants will be added to that list. Hopefully the competition will drive up standards and offer a better service for clients. We always put the client at the centre of everything we do and, if increased competition in the market means they obtain a better service, then we’re all for it.