Entering the post-traditional era

2012 saw law firms across the UK coming to terms with a change in the law governing the way they can be owned. The full impact of alternative business structures (ABSs) remains to be seen, but one thing is for sure; firms have to address the way they do business and sharpen their approach to the realities of the commercial environment.

After the introduction of the so-called 'Tesco Law', it was widely feared that the legal arena would become ever more competitive and the overall quality would dip because of companies attempting to keep up with increased pressure from ABSs by employing fewer experienced solicitors and more paralegals. Many solicitors feared aggressive marketing tactics from ABSs driving clients away from traditional firms; traditional firms being priced out of the market; standards dropping across the board; and clients receiving inferior advice.

However, the result of the introduction of ABSs has been rather different than expected, particularly for traditional LLPs. At Freeth Cartwright, the biggest impact of the change in the law was for us to immediately address our business from a commercial point of view. It led us to take a more proactive approach to addressing and defining what makes us different to other firms of solicitors. While this sort of marketing approach is the first step many companies take towards publicity; for the legal profession, it is fairly new.

For example, we very quickly ruled out adjusting the service we offer, as we consider the standard of service and the quality of expertise and knowledge that all our partners and fee-earners offer is the primary reason why our clients value us. To alter this in any way (such as increasing our ratio of paralegals to solicitors) would have been counterproductive. We felt it would be much better to focus on more effectively communicating the services we provide to our clients.

We began thinking creatively and innovatively, and working with marketing professionals, to generate ways to let people know why we believe they should come to us. What began as a reaction to the perceived threat from ABSs has become much more focused around our clients, the services we provide, and the approach we take to winning new clients.

Of course, we're not the only firm to take this approach. Other firms have also undergone a process of forced self-reflection following the introduction of the 'Tesco law'. In their recent strategic announcement delivered in Birmingham, the Solicitors Regulation Authority (SRA) laid out its priorities for the forthcoming three years. During which, they remarked that traditional firms were being 'more innovative than ABSs'.

It is very early days, but many firms of solicitors have adapted the way they do things in light of a perceived threat from ABSs. However, it is those who have undertaken this sustainably rather than making a snap reaction that will succeed in the long run.

The fear among many firms is that the introduction of greater competition will result in diminishing standards across the board as companies fall over each other to secure a commercial advantage. Some firms have adapted to the changes by significantly altering the way they do business, others have stuck to their same old strategies and made few, if any, changes to their operations, while yet another group have subtly adapted to the realities of the new situation by focusing on making their existing offering more accessible to customers by more effectively communicating it.

ABSs have definitely changed the landscape. Law firms have felt protected and isolated from the commercial arena for a long time, but that is all changing

However, there are legitimate concerns to be raised against ABSs. The benefits of a partnership are not simply the retention of control by specialist experts in their field, but have wider implications too, including in the way that firms are able to attract new talent and in the career development of lawyers in general. When the ownership of companies is shared between external investors, firms of solicitors will be in danger of losing the traditional incentive for early-career solicitors of one day achieving partner status within a firm, and the share of the profits that goes with this. There are fears that the legal profession will become less attractive to graduates and young people as a career.

The full picture surrounding the introduction of ABSs has not yet become clear. However, the industry is certainly nervous about what the future holds. If there is fear, though, it is tempered in many firms by optimism and excitement about the opportunities that increased competition will bring for firms to innovate, increase service levels and market effectively, all of which should have a positive impact on the profitability of the legal industry.