Going solo: Solicitors as consultants
Taylor Rose MW CEO Adrian Jaggard comments on how compliance and rising costs are driving consultancy growth in the legal profession
The ongoing rise in Professional Indemnity Insurance (PII) costs is having a significant effect on how sole practitioners will be able to operate in the future. A recent industry report suggests SME firms in the legal sector have ended up forking out on average 30 per cent more for their cover due to hikes in PII premiums.
How does the rise in premiums make consultancy more attractive?
Such an increase is having a particular impact on smaller firms and sole practitioners, affecting their appetite and financial capability to keep operating independently. Research from Mazars suggests closures of law firms over failures to obtain insurance have increased sixfold in five years. The accumulation of rising costs and compliance pressures mean it is making life very difficult for SMEs and sole practitioners to continue under the same model. Indeed, in the last six months, the number of sole practitioners regulated by the SRA has dropped by 5 per cent.
What has caused the PII premium hike?
The premium rise is partially due to the increasing number of solicitors working from home post-pandemic, which has further increased risk for insurers, particularly for smaller firms without well-established risk, compliance and quality control processes.
Why are solicitors turning to consultancy as an alternative?
As a result, we are witnessing many lawyers from smaller firms and sole practitioners being driven to work for firms operating a legal consultancy model. The consultancy lifestyle has become an attractive and viable alternative way of working for experienced lawyers offers increased earnings, a better work-life balance, and a new-found sense of security and freedom. The legal consultant business model offers lawyers a central service platform, brand and management infrastructure from which to operate, in return for a percentage of the lawyer’s revenue. The lawyers themselves are self-employed consultants who retain an average of 70 per cent of their billings, with the remainder taken by the consultancy firm.
How has this phenomenon affected Taylor Rose MW?
As a legal services businesses operating a leading consultancy division, we have seen a significant impact. We have more than doubled the number of consultant solicitors in our legal consultancy division over the past year - with more than 350 now working with us and a current growth rate of between 15-20 per cent per month. The pressures on smaller firms coupled with the attraction of the consultant working pattern are certainly important factors in this rapid growth.
Where’s the appeal?
Experienced solicitors no longer want the responsibilities of compliance and increasing operating costs. Yet, as consultants, they can remain ambitious – and can often end up running their own businesses without the burden of high initial start-up costs, such as securing office space, purchasing indemnity insurance, IT infrastructure and legal subscriptions. These advantages, combined with the marketing and new business support provided by firms with strong brands, leaves lawyers to concentrate on being lawyers, as the consultancy firm provides the framework needed to practice.
Where could it lead?
The operating model is still in its infancy and has a long way to grow, but the greater the pressures building up on smaller firms, the more we will see lawyers deserting traditional practices in favour of the legal consultants.
Adrian Jaggard is CEO of Taylor Rose MW: taylor-rose.co.uk