How the smallest firms are getting the best out of ABS status

‘Diminution’ is not something most people know about. Even solicitors may wonder what it refers to. Stewart Fairhurst, a Northumberland solicitor, has made this field ?of personal injury law ?his speciality.

One of his biggest diminution damages victories involved an Aston Martin of exactly the kind driven by James Bond. The DB4 was damaged in a crash and repaired, but the owner was awarded £20,000 because the car was still worth significantly less than it would have been had no accident happened at all.

Fairhurst began as non-practising barrister, lecturing at Northumbria University, before working for Dickinson Dees and only later qualifying as a solicitor. Clifford James Consultants, a niche RTA diminution service, became an ABS on 1 April 2013.

Becoming an ABS allowed his wife, Emma, to become a co-director. It has also allowed the firm to provide non-legal services, such as vehicle disposal or scrapping.

“An ABS to me is about being a business as well as a law firm. Clients were losing a lot of money by disposing of their vehicles through insurers. For us, it was a way of saving them money and generating income.”

Fairhurst said Emma, who is also a minority shareholder in the firm, has a background in sales, initially selling Cadbury chocolate to shops but later managing an estate agents.

“She’s not here because she’s my wife, but because she’s very good at what she does and brings a lot of skills to the business that we need.”

On expansion, Fairhurst said the firm would not “go out looking” for external investment but would naturally consider any offers they could not refuse.

“With or without investment, we’ve done this ourselves and I’d like to keep it that way,” he said.

“An ABS structure allows us ?to invest in other law firms, ?and potentially in other areas ?of law. I see it more as a tool of expansion than inward investment.”

Nicola Phillips, formerly a sole practitioner in Horsham, Sussex, converted her conveyancing practice into an ABS a year ago and made her mother a partner. Phillips’ main concern was to keep access to lenders’ panels.

“As a sole practitioner, doors are shutting,” she said. “Some lenders like a two partner firm – others I’m still struggling with.”

Phillips said having an additional partner reduced the price of the firm’s indemnity insurance and proved popular with clients.

“Clients like to know there are two partners in case one of you is ill,” she said. “It’s bizarre.”

Phillips was “really pleased” the firm converted to an ABS, despite the work involved.

“The ABS application ?process is pretty tough, but it’s worth it,” she said. “My advice ?is to take it bit by bit – it took us six months.”

Phillips said the firm would soon be moving to bigger offices and appointing a new solicitor, who would hopefully become ?a partner.

“With three partners we ?could solve all our problems,” she added.

DR Solicitors in Guildford, Surrey, specialises entirely ?in work for GPs’ surgeries, dentists and other primary ?care providers – the only firm ?of its kind.

Formerly a sole practice led ?by Daphne Robertson, previously a solicitor at Freshfields and Hempsons, it became an ABS last month.

Nils Christiansen, a chartered accountant and former management consultant at ?PwC, became co-director.

“Our focus is on a ?sector which is full of small businesses. There are a few larger businesses but most surgeries are small businesses with three to four partners.

“They operate in a highly complex world with lots of regulatory issues, but without the compliance officers you might get in larger businesses.”

Like Fairhurst, he said it ?gave the firm the chance to provide other “innovative” services and resulted in plenty of “interesting conversations” with other organisations in the medical sector.

“Becoming an ABS means ?we can have conversations we did not have before.” Christiansen said the firm wanted to become bigger but that did not equate with expanding the management team or external investment.

“It’s a question of making the most of your client base and providing other services which they find valuable.”

Christiansen said ABS status was “at least of equal interest to small firms”.

“It allows innovation which was simply not possible. We were talking about this 20 years ago when I was qualifying as an accountant. Now it has finally happened.”