Lawyers and accountants: A level playing field?
Are recent regulator proposals a bad move for the solicitor profession or will they make legal services more readily available to a wider audience, wonders Viv Williams
With new proposals from the Legal Services Board recommending further reserved legal services for the Institute of Chartered Accountants in England and Wales, as well as proposals from the Solicitors Regulation Authority to allow both law firm regulation and individual regulation, we can now see the future direction that the legal profession is taking.
The accountancy profession has self-restricted itself to the area of tax at this moment in time, but I wonder how many solicitors will end up being employed by accountants delivering wills, inheritance tax planning, and eventually probate?
There can be little doubt that accountants who have a less transactional relationship with their clients will take full advantage of this opportunity. The only requirement for a solicitor will be for the grant of probate – not much to look forward to.
We have seen the ICAEW granting alternative business structure (ABS) licences to nearly 50 per cent of accountancy firms compared to the circa 600 issued by the SRA to law firms. The ICAEW is both the representative body and regulator for the accountancy profession – a very different story to the relationship between the SRA and the Law Society. Need I say more?
We will have legal practices where all staff will be delivering legal services, both reserved and non-reserved activities, regulated by the SRA. We will also have individuals regulated by the SRA working for other businesses not under the regulator’s umbrella.
The individuals will not be delivering reserved activities but can deliver everything else as part of a legal services provider. These could be insurance companies, financial services firms, accountants, or any other business that wishes to provide legal services to its customers.
These businesses do not offer access to the right of privilege, and no access to the compensation fund, but will be subject to oversight by the Legal Ombudsman following protests from the Law Society.
Professional indemnity insurance will be a personal policy and not firm wide – it is yet to be seen what value this will carry for the individual but we all know that PII is probably one of the three largest overheads a SRA-regulated law firm carries.
Surely, this creates a two-tier profession and the purchasers of legal services will need to be fully aware of their rights under such a proposal?
The opportunity this presents to other businesses is huge and, as we have a succession crisis in the current crop of practices, with younger people wanting the career of solicitor without the responsibility of being a future owner of a firm, tells us a lot about the future direction.
Is this a bad move or will it make access to legal services more readily available to a wider audience? Some firms are already moving away from the solicitor brand and are calling themselves lawyers. That in itself reduces the value of the solicitor brand that seems to be moving towards the individual.
There are approximately 800 new law firms formed each year and these are replacing many of the firms that have merged, closed, or failed hence the numbers of practices remaining relatively high. Many new entrants are sole practitioners that have either left larger firms or been made redundant. They are predominately limited companies, have few overheads, and tend to be niche practices with a following of clients.
The larger international, City, and regional firms will simply get bigger so the challenge to the future of the profession is for the mid-sized two-to-ten partner practices that have not planned for succession or exit. Many have relied on other parties to provide them with work, such as conveyancing panels and claims management companies. This model is no longer sustainable and many practices have not grasped the opportunity of marketing to existing clients without relying on others.
We have discussed consolidation for a decade with little change, yet these new regulator proposals appear to be going ahead without challenge, despite irrevocably changing the legal landscape.
My concern is for the thousands of practices that will be looking for a way out, whether by merger or closure. Who will represent the profession and offer helpful solutions?
There will be troubled times ahead for a large number of solicitors. Prepare to see more change in the next few years than we have seen for decades.
Viv Williams is legal services director of SIFA 36