There are no cookie-cutter ABSs

In the early 2000s, when the Legal Services Act was just ?a glint in David Clementi’s eye, some of us talked well ?into the night on what multi-disciplinary practices might look like. The model we had in mind was some variation of the one-stop shop. 

We imagined large modern offices populated by solicitors, accountants, financial advisers, surveyors, and others, offering a variety of client services in a seamless fashion. It will shortly be four years since the first alternative business structure (ABS) received its licence, so it is a good time to see how the reality measures up to our fertile imaginations.

There are now around ?600 ABSs of many types, approximately 70 per cent of which are licensed by the Solicitors Regulation Authority (SRA). Of these, relatively few look very like one-stop shops. Most ABSs are not new businesses at all, but rather ?they are old businesses ?with non-lawyers made into partners, members, or directors. ?Of those offering more than one professional discipline, there is ?a great variety of approaches. 

One example of a solicitor-led ABS is the Kidwell Group, operating in Herefordshire. The law firm, Kidwell Law Solicitors, became an ABS in October 2013. In August 2015, Kidwells announced a joint venture with ?a Welsh accountancy firm, joining nine other businesses in the Kidwell Group. Both Kidwells ?and the accounting firm shared ?a niche in advising former members of the armed forces ?and appear to have a common ethos. The new venture is ?being marketed through KidwellsNexus, launched in 2014.

Solicitor-led innovation 

From the client’s perspective, the services offered may well look like a one-stop shop, even though there are a number of different companies involved. However, the most notable aspect of the whole arrangement is its rarity, especially in that the innovation here is mainly solicitor-led.

The Institute of Chartered Accountants in England and Wales (ICAEW) became a licensing authority for ABSs in 2014 and, at the same time, was able to license its members for probate work. There are now around 110–120 accountancy firms undertaking probate work through the institute, which had hoped for as many as 250 firms in its first year of licensing (that ?year ends in October 2015). 

However, some firms of accountants wanting to offer ?a wider range of legal services than the probate work allows have gone to the SRA, rather than the ICAEW. One such firm ?is Churchgate Accountants, based in Bury St Edmunds, which became an ABS in August. Churchgate made a point in saying, when launching the ABS, that the change was a response to client demand for ?a one-stop shop. Matthew Boardman, who is a solicitor ?and director of legal services at Churchgate, said: ‘We see our clients fairly regularly, rather than solicitors who tend to see them once in a blue moon’. 

A number of accountancy firms have identified the single transaction relationship solicitors tend to have with ?their clients as a major weakness. Solicitors often view the notion of greater contact with their clients as equating to selling them more services, rather than providing a service clients actually want.

Single discipline companies

One of the more high-profile ABSs has been Bobby Dhanjal Legal Services, the first independent financial adviser ?to become an ABS. In addition to its legal services and financial services businesses, the company has now set up an estate agency. The firm also announced that the average case size handled by its wealth management division had continued to grow as a result ?of cross-selling with the ABs. ?The average value of cases had increased by 50 per cent as a result of the ABS. It is worth noting, though, that the firm has not created a one-stop shop; rather it has formed a series of close-knit single discipline companies, which refer business to one another.

The examples set out here are the exceptions, not the rule. ?There is still no identifiable proven model of an ABS one-stop shop that new entrants to the market can copy. The reasons why this is the case are many and complex. However, the explanation which I hear most frequently is the complexity and lack of practicality in having more than one regulator operating in the same firm at the same time. The phrase used is ‘one regulator is bad enough’.  

The Legal Services Board, whose job is to promote new business innovation, may not be too impressed with that.

Stuart Bushell is managing director of SIFA @sifa_stuart www.sifa.co.uk 

Copyright & permissions