UK solicitors voice concerns about client accounts

Recent findings from digital payments platform Shieldpay indicate that UK solicitors are grappling with the risks associated with holding client money in traditional client accounts. While 63% of solicitors believe that client trust could be improved by abandoning these accounts, a staggering 85% express concerns that losing control over them would hinder their ability to deliver effective legal services. This duality suggests an appetite for modern solutions that ensure client protection without compromising the quality of legal service offered.

The survey indicates that two-thirds (67%) of solicitors regard the risks of holding client money as having increased in recent years. The most pressing concern among solicitors, regarding potential breaches of the SRA Account Rules, is the necessity to return funds promptly when no longer needed (Rule 2.5), which 41% of participants cited. Issues such as the considerable resources required to manage these accounts (22%) and the administrative burden involved (19%) are seen as significant challenges to effective account management.

Interestingly, while a slight majority (51%) feel that law firms should retain the practice of holding client money, the profession acknowledges the necessity of better practices and compliance. Around 59% of solicitors emphasise that pursuing best practices demonstrates their commitment to upholding the highest standards, irrespective of the regulatory pace. The overarching belief is that the Solicitors Regulation Authority (SRA) ought to "ensure that there are proper systems and controls in place to protect consumers in the long term," as asserted by 88% of solicitors.

The last year has seen a notable 40% increase in SRA investigations, with complaints soaring past 100,000. Nonetheless, some resistance to change persists, as 35% of practitioners believe that the status quo is sufficient, asserting “it’s the way it’s always been done.” Cultural resistance (54%), unwillingness to alter existing processes (44%), and a lack of knowledge regarding alternative models (43%) are seen as barriers to reform.

When solicitors were queried about potential solutions, nearly half (49%) expressed a preference for Third Party Managed Accounts (TPMAs). Two-thirds acknowledged that “TPMAs introduce an additional layer of accountability and transparency” and offer “real-time visibility of payment transactions” (both 68%). While firms with heightened risk sensitivity may find TPMAs best suited to their needs (51%), there is also widespread sentiment that TPMAs could benefit all firms (48%).

Should the SRA mandate the use of alternatives to traditional accounts, most solicitors (28%) advocate for a gradual transition, with one in five favouring immediate implementation (22%). A majority (60%) see a timeframe of seven months to one year as most feasible for this transition, while 24% believe a hybrid approach, combining TPMA usage with traditional client accounts, would be the optimal solution.

Sophie Condie, CEO of Shieldpay, highlighted the ongoing challenges, stating, “Many law firms will be relieved that the SRA has paused immediate structural reform to client accounts. However, what persists is the operational burden that client accounts are weighing firms down with and a landscape of increasingly sophisticated cybersecurity threats. What the sector needs now is clarity on the alternative money management solutions available and how these meet regulatory requirements without impacting delivery of legal services. As the legal sector stands at a crossroads, we argue that the route forwards isn’t an all or nothing approach, but instead a hybrid model that acknowledges the complexity of the challenges firms are facing.”

Shieldpay operates under the regulations set by the Financial Conduct Authority (FCA) and is registered with HMRC for anti-money laundering compliance.