Use OFR to your advantage

Outcomes-focused regulation (OFR) means you will be judged on the outcome of your actions within certain guidelines rather than following a set of rules.

Solicitors like rules and this new regime will represent a complete change to our thought processes. In my experience,
both the COLP and COFA need help and support to function effectively in a small to medium practice that does not have the time or resource to employ teams of people to conduct file reviews, keep the registers up to date and train the staff, etc.

Deputy roles

Hence the rise of the ‘deputy COLP’ and ‘deputy COFA’ roles within firms. While this cannot change the responsibility of the appointed COLP and COFA, it allows the partners/owners responsible to outsource these duties to an experienced compliance person at an acceptable monthly rate.

This gives the COLP and COFA the time to work on their overall strategy and implement it while not being bogged down with the minutiae of adhering to an OFR regime. The principles of OFR are steeped in the old tradition of the Financial Services Authority, now the Financial Conduct Authority (FCA), based on fining people heavily for non-compliance. However, the financial services industry has been through this experience for the past decade, and whether we like it or not that will be the only way the Solicitors Regulation Authority (SRA)
can operate.

The solicitors’ mark
should really mean something
and compliance is the
only differentiator between
a solicitor’s practice and the competition. If we use OFR to
our advantage surely we should be able to charge a premium for our services compared to commoditised legal service brands?

Bringing OFR and compliance into the heart of your firm should be the key differentiator.

There has to be consolidation within the legal sector: it is envisaged that somewhere between 2,000 and 3,000
firms will end up merging, consolidating or simply going
out of business in the next few
years. It could be that the cost
of complying with the new regulations will force many firms to consider merging or simply being acquired. There are many practices in conversation for that very reason. Given the right circumstances, merging two well-run and managed practices drives down costs and overheads, so the cost of compliance seems perfectly natural.

Efficient management

Is this the sign of things to come? How many firms can honestly say they are well-run, well-managed and profitable? Has the improved position over the past six months merely papered over the cracks?

Have many of the firms who have been having ‘chats’ now realised that the only way to pay for and survive this new regime is by getting bigger and sharing the potential cost of compliance under the OFR regime?

The financial services industry has experienced OFR for the past decade, and it seems that only a few prime examples are needed to make the remainder sit up and listen. Looking back to the early days of OFR compliance in financial services then we can
see heavy fines for those businesses that failed to comply. Is this the stage we are now at with the legal profession? How many firms have paid lip service to the new regime and only when examples are made will they really take these fundamental changes seriously?

Spreading the cost of compliance in larger practices could prove an attractive option to some. Larger practices could offer their compliance service to smaller firms; merging or being acquired could be another, but care should be taken in both the way your firm is presented and to whom you offer your practice.

However, many of you that wish to retain your independence should consider bringing in specialist help in the deputy role to give you the time to grow and develop the practice – a modest monthly investment could prove invaluable.

Compliance is not just reviewing a few files and considering what your options are; it should be an integral part of your ongoing strategy for running your practice, and the growth of the deputy COLP role at a nominal monthly sum could well be the solution for many firms. Do remember that the regulator cannot be your friend and has to rely on fear to make compliance work – therefore the cost of not getting it right could be immeasurable.

Finally, we are now seeing
the first batch of professional indemnity insurance (PII) renewal premiums following a chaotic consultation process – an average of 25 per cent increase in premiums could well be the catalyst for many firms to say enough is enough. SJ

Viv Williams is the CEO of ?360 Legal Group