SRA: impact of ABSs on small firms may not be as bad as feared

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By Legal Futures

7 March 2011

Equality: new business models may help change profession's culture

Alternative business structures (ABSs) “may not be as big a threat” to small firms as some fear, the Solicitors Regulation Authority (SRA) has suggested.

A draft impact assessment also argued that ABSs could help equality and diversity in the legal profession by breaking the traditional partnership model that has held it back.

An updated assessment on the impact of ABSs on equality and diversity has just been published by the SRA for feedback ahead of its submission to the Legal Services Board this month with the application to become an ABS licensing authority – assuming the Law Society council approves the application.

Consumer research published by the SRA two years ago – which found concerns that alternative providers may find it hard to replicate the tailored service offered by firms of solicitors – has been augmented by further research recently on what customers want and need from outcomes-focused regulation. The interview sample included non-English speaking consumers and disabled consumers. It found:

  • Consumers of legal services have low knowledge and awareness levels of the market, although place high trust in the legal profession and in the individuals employed within the sector;
  • Recommendation by word of mouth plays a key role in choosing a solicitor; and
  • There is a high degree of loyalty within the market, as consumers tend to return to the same provider for subsequent legal services.

The assessment said: “These findings tend to support the previous research findings in that consumers are likely to continue to use existing providers of legal services, despite the changes that are likely to be introduced.”

The SRA also drew on Law Society research into the impact of ABS on geographical access to justice, whose conclusions included:

  • ABSs are more likely to benefit large firms than small firms;
  • The introduction of ABS firms in Australia does not appear to have had a significant impact on the number of non-ABS small firms;
  • Factors that precede the introduction of ABS have already initiated a threat to small firms, including legal aid reforms, the increased use of non-solicitors in providing legal advice and the growing use of new technology in accessing legal advice;
  • A moderate reduction in the number of law firms would not have a significantly adverse impact on geographical access to justice;
  • The introduction of ABS would only have an effect on geographic access to justice if it results in the closure of some small firms in areas that are thinly served at present.

The SRA said: “These findings indicate that ABS in themselves may not be as big a threat to small firms as some have suggested, particularly if they are not competing in the same market. There also appears to be loyalty amongst consumers to their traditional high street firms, which would indicate that there is still a demand for small firms in the legal marketplace.”

The assessment, which was first published in draft last October, concludes that there is insufficient information to assess the actual impact ABSs will have on equality.

It added: “Nevertheless, it is clear [from other research] that the set-up of traditional firms has not been conducive to creating a diverse workforce and many barriers continue to exist both in terms of entry to the profession and also within the profession itself… The more diverse business models may indeed bring about greater flexibility and cultural change.”

The issue feeds into the review of legal training the SRA is conducting with the Bar Standards Board and ILEX Professional Standards, while the SRA is organising engagement with the Association of Women Solicitors, the Society of Asian Lawyers, the Sole Practitioners Group and Lawyers with Disabilities Division “to discuss the potential impact and opportunities of ABS on their members and the support that they require going forward”.

The assessment details a plethora of other initiatives the SRA is running to engage with both lawyers and consumers over ABSs, with the latter supported by a new dedicated consumer affairs function within the authority.

The assessment finishes: “We believe that ABS have the potential to present new opportunities to individual solicitors and firms and provide benefits to the public and consumers through increased competition and the development of new services and new means of accessing those services. At the same time, however, we recognise that there are still many concerns from certain parts of the profession about the impact that these changes will have on their firms.”

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