Posted by Chris Kenny, chief executive of the Legal Services Board
It’s in fashion these days to say that the legal services market is at a crossroads. Depending on your point of view, it may or may not be. But it is clear that the market is evolving in ways not envisaged even a few years ago when the Legal Services Act 2007 was first introduced.
This Act, just to recap, was introduced with cross party support, the backing of most of the legal profession, and with strong support from the consumer movement. Behind it was a desire to improve the quality, value and accessibility of legal services and, at least some, acceptance that one way to achieve this was to remove existing restrictions on ownership and organisation of law firms.
This would increase competition within and from outside the sector and so find new and more innovative ways to serve customers, providing better value at the same time.
The Legal Services Board (LSB) was given the job of bringing those changes to life. Some think that means a Frankenstein’s monster has been created. The truth couldn’t be more different. We’re seeing new kinds of firms, new ways of delivering services and, in the medium term, that will mean new people being able to access justice – not just those who could always afford legal services, or those who have been dependent on legal aid in the past.
The majority of basic rate taxpayers and small businesses are – depending where you sit – either a huge ‘squeezed middle’ of excluded citizens or a great commercial opportunity. The fact is that they are both. And new commercial freedom for law firms means that they can now serve these citizens much more effectively than before.
The legal services market is changing. It now has over 250 firms described as alternative business structures (ABSs) – although as a recent blog on this website muses, the only thing some of these have in common is that acronym. Big name brands are entering the market. Legal businesses are benefiting from different types of expertise – be that financial, strategy, marketing, business development or IT. Innovative business models are developing such as subscription services for SMEs and online dispute resolution for individuals.
And, at long last, true multi-disciplinary practices with the ability to deliver coordinated advice and services are entering the market place. Our recent recommendation to the Lord Chancellor that the Institute of Chartered Accountants in England and Wales be designated as an approved regulator for probate activities and as a licensing authority for ABS is another significant step
But let’s be clear. The market is driving these developments, not regulation. Regulation, if anything, is doing its best to keep pace with the market. For example regulatory hurdles facing barristers continue to be removed, so consumers can now instruct registered barristers directly. The ban on barristers undertaking litigation fell away at the start of 2014. This has the effect of allowing barristers to be able to compete more effectively with solicitors and provide greater choice for consumers. That is they want to.
We also have regulators of different branches of the legal profession working together on specific issues. The Solicitors Regulation Authority, Bar Standards Board and ILEX Professional Standards have collaborated on the Quality Assurance Scheme for Advocates and the Legal Education and Training Review. This is a good sign of change for the better.
However, in spite of these very positive developments, this new legal services market is still very much work in progress. We know that one in three persons does not get the legal help they need. And fewer than one in five small businesses get legal advice when they have a problem; only 13% of SMEs see lawyers as value for money, even though 54% see law as very important for doing business.
We agree with consumer groups that further simplification, liberalisation and removal of unnecessary regulatory burdens are needed. And here we come to one of the not unexpected reactions to the changes that are taking place. For whatever reason, perhaps for example, feeling the threat to the homogeneous, practitioner friendly way of life some are used to, representatives of the profession are now once again calling for a return to self-regulation (see here and here).
I understand this. Competitive pressure which generates change is unsettling for anyone and any business never mind, traditional legal services providers. The government reviews of the regulatory framework and the structure of the profession are also creating further uncertainty.
However, I have to say that seeking a return to the closed shop mentality of self-regulation is the wrong answer. People have not forgotten why Parliament felt it necessary to put the Legal Services Act on the statute books in the first place. High barriers to entry, restrictions on innovation, prescriptive rules, bans on advertising, restrictions on forms of funding, structure and ownership for firms to name but a few of the many restrictive practices that have been used in the relatively recent past for no reason other than protecting the lawyer from change.
These and other practices did nothing to meet the legal needs which the average consumer, be they an individual, group of individuals, small or medium-sized business have. Instead we saw significant lawyer involvement in mortgage fraud, scandals such as miners’ compensation, and systematically poor consumer complaints handling in firms and regulators alike, with the regulators slow off the mark at best and not at the races at worst. The majority of decent, ethical practitioners could only look on in despair.
This is how it was before the introduction of the Act. And I have to say I’ve heard nothing in the arguments for a return to self-regulation that has convinced me that it will not be how it will be again should self-regulation return.
What the market and consumers need are more innovative providers delivering the affordable services that consumers, and more importantly potential consumers, want in the way that they want them.
They also want collaboration and competition between different branches of the profession and an outward-looking attitude encompassing all legal services providers in the broadest sense with best practice being learned from other professional and service industries.
This is the future of legal services in this country. Calling for a return to self-regulation is, at best, an irrelevance, at worst an obstacle to progress.