Who are they trying to fool?

Posted by Duncan Finlyson, manager of Lawyers Defence Group, a Legal Futures Associate

Finlyson: let's not pretend ABSs will not affect existing law firms

Today’s Law Society Gazette carries an article optimistically entitled “Small firms will be ‘resilient’ in the face of ABSs” (see story). This sums up a report by consultants Oxera, commissioned by the Law Society, and first revealed by Legal Futures last week (see story). It came to the conclusion that alternative business structures (ABSs) are not only unlikely to undermine geographic access to justice for consumers, but would also not have a detrimental effect upon the businesses of small practitioners.

Apparently the research, which was so in-depth that Oxera actually managed to speak to 20 (yes, 20) law firms by telephone found that existing ‘commodity’ legal providers, such as bulk conveyancing firms, might have problems competing with an ABS firm that is built on a trusted brand and might therefore choose to merge with a branded provider seeking to enter the market. But smaller firms would be able to “differentiate themselves” by finding themselves a specialised area of the market not suitable for “high-volume, remote legal access”.

The report went on to state that some of those interviewed believed that small firms would need to “specialise in clients who value face-to-face contact, such as the elderly, disabled or high net-worth individuals, or areas of the law that involve more bespoke advice, such as child custody or divorce.”

However, where the article really began to lose credibility was when it went on to say that those interviewed thought they would be safe from competition because they focused on market sectors such as elderly clients or because they had their own strong local branding would “insulate them from larger firms offering a more remote service”.

Finite amount of work

Who are they trying to fool?

The elderly is surely the very sector that the Co-operative, for example, will be best able to target, and as for a remote service, what is remote about having the Co-op or Tesco Express just around the corner?

The vast majority of smaller firms are finding it hard enough to eke out a living as it is without having to share it with the Co-op around the corner. Moreover, many do not do the kind of work that would lend itself well to niche or specialised service provision, and more to the point there is a finite limit to the number of people who can provide niche services – the clue is in the word “niche”.

ABSs are (nearly) here, and there is not much we can do about it. In many cases they may not reduce the public’s access to legal services. Indeed, if they are regulated correctly and put in place procedures that ensure quality of service is maintained, they may even benefit the public by reducing costs and improving standards.

So, by all means let us work towards a legal marketplace where the ABS operates and undertakes work. But let us not pretend that it is not going to make a difference to the current players who want to carry on as they were, relying solely, it would appear, on their own, usually non-existent, “strong local branding”.

I would challenge any firm to go into the street in their local town and ask a few people to name some local solicitors. They may be in for a shock.

The public, and I count myself amongst that happy band, are a fickle bunch. They will invariably buy that which is cheapest, or is most effectively marketed, or has the most well-known brand name or appears to be best value for money. So, if an ABS comes along that can offer one or more of these “values”, the chances are that they will take work away from the firms with their self-delusional strong brands.

If an ABS enters the market, it will do so to produce a profit. It will produce that profit by attracting to it as much work as it can undertake profitably. Since there is a limit to the amount of work available, so that work will have to come from somewhere. That somewhere is going to be those solicitors who are already providing those services.

Do something about it

So instead of deluding ourselves into thinking that it won’t make a difference can I make some suggestions. Why don’t we:

  • Start to tackle the problem head-on;
  • Become better at offering the services we want people to buy;
  • Improve our internal procedures so that we become more cost-effective;
  • Make our premises look less forbidding and Dickensian;
  • Market ourselves to those whom we would like to have as clients;
  • Find genuine unique selling points that really do differentiate us from the competition;
  • Address risk and client care;
  • Adopt a “right first-time” approach to the work we do;
  • Have work carried out by appropriate grades of fee-earners so as to keep the firm’s costs as low as possible and the firm profitable; and
  • Use the Internet as a tool to assist our work rather than a vehicle through which to offer hideously designed brochure sites which do nothing other than make the firm look out-of-date.

In a nutshell let’s stop pretending all in the garden is rosy, take a good look at ourselves and then do something about it.

Many solicitors will inevitably find practice in the future difficult. Perhaps some need to let go of the over-powering need for independence and embrace the ABS as a potential future employer rather than as a competitor. However, it may be worth bearing in mind that many of the available jobs may be for paralegals rather than qualified, over-paid professionals.

A losing battle?

We may be witnessing the same process in the legal sector as has happened over the years in relation to supermarkets. Local shop-keepers started by putting forward precisely the same arguments to oppose them – lack of a personal service and the fact that the local shop had been on the high street for 100 years.

But the supermarkets won. The simple fact was that they were more convenient, user-friendly and:

  • They had parking spaces outside;
  • They stocked more products;
  • They were often cheaper;
  • They opened branches in railway stations and motorway services where the people were rather than expecting the people always to come to them;
  • They extended their opening hours to suit the customer;
  • They opened on Sundays;
  • They offered ancillary products and services; and
  • They offered Internet shopping and home deliveries.

Look at any town centre and count the number of small food retailers. There may be a specialist butcher of fishmonger – although it is highly likely that there will not be – and if there is a baker then it is likely to be one of a chain of bakers.

So please, by all means accept that there is a challenge to be met, but let’s stop pretending that it won’t make a difference. We don’t have long – but if we do something, it will be better than sitting back and pretending that things will still be the same.


    Readers Comments

  • Great article Duncan. Solicitors firms must provide the legal services people want at a price they are willing to pay. Sounds simple enough, but how many law firms have actually researched their target market and adapted their policies and procedures accordingly? Rather than impose their own will on Clients, Managers/Partners should listen and, where necessary, embrace IT, delegate work, offer fixed fees etc. etc. In general terms, they must move with the times and become much more user friendly.

  • Duncan Finlyson’s comments would be perfectly valid if the professions were to continue to operate in discrete silos. However, the world is changing, and for solicitors serving clients other than those who wish to buy commodity products off the shelf, the key variant of ABS is multi-disciplinary practice, and the key role in this context is that of the trusted adviser, who commands confidence and respect and can be entrusted with co-ordinating clients’ professional affairs generally. For solicitors seeking this role, arguably the most suitable alignment is with fee-based independent financial advisers. Money matters pervade other areas of professional advice, and financial advisers enjoy the on-going client relationships which transactional legal work denies.

  • Duncan Finlyson is spot-on. Law firms need to think through their strategic response to the increasing competition that ABS will bring. The real competition for many firms will no longer be the law firm down the road. Commoditised services will come under price pressure from the ‘Big Brands’ who will move up the food chain in time.
    To compete firms have to be seen to be different, to determine the services they can continue to sell profitably often incorporating some value added offering, offer great service with prompt turnaround times and get their cost base under tight control. Selling skills need to be learned and x-selling opportunities maximised.
    Firms will need to be well/better financed than many are at present and embrace technology. How many firms employ expensive legal secretaries yet still suffer constant or frequent backlogs? Many if not most in my experience. The answer, legal speech recognition – improved fee earner:support staff ratios often more than covering the cost so improving the bottom line, instant turnaround times so no more backlogs, available 24/7 office and home, leading to improved client service. Legal speech recognition really is a no-brainer.
    For firms with significant Private Client work then financial planning/wealth management makes good sense. Why not offer tax planning too? ABS, whilst a threat to some firms, should be seen as an opportunity. Law firms are only another business, owners should take some time out to think through what services they can offer profitably going forward, how to offer them and to whom, who they could partner with etc and above all have a clear plan in writing, communicated to all staff. After all firms are dependent on their staff as well as the owners to deliver first class service to clients, your staff should be seen as a major asset.
    The most successful businesses have one thing in common, they plan their way forward, law firms are no different.

  • Mike Owen says:

    A short comment on the long term…

    Yes, firms need to recognise how quickly the legal market is changing, and to be one of the survivors must plan for the future.

    Some smaller firms are taking smart steps. Have a look at the resources on websites such as Andrew Jackson, Shulmans or BP Collins.

    Mike Owen, http://www.lawdonut.co.uk

  • I agree whole heartedly with Mr Finlyson’s article. How many firms are worried about the upcoming ABS? Well when I meet with my solicitor contacts (I am a Financial Planner) and I ask how they feel the reply I receive is consistently “I am not concerned”’ and yet no disrespect to my associates if you are reading, but this appears to be a bit of a ‘head in the sand’ response. Financial Advisers have faced ‘branded’ competition from High Street Banks and Building Societies, as well as large Institutional Insurers and Savings providers for many years, and just as we have learned how to hone our services to be competitive it now appears that solicitors will face the same challenges. This will require many changes, for us as a very small family firm, the answer has been to provide a unique proposition, at a fee that our clients value, to provide the best of client care and service, and to ensure that in-house expenses are monitored closely and justified. I have every faith that small solicitor firms do have a future, but they need to realise the challenges that they will face and make their plans now to secure their future.

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