Kumar: desire for control explains lack of external investment
Alternative business structures (ABS) are far more likely to invest in their businesses than non-ABSs, research in the licensed conveyancer community has suggested.
The survey [1] carried out by the Council for Licensed Conveyancers (CLC) also showed pricing to be broadly consistent across different sizes of firm.
An analysis of the 214 annual regulatory returns completed by firms regulated by the CLC revealed ABSs to be more than twice as likely to have made a substantial investments (52.2%) than non-ABSs (23.2%).
The resulting report said: “Bearing in mind the caveat that correlation does not equal causation, it nevertheless seems that there may be something about the ABS which engenders a greater sense of entrepreneurialism.”
The main targets of new money were hiring more staff, followed by IT-related improvements in practice management and consumer-facing IT.
By some distance the main source of funds for both traditional firms and ABSs was business profits or cash reserves, and among those practices that actually made investments. However, while the second most popular funding option for ABSs was capital injections from existing owners, traditional practices were more likely to resort to the banks.
Commenting in the report on the lack of appetite for external investment, CLC chief executive, Sheila Kumar, said: “Profits generate sufficient funds for the vast majority of firms’ investment needs it would seem and there is a fairly widespread view that retaining control is very important.”
The CLC reported that, perhaps unsurprisingly, given that conveyancing and probate are the two main areas of legal work its firms handle and almost all clients are private consumers, 90% of services were offered on a fixed-price basis.
The pricing of services was “broadly consistent” across the sector, regardless of the practices’ turnovers.
The average (mean) price for a £250,000 property were found to be: £607 (purchase), £616 buy-to-let purchase, £578 (sale) and £384 remortgage.
It was a similar story with probate, where the mean cost of a fully-administered probate was £2,374. It was £752 for grant-only probate, and £149 for a will.
Where hourly rates did apply, the averages were £173 for a senior fee-earner, £139 for a junior fee-earner and £54 for support staff.
Other interesting results included:
- The majority of CLC-regulated firms (56%) have turnovers of between £100,000 and £500,000;
- Across all firms, probate only made up 7.6% of workload, although the smaller the firm, the higher the figure;
- A typical CLC-regulated entity had almost four managers and 16 employees. Some 29% of practices had a manager who was a solicitor, and 17% had a chartered legal executive. In terms of staff, however, firms were more likely to have a non-qualified person (61% had at least one) than a licensed conveyancer (40%);
- The busiest firm had 79,089 clients in 2015, the least busiest just eight – the median figure was 397;
- Similarly the busiest firm on the probate side handled 85,621
- Firms converted 68% of the leads that came their way;
- Almost two-fifths of practices carried out client satisfaction surveys, but this rises to 100% of the largest practices. “This perhaps reflects the inescapable conclusion that beyond a certain size it is impossible to gain a sense of clients’ attitudes without some formalised system of monitoring”;
- 31% of firms received a complaint in 2015, and nearly 10% of those complaints ended up at the Legal Ombudsman;
- Just over three-fifths of practices had acted for both sides in a transaction, including all of the largest ones;
- Former clients were the largest source of work (38%), followed by new clients approaching the firm directly (30%) and referral arrangements (26%);
- CLC-regulated firms are on an average of 25 lender panels; and
- The biggest CLC-regulated firms are among the largest conveyancing businesses in the country and they identified each other as their main competitors, whereas smaller firms (with turnovers of less than £3m) saw local solicitors’ firms as their primary rivals.
Along with the regulatory return, the CLC published it 2017 business plan [2] last week. Announcing the plan, CLC chair Dame Janet Paraskeva highlighted that the CLC had cut its regulatory fee rates by 20%.
Earlier this year, the CLC began a review of its entire rulebook, and Ms Kumar said in the plan that the accounts rules would be next under the spotlight.
She said it would also consult on the potential to improve price transparency and increase consumer feedback. This would “enable us to respond to the expected calls from the Competition and Markets Authority for regulators to step in to address the gaps in consumer information about legal services”, she explained.
“These are novel issues for regulators that are not designed as economic regulators. Opinion in the legal sector about the potential impact of regulatory action to encourage price transparency is divided and there is a lack of clarity about how information on quality can be collected and presented.
“Our pilots will help provide evidence on which to base further policy development to address consumer need effectively.”