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Join them to beat them: Law Society urges firms to use ABS to compete with accountants

Jonathan Smithers [1]

Smithers: clients “not concerned” about obtaining services from non-lawyers

Rather than feeling threatened by accountants’ move into legal services, law firms should set up alternative business structures (ABS) and compete with them, the president of the Law Society has said.

Jonathan Smithers said that in the same way as accountants set up ABSs to carry out probate work, there was “nothing to prevent” law firms from taking advantage of ABSs to provide additional services and remain competitive.

Earlier this week, Legal Futures reported that the number of ABSs licensed by the Institute of Chartered Accountants in England and Wales (ICAEW) had reached 100 [2].

In an article for the Canadian Bar Association’s National Magazine on the impact of ABSs [3] on England and Wales, Mr Smithers said: “The success of ABS to date indicates that clients are generally not concerned about sourcing their legal services from non-lawyers.

“Clients still seek quality assurance and efficient delivery. But whether this is achieved via traditional firms or ABS, or even in some cases online solutions, would appear to be of less importance.”

Mr Smithers said accountancy firms had recognised the trend and were “positioning themselves” to expand into legal services.

“Although this may appear threatening to solicitors and firms, there is nothing to prevent traditional firms from taking advantage of the ABS model in a similar way to provide additional services and remain competitive.”

Mr Smithers said the SRA’s reforms to the separate business rule [4], which come into force next week, “specifically enable the traditional law firm model to do just that in relation to accountancy and other professional and specialist support services, including human resources and recruitment”.

Mr Smithers acknowledged that the introduction of ABSs polarised opinion, with some regarding it as a “game changer”, while for others it “signaled the end” of the solicitors’ profession.

While critics argued that ABSs would produce a “significantly damaged profession and a legal landscape that was forever changed”, citing the example of Quindell, others replied that mismanagement had always occurred in traditional firms and ABSs pose no increased threat.

“In practice, and with three years’ experience of their impact, the advent of ABS has not led to the radical changes that some envisaged. What is occurring is more an evolution mostly towards digital provision while maintaining the excellent standard of which we are all so proud.

“Mostly smaller firms have used the ABS model and the commercial freedoms it provides to alter practices and help keep the small and medium-sized ‘high street’ firm competitive and innovative.

“The common thread in firms converting to ABS is a desire to re-position themselves with a clear ambition to offer customers multiple services from within the same company.”

Mr Smithers concluded: “Research shows that traditional law firms have not been pushed out of the market. Neither have corporate leviathans steam-rolled into the sector.

“The dawn of ABSs may result in increased competition for traditional firms, but the potential benefits to clients in the form of greater choice, lower cost, and increased access to justice, shows their value to the legal world.”