Why big brand legal services are bad news for solicitors

Legal Futures Editor Neil Rose’s weekly blog on the Guardian’s law website:

Is it time for solicitors to panic? The significance of the announcement that the AA and Saga have launched legal services websites is less in what they are offering but in the fact that they are the latest big brands to see potential in the legal market.

The AA actually dipped its toe in the water some time ago, while the Halifax and Which? are already in there and the Co-operative group, which has built a £20m legal business over four years.

The AA and Saga are owned by the same trio of private equity firms – Charterhouse, CVC and Permira – and are looking to capitalise on their strong membership base (15 million for the AA, while Saga has 2.7 million customers). Legal services are an obvious extension to their existing financial services.

The new services will direct those with legal issues to an automated legal document assembly tool and/or a firm of solicitors. They will be marketed individually to consumers or as part of a wider package for existing insurance policy holders.

The intelligent document assembly, provided by legal IT company Epoq, is already used by a host of other institutions (and a growing number of law firms).

If you need a lawyer either to review the document or for more sophisticated legal advice, Cogent Law, which has an existing relationship with the AA and Saga, is on hand at what one assumes are very competitive rates. The small print says customers only get 30 minutes free for a Cogent lawyer to review their document, so it’s best not to make it too complicated. What is unusual in this deal is that a law firm is behind the website, rather than an intermediary.

The launch shows that while many are looking to 6 October 2011 and the introduction of alternative business structures (ABS) –which will allow non-lawyers to own and invest in law firms for the first time – much can already be achieved under the present rules. All this mean is that, for the next 11 months, the AA and Saga cannot buy a law firm (and may well not want to anyway; Halifax has been clear about that) and cannot undertake the limited range of reserved legal activities, about which I have blogged before.

But there is nothing to stop them referring such cases to Cogent, and a quick bit of mystery shopping indicated that for doing so they will receive 15% of the fees Cogent invoices the client. This is another reason why the AA and Saga may not feel the need to buy a law firm when the rules allow.

To read the rest of this article, click here.


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