Securing your competitive future

The Law Management section’s event on 22 September was thought provoking despite some of the advice being contradictory.  Although much of the content was aimed at the unsophisticated sole practitioner who may not even yet be online, and who practices in general commoditised areas like conveyancing where the fee to act for the lender can be as low as £50, I came away with solutions to some practical problems I had been grappling with.

For example, I had been distinguishing our Azright Online service from Azrights offline.  Listening to Grahame Cohen’s talk helped me to see the error in positioning oneself in terms of online and offline "me the solicitor". They don’t need delineating.  Clients contact you for one major reason -  to solve their problem.  You need to offer a solution that is appropriate to you both.  As he put it “..if someone wants a shareholder agreement, they don’t care if it’s online or offline.  Online conjures up price certainty for solicitors.  They think they need to have a cheap fixed price online service.”

Changes

On 14 June 2010 the Legal Services Board published papers to inform debate about ABS and the impact on the market for legal services – entitled The future of the legal services – Emerging Thinking 

This had clearly informed some of the speakers’ thinking, and so is well worth a read.  For one it draws parallels between deregulation of the opticians market and legal services, and looks at the long term effects of the changes in that industry.  However, it does pick up the point that the legal services market is much more complex than the comparators of general insurance or optometrists, because unlike glasses, legal services consist of many different types of services.  I suppose this aspect of the report was not sufficiently addressed by the event, as there was little discussion about niche practice.

The paper also draws attention to the vast section of the population that earns too much to qualify for legal aid, but less than £50,000, and hence too little to afford the sort of prices law firms currently charge.  As Grahame put it, there is at the one end of the scale high cost legal services – the traditional model, where clients pay for a bespoke, personal, easy to access legal service – and at the other end of the scale is an impersonal, do it yourself type service consisting of simple legal documents, either in the form of paper kits or delivered via a software/web interface.  This low cost, convenient and impersonal solution is not something solicitors should try to offer.

Instead they should try to provide offerings in the big white space in the top right corner – namely personal service in an easy to access way at low cost.  This space in the top right hand corner - what is often referred to as the latent market, in Richard Susskind speak - is where institutions will try to move in.  More detailed information about the ideas informing Grahame's speech can be found here.

Institutions pose a threat

The institutions' greater investment will ensure that they capture a large share of the market.  A possible approach the big brands might take to the "white space" is illustrated if you look at legalzoom.com in USA which is turning over $100 million a year.  It’s an example of what’s possible.  Consumers are gravitating towards it. Legalzoom  which is described more here states on its About Us page

Every year, Americans spend millions of dollars on routine legal needs, from incorporations and trademarks to last wills. Others put off creating essential legal documents because of the inconvenience and high fees. As attorneys, we knew there had to be an easier, more affordable way to take care of common legal matters.

Our founding vision was for an easy-to-use, online service that helped people create their own legal documents. We brought together some of the best minds in the legal and technological fields to make this vision a reality. The result is LegalZoom, the nation’s leading online legal document service.

In the UK More Than offers the opportunity to buy fixed fee legal services.  Also Barclays has packaged up the legal and accounting space – offering employment agreements etc.

Solicitors are in a different market

Solicitors don’t necessarily sit in the same space as these offerings, but need to be aware of what the institutions are doing and may do in future. Value, price certainty are all in the big white space – so the challenge for solicitors is to provide solutions aimed at the latent market where the prospective client is looking for a solicitor to do the work.

If people perceive their issue as a legal problem they will look for a solicitor to solve it.  Solicitors providing services that the public associate with solicitors, therefore have a potential market of clients who are predisposed to using them.

Commoditised work

Chris Marston of Lloyds TSB advised solicitors to steer clear of commoditised work on the basis that such work would disappear once the institutions begin to compete with solicitors for legal work.  However, little was said as to what he meant by commoditised work.  But taking a look at LegalZoom a vast amount of work that is niche work which solicitors now do, such as employment contracts and trade mark registration might be described as commoditised work.

The question is whether to steer clear of such work on the basis that the institutions with their greater access to investment will wipe you out once they enter the market next year?  The answer seems to be that if clients are looking for solicitors as the answer to their problems then you do not necessarily have to be the cheapest provided you offer a cost effective service.

However, people’s trust needs to be earned.  They want confidence from the service.  You should not process clients.  Think carefully about what the client does to find you.  What sets you apart?  How will you stand out?  How do you get clients?

The importance of the net

50% of online legal searches in the UK contain the word ‘solicitor’.  Over 2 million searches every month occur with the term ‘solicitor’ in the title.  So, this suggests consumers are using the web to find legal solutions rather than to solve problems on their own.  So Grahame’s message was to make your website very important, and get your web presence right.

Andrew Woolley on the other hand felt that people who were not already online had missed the boat and would have to pay a lot of money to get anywhere.  He was also pessimistic about the future, prophesising that half the room will not have a firm in 5-10 years time.

The nature of legal service

Law is already a very competitive environment.  Selling legal services – is it just like selling beans?  What are we selling?  How do we know consumers are looking for one stop shops?  What do people want?  Tesco which is now providing banking services, and had done some research on banking which is enlightening by analogy. 

Although Tesco has said it is not intending to move into the legal services market, it has moved into banking despite the fact that its research initially showed a mere 4% of consumers would be willing to use Tesco for banking.  The greatest majority in the survey expressed a preference to use a bank.  However, the survey also showed that people generally trusted no one. 

What this survey suggests is that solicitors should not be complacent.  The fact that a majority of the public would look for a solicitor as the solution to their particular problems now, does not mean they automatically trust us, or that a few years from now they will still be perceiving us as the natural go to people to solve their legal requirements.  We must win their confidence.  Gaining clients’ trust is therefore key to building a successful practice as a solicitor.

The other fact that all the speakers seemed to agree on was the importance of not processing clients.  Instead they should be given a feeling of receiving service.

Solutions to these challenges will require a step change in the thinking and approach of the profession. So what solutions are likely to emerge to meet consumer needs in the changing legal services market? There is currently much uncertainty. However, the ABS gives institutions a chance to enter the legal services market as full-blooded providers, as opposed to simply offering a branded referral service, which is what they are doing at present. These companies have the infrastructure, or access to it, through their banking, financial and insurance services arms.  In my own opinion, it will be difficult, bearing in mind their likely advertising budgets, to gradually shift the public's perception as to who is the natural choice to handle their various legal requirements.

ABS

Once ABS become available post 6 October 2011 an entity that wants to become an ABS will be free to choose its regulator.  So it’s possible to choose to be regulated by one body, while the individual solicitors working within that entity continue to be regulated by the SRA.

The ABS will allow ownership of solicitors firms by non-solicitors – subject to a “fitness to own” test as to ownership and management.  To be eligible there must be a Head of Legal Practice (HoLP) and a Head of Finance and Administration (HoFA) responsible for those areas and answerable to the regulator.  External ownership can be 100%.  However a great deal remains unknown.

One such question is what will happen to the delivery of legal services? 

As Tony Guise put it: Speculation is rife at the moment which does not assist in business planning. There are a range of resources on his website which may provide greater insight.

The Consultants Law Firm Model 

Finally, Lucy Scott-Moncrieff partner in Scomo walked us through what has proved to be a very successful model both for her firm and for Woolleys - namely a virtual firm using the services of self employed senior solicitors working from home.  Her firm's model is well explained in this Law Society Gazette article so I won't reiterate it here. The fact that I know of a number of others who are successfully using this model -  Keystone Law,  Cubism Law,Halebury   is a sure sign that it works.

Lucy also mentioned her recent idea for firms to group together to share certain costs like insurance, while retaining their separate identities.  This was recently discussed in the Law Society Gazette

Conclusion

So, currently clients are more favourably disposed to us solicitors than is commonly-believed, particularly when compared to non-admitted providers. The natural and automatic response to any problem or issue or situation of a legal nature is: "I need a solicitor to sort this", and this reflects a deeper, implicit belief that only a solicitor can sort it, and no-one else is to be trusted.

But if you look back in time, we used to be trusted business advisers that clients turned to for tax advice, but now it's accountants they think of for general tax advice.  So, although nobody knows what will happen with ABS the best we can do is to focus on keeping ourselves top of mind for clients seeking legal services by making our businesses the best they can be.   The other point to bear in mind (this is my own opinion) is that the institutions will be using solicitors to do the legal work, so how much of an advantage do we really have?.

Solicitor numbers have grown inexorably – will this change?  Is it the end of the high street law firm?  Probably not said some of the speakers, but firms will need to consider their:

• Business structure- a corporate vehicle is better than partnership. 
• The work they do/services they deliver. 
• Building brand loyalty based on one or more of:

1. geography
2. sector specialism
3. service levels (people will pay more to get looked after well
4. technical excellen
5. value-building ethos

However, while the next few years will undoubtedly present challenges, they may also present opportunities for law firms to find more suitable exit arrangements.  After all, the institutions are going to be needing the services of lawyers and law firms to become full blooded competitors with solicitors.