Is the gavel going to come down on the family firms?

Oct 14 2008 by Jez Davison for the Evening Gazette

Virtual lawyers on the internet, multi-disciplinary practices... whatever happened to the family solicitor? JEZ DAVISON finds out

INCREASINGLY seen as expensive, outdated and inefficient, the UK’s £19bn+ legal industry is set to be transformed by 2011 thanks to a series of far-reaching recommendations, tabled by Sir David Clementi, chairman of Prudential plc, one of Britain’s largest insurance firms.

A key feature of the reform of the legal landscape is to boost competition by encouraging supermarkets, motoring groups, banks and other companies to offer legal services, breaking the lawyers’ monopoly on advice.

But Tees Valley’s law professionals are ready for the challenge.

Simon Catterall a partner at the newly formed MincoffJacksons and President of the Tees Valley Law Society, says: “Banks, Tesco and building societies are coming whether we like it or not. We’re happy to take them on.

“The legal profession has to adjust to and embrace these reforms - otherwise it will get left behind.”

While extra competition could push down eye-watering legal fees, it could also jeopardise the existence of the traditional lawyer who makes money primarily from lower-end private services, including personal injury advice, will drafting and probates.

Simon says: “It will challenge small, long-established high street firms. We foresee a number of amalgamations so that solicitors can achieve economies of scale to remain profitable.”

This has already started to happen in Tees Valley. Recently, Stockton-based Jacksons and Mincoffs of Tyneside merged to create one of the top five major players in the North-east comprising 21 partners and more than 160 staff.

Meanwhile, multi-disciplinary firm BHP Law in Darlington, has extended its footprint into the heart of Teesside by merging with long-standing Thornaby lawyers, James and Baker last year - putting it closer to the area’s burgeoning petrochemical and shipping sectors.

Industry experts claim small firms which aren’t in line for takeovers and mergers will need to diversify by expanding their range of services. And that could spell opportunity for other companies - independent financial advisors (IFAs), for example - which already refer work to an established network of lawyers.

Guisborough-based IFA firm Active Financial Services says it would consider an approach to enter a formal partnership with a law firm if the deal was right.

Karl Pemberton, who runs the firm with his father Glyn, believes their ambitious expansion plans to double in size and extend their regional coverage will put them in a more favourable position for a potential buy-out or merger.

He says: “If the benefits of bringing in our own solicitor or co-branding with another law firm were tangible, we would certainly consider it.”

While he believes the deregulation of the legal market is “a great idea” he’s not expending much effort in speculating on its implications.

“It’s far too early and what is expected now may be vastly different to what is expected in a couple of years,” he says.

While some claim budget operators will out-price the average high street law firm, others say the proposed alternative business structures (ABS) - which would allow non-legal professionals to offer legal advice - could lower standards by attracting fraudsters offering bogus advice.

Liberal Democrat MP Lorely Burt reportedly claimed that will-writing, which requires no formal qualification, is a “hunting ground for the incompetent” and should be subject to tougher rules and regulation.

To prevent rip-off merchants from making easy money, an independent Legal Services Board will oversee professional bodies including the Bar Council and Law Society, which deal with consumer complaints.

Teesside practices, often referred to as the “cheap boys up north”, charge considerably less for the same advice offered by practices with expensive London addresses.

Rather than drop their fees, Bryan Hoare, marketing officer for BHP Law, argues that they need to become even more entrepreneurial and flexible, offering other professional services as part of the practice package.

The jury might still be out on the value of a free market approach, but whatever happens, the legal landscape is set to change forever.

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Now, more than ever, lawyers need to be business people whose legal expertise is matched by their commercial awareness, says Bryan Hoare, pictured right, director of marketing at the multi-disciplinary practice BHP Law, which has new offices on Teesside

HOW comfortable would you be selling your house at a supermarket or picking up a divorce as you do your weekly shop?

It might sound extreme, but whole scale change in the legal sector could potentially see a range of services traditionally offered by law firms being touted by retailers and other non-legal providers.

In a free market, barriers break down. Innovation is rewarded. Thriving in this competitive new world will require a different approach.

The merits of the changes include greater choice for clients and fresh opportunities both for non-legal organisations and law firms that are forward-thinking and innovative.

Multi-disciplinary practices are at the forefront of these developments so clients have a wider choice of services, some of which are not necessarily directly related to law. BHP, for example, has a sports management division, led by former Darlington FC manager and qualified Football Association agent David Hodgson, one of the biggest in-house town and country planning departments in the region, an estate agency, and independent financial advice - none of these would ordinarily be associated with a law firm.

The most obvious impact could be on the high street, maybe not in the immediate future, but longer term. The traditional law firm as we have come to know it could all but disappear as clients become used to accessing legal services from new, perhaps unconventional, providers, leaving smaller practices unable to compete. Or they could take the opposite view and shed services to specialise in one or two areas.

The personal injury market is an example of where specialist firms have all but taken over from “traditional” lawyers since advertising restrictions were lifted. The explosion in this area led to concerns, especially over the introduction fees being paid to claims management companies.

Meanwhile, consolidation in the market is inevitable as smaller, family practices merge or are taken over by bigger law firms and our towns and cities become dominated by a handful of legal giants.

There will be those clients, of course, who will continue to meet their longstanding family solicitor face to face in a wood-panelled office to discuss their personal business. But many others, especially younger people who have not known this tradition, may buy their will from a newsagent and put their house up for sale as they fill their supermarket trolley.

The greatest impact, however, is likely to be the continuing influence of the internet. Businesses and individuals already seek legal advice online, and this is only set to grow from 2011. There has also been huge growth in legal advice telephone lines.

Naturally, there is concern about how these organisations will be regulated to ensure the public are protected.

But it won't just be new providers of legal services that spring up online. The more innovative law firms have for some time made greater use of the internet to meet clients' needs.

It's why at BHP Law we are placing increasing importance on internet and web marketing as part of our overall strategic marketing activity.

Qualified lawyers and legal advisors in England have earned the public's respect for their knowledge and personal service provided to clients over many years. Now, more than ever, they also need to be business people whose legal expertise is matched by their commercial awareness.