Law Firms: Could we provide unregulated services?

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Is your business “Brexit ready”?

The Brexit situation has done us one good favour  – it has knocked most of us out of our comfort zone and caused us to reflect on what we are doing with our careers, our workplace and with the direction of our business.

Most of us involved with business development and marketing are reviewing our strategy and are allowing for some lean years ahead. We can’t sit back in the armchair of the European Union any longer: Plentiful labour, international clients keen to invest in the UK , steady economic growth – none of these can be relied upon over the coming years, possibly for a decade, while Britain re-aligns its economy and works out a new trade agreement.

So – what can we do to effect an EU-out ready legal services business? One option is to look at regulation.

Legal Services Board’s report on unregulated legal service providers is not well received by regulators

The report from the Legal Services Board Unregulated Legal Service Providers: Understanding supply side characteristics (published 28 June) is good timing, and the angle taken on its findings as reported in the legal media has been interesting.

The Law Society Gazette has reported that the LSB are “cheering on” unregulated service providers – see “Unregulated online legal services providers: A solution?” (4 July 2016),  “Unregulated legal services providers cheaper and more innovative, says LSB” (28 June 2016) and “Throw consumers to the wolves. It’s cheaper” (1 July 2016).

The Bar Council were also quick to respond to the report by warning of the risks to consumers- see Bar Council: Unregulated legal service providers a risk to  consumers (29 June 2016).

The response from lawyers

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How does Regulation affect the quality of our services?

Reader comments to the Law Society Gazette’s articles are extremely insightful and are well worth a read – one (see “Throw consumers to the wolves”) offers the opinion that regulation is irrelevant to the quality of legal advice we provide, and plenty of readers agree – 11 thumbs up.

Are the LSB favouring unregulated providers?

Is it true that the LSB’s report disregards the risk to consumers of unregulated legal service providers in favour of trumpeting their prices? I don’t believe so. The report reveals that the LSB (a) did not test the technical aspect of their services, but they found mixed evidence as to the quality of the client service provided (b) yes they found evidence of cheaper prices, but only for wills and divorce (c) consumers should be aware of the potential risks of using unregulated advisers, including the potential lack of recourse to remedies such as professional indemnity insurance.

Why are we providing regulated legal services that are unregulated?

So what has this got to do with us and our business? The point is that reserved legal activities are limited to six very specific legal duties under section 12 of the Legal Services Act 2007. These are in summary; the right to appear before a court, the conduct of litigation, acts performed relating to land under the Land Registration Act 2002, the preparation of probate papers which oppose a grant of probate or a grant of letters of administration, notarial activities, and the administration of oaths.

The above activities require conduct by lawyers who are subject to approved regulators in the legal services sector – section 18 of the LSA 2007. The approved regulators are listed in Part 1 of Schedule 4 and include the Bar Council, the Law Society, the Institute of Legal Executives and other service-specific regulators including the Council for Licensed Conveyancers.

Any legal service falling outside of section 12 is not subject to the “approved regulator” requirement, although they may be subject to other legal regulatory requirements found outside of this Act – for example non-solicitor/barrister UK immigration advisers must be accredited and regulated by the Office for Immigration Services Commissioner (OISC). For a good overview of unregulated legal services, see the main part of the LSB’s report.

Could an unregulated service be more efficient?

Should we be looking at making changes to our business model?
Should we be looking at making changes to our business model?

Where does this leave law firms? If we are expecting a lean period ahead, we could be looking at new cost-effective means of providing safeguarded quality legal services to our clients, and one way that we can look at doing this is by examining carefully what areas of our work are unreserved legal activities, and whether we could improve the way these services are provided by switching from a regulated to an unregulated service.

Doesn’t that mean the clients are worse off?

Does  providing an unregulated service mean abandoning safeguards for our clients, including professional indemnity insurance? No – indemnity insurance is not just available to SRA regulated law firms, it is also available to other legal service providers including OISC regulated businesses.

Nor does it require any changes to our thorough internal legal service quality audits and supervision procedures, or any compromise or change to the professional qualifications and abilities of our staff – some solicitors, as shown by the comments in reply to the Law Society Gazette’s articles above,  have very much welcomed the opportunity to provide unregulated legal services.

Could we provide a separate unregulated services business?

Changing to an unregulated regime doesn’t mean changing or reducing the scale of our existing business or staff – it could also be achieved by setting up an entirely separate business outside of your SRA regulated law firm which targets a different sector of the market – potentially online, and international.

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LSB: On the whole, unregulated advice does not result in lower quality standards

Conclusion

Worth some thought? Definitely in my view – if  the LSB say that unregulated advisers are getting good reviews from clients who are on the whole happy with the service provided to them, we should not be horrified at the idea of providing unregulated legal services. However, if regulation and the EU are essential to your business, see Is moving your law firm to Ireland for a light look at an alternative.

Ideas and input would be welcome, please use the comments facility below. Please do not be deterred from commenting if you wholly disagree with this post.

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Ben

I set up Law Practice Manager because I enjoy sharing fresh and original opinions and posts on law management issues. Facebook and Twitter: @LawManager1 LinkedIn group: https://www.linkedin.com/groups/8538343

5 thoughts on “Law Firms: Could we provide unregulated services?

  • PaulW
    July 6, 2016 at 9:34 am
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    A question I would like answered is, of the clients who are happy with the service from unregulated providers, how many have seen the full cycle of their engagement? The value of that advice is not likely to be tested for some years ahead when the purpose of the engagement is going to need to be revisited and tested.

    Reply
  • July 13, 2016 at 12:40 am
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    In New Zealand the law society has managed to retain a monopoly over paid legal advice despite legislative change in 2006 which deregulated almost all legal services. Lawyers do not know that legal services were deregulated to that extent. Nor do bureaucrats, despite the fact the change was pushed through by bureaucrats contrary to the wishes of the law society. When I used non-lawyers as part of my legal practice, including for the provision of legal advice, I was effectively put out of business by the legal-aid bureaucrats and the law society in combination, none of whom applied the correct law or acknowledged the key constitutional principle that interpretation issues are for the courts to decide, not for unilateral decisions by bureaucrats (or law societies). I was eventually vindicated (but not compensated). The episode shows me that the regulatory restrictions are meaningless because the lawyers don’t apply, know or respect the law anyway. The regulatory system also does not in effect protect consumers, despite the theory. It acts too late and too little. That’s the New Zealand system. I don’t know the UK system and I will be following this with some interest.

    Reply
    • July 13, 2016 at 5:01 am
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      Thanks very much Cheryl for sharing this experience with us, though I am also horrified and very sorry to hear you were treated this way by the authorities. I have no knowledge or experience concerning our regulator (the SRA) failing to protect consumers, through I am sure some solicitors will disagree with me! But in my personal experience (I can’t speak for others) many solicitors are not aware of which services legally require regulation by an authorised body, and which do not. Fortunately, we do have the Legal Services Board who have provided this recent report on their activities referred to in my post , which is very insightful. Cheryl I wish you well and please keep in touch and keep reading.

      Reply
  • MattStill
    July 18, 2016 at 12:40 pm
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    Of course you can provide unregulated legal services Ben, and perhaps make a solid business out of it. I won’t be saying anything you don’t already know, but to a great extent this will depend on your offer, your client engagement, and on how you’re branding yourself. Solicitors can also take advantage of this April’s Separate Business Rule. However, and this is the crucial point currently, if you wish to trade under the title of ‘solicitor’ then you’re agreeing to certain club rules whether your service is within the reserved activities or not.

    The vast majority of legal services (regulated or otherwise) are provided by solicitors, although other providers have an increasing market presence in specific areas, such as Licensed Conveyancers. What the Competition and Markets Authority asked lawyers to consider at last week’s SRA #rethinkreg conference is why consumers tend to choose solicitors over other possible providers?

    There are other factors also at play – should the reserved list remain (and if not what happens when anyone wants to ‘have a go’); should other professional groups have equal access to the list; are regulations and profession standards the same thing, or can you do away with the former and simply rely on assertions of quality if you happen to belong to one professional members club or another?

    Who knows, but you’re right, times are a changing and how solicitors or anyone else positions themselves in existing or new markets will be the key.

    Reply
    • July 18, 2016 at 1:16 pm
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      Thanks Matt I think you are spot on. This post is really just to flag up that we have another option. I don’t think many of us will be effecting a change from a regulated to an unregulated service but we could charter the unexplored waters of unregulated advice, and see where it takes us? Worth considering I think in the right specific circumstances.

      Reply

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