How to minimise the cost of Covid-19 to your practice

Covid-19 has created a range of additional risks for law

firms. In this article, James Robins and Ivan Roots of Womble Bond Dickinson, who are specialists in defending professional negligence claims, discuss some of the key risks that may arise and how best to mitigate them.

History teaches us that there is a correlation between recessions and professional negligence claims against solicitors. Recent weeks have seen a transformation in how law firms operate, with most moving to remote working. Many firms have invested heavily in their IT systems and have well developed business continuity plans but some do not.

Firms have also had to respond to the practical and evolving challenges of providing a legal service in lockdown. Litigation deadlines still need to be met. Trials will continue. Commercial deals will still go through. Private client solicitors have seen a huge surge in demand for wills. Many law firms are embracing technology and other creative solutions (for example “wills through the window”) but not all law firms will be agile enough to adapt quickly to these practical challenges and some may be using untested solutions.

Below we set out some of the more common problems firms will face and what steps they can take to mitigate their effects.

IT systems failing and critical deadlines being missed:

■ Risks of this nature can be mitigated by ensuring that a full review of all critical dates across teams is completed and then recorded in a location that can be accessed by all of the relevant people across the firm. For example, by recording all relevant critical dates within each file and then additionally in a central database or diary as well.

Cyber fraud especially on smaller firms with limited IT protection thereby increasing the firm’s exposure to breach of trust type claims:

■ Be extra vigilant of criminals taking advantage of the circumstances and phishing. Never download or open attachments from unsolicited emails. Do not follow links that you are unsure of and ensure that you do not give out any information unless you are completely sure it is not a scam. ■ All staff should be trained to recognise these types of scams and firms should consider if refresher training is necessary.

Data breaches:

■ In order to prevent this, ensure all staff are using work devices provided by the firm (mobile phones, laptops) as far as possible. Ensure that you keep your all of your systems up to date, particularly remote connection software, as this will protect you from the latest known cyber vulnerabilities. ■ If members of staff do not have access to secure IT equipment, they must not handle client’s information. If it is absolutely necessary, redact any documents before sending them to someone working from their own personal devices in order to protect this information.

Insufficiently developed business continuity plans and/or partners having to focus on managing the firm’s response to the crisis over client needs:

■ Everyone has been affected by Covid-19, including your clients. Make sure that you update all clients with regards to the firm’s situation wherever possible. If you are unable to provide a service to your client at all you must notify them as soon as you can, and advise that they find another solicitor. ■ Some firms may fail to notify claims or circumstances to insurers in accordance with policy terms because risks are harder to monitor remotely or simply due to operational and other pressures. The key here is to notify all claims or circumstances as promptly as possible as soon as they are discovered.

A material number of solicitors or other employees being sick or furloughed:

■ If you are operating with skeleton staff it is very important to make sure that all the staff are fully aware of policies relating to things such as handling client monies and other high risk areas, to prevent any potential claims arising. ■ Make sure that all staff on sick/furlough leave have updated out of office messages with appropriate alternative contacts.

Supervision regimes faltering:

■ The SRA still expects firms and their solicitors to meet the high standards that are usually expected even during these unprecedented times. However, they have made it clear that if any complaints are made against a firm or solicitor during, or as a result of these times, they will take a proportionate approach and take all of the factors into consideration. ■ If you do come across difficulties relating to supervision regimes faltering, it is very important that the approach taken is clearly documented. This means that it can easily be distinguished that you were trying to do the right thing. ■

James Robins & Ivan Roots Womble Bond Dickinson

The Similar Sequel:

Re Debenhams Retail Ltd [2020] EWHC 921 (Ch) following Re Carluccio’s Ltd [2020] EWHC 886 (Ch)

Background

According to the Enterprise Research Centre, 21,000 more UK businesses collapsed in March 2020 compared with a year ago. With the uncertainty for businesses in the current Covid-19 crisis, the High Court decided that it should assist the insolvency profession. In absence of representative employees, it has recently handed down two non-binding decisions in response to urgent applications from high street brands.

In Re Carluccio’s Ltd [2020] EWHC 886 (Ch), for the purposes of paragraph 99, Schedule B1 of the Insolvency Act 1986, the Court decided when an employment contract would be ‘adopted’ where administrators use the Coronavirus Job Retention Scheme (“CJRS”). Under paragraph 99, where an employment contract is adopted (with no act within the first 14 days of the administrator’s appointment amounting to an adoption), liabilities under it qualifies as a super-priority in the administration, above the administrator’s remuneration, expenses and other creditors.

After their appointment on 30th March 2020, the Administrators sent out variation letters to most of the company’s employees, seeking agreement for their participation in the CJRS by 3rd April 2020. By 7th April 2020, whilst most had consented, a number had objected or not responded.

With the 14 day ‘safe period’ under paragraph 99 ending soon, the Administrators were keen to understand: how to lawfully give effect to the furlough arrangements with consenting employees; and whether they could avoid the adoption of the unvaried contracts so that they need not make the non-responding employees redundant before the end of the ‘safe period’.

The High Court held that:

1. An offer to place an employee into the CJRS, once accepted, constituted a variation of the employment contract. 2. A mere failure to terminate an employee’s contract within the 14 days will not automatically lead to adoption. For consenting employees, their varied contract will be adopted when the Administrators engage in conduct that amounts to an election to treat the contract as giving rise to a separate liability, such as making an application in respect of the employee under the CJRS, or paying the employee’s salary (Powdrill v Watson & Anor (Paramount Airways Ltd) [1995] 2 A.C. 394). This was irrespective of furloughed employees not rendering services or unilateral attempts to exclude adoption within the variation letter. 3. For objecting employees, their current contracts will not be considered varied or adopted and would likely be terminated by redundancy. For non-responding employees, if they consented within the 14 days or belatedly thereafter, assuming the variation letters had not been withdrawn, they will be in the same position as the consenting employees. Otherwise, they will continue to be employed under their unvaried contract until it is terminated, but it will not be adopted where they do not work and the Administrators do nothing to amount to an adoption.

Re Debenhams Retail Ltd [2020] EWHC 921 (Ch) concerned similar circumstances. However, the directors had placed most employees on furlough prior to administration and had not sought consent. On 10th April 2020, the day after the Administrators were appointed, variation letters were sent out asking employees to agree, which most consented to by the date of the hearing.

The Administrators challenged Re Carluccio’s and sought a declaration that if they merely kept employees on furlough and paid their salaries, the contracts would not be adopted.

Decision

The High Court held that:

1. Re Carluccio’s should be followed and so after the initial 14 days, where a company made payments to an employee, or made an application in respect of that employee to the CJRS, their contract will be adopted. 2. A company that furloughed employees before administration and kept them on furlough, with payments merely being made to them pursuant to the CJRS, would not avoid adoption (Paramount Airways Ltd). This was irrespective of the intentions of administrators. 3. Payments to employees by way of reliance on paragraph 66,

Schedule B1 of the Insolvency Act 1986 would not circumvent the adoption of such contracts.

Commentary

1. Administrators will welcome the consistency of these two decisions, dealing with circumstances in which employees have been furloughed before and after administration. This is especially considering the understandable lack of detail as to how the CJRS should operate with insolvency legislation. 2. However, whilst these decisions are not binding, administrators may be concerned that they represent a widening of the meaning of ‘adoption’ within paragraph 99, beyond the CJRS. This is particularly with regards to making payments to employees. 3. In these two cases, most employees consented to the variation letters with respect to the CJRS. For administrators to minimise the risk of potentially adopting liabilities under unvaried employment contracts, for non-responding employees, it is advisable for consent to be sought as quickly as possible. In this same respect, administrators and employees should remain alive to new developments in these exceptional times. ■

Edward Bates Second Six Pupil Barrister 5 Pump Court

Edward is a Second Six Pupil Barrister at 5 Pump Court. Prior to coming to the Bar, he worked in academia as a Lecturer-inLaw and Co-Director of the LLB Programme at City, University of London. He is also a Chartered Management Accountant (CGMA, ACMA) and started his professional career in Management Consulting at KPMG LLP.

4 reasons why now’s the time to get social

Whether you have been furloughed or are working

hard to juggle working from home with keeping sane during this current lockdown period we’re finding ourselves in, one thing is for sure: people are spending more time online than ever before. Whilst it’s too early for official research to confirm what the longer-term impact of COVID-19 will be on use of social platforms, we are seeing increased use and engagement on established social media sites such as Facebook, LinkedIn and Twitter.

In a global survey of over 13,000 consumers, conducted between 16th-20th March, GWI found that 45% of global consumers spending more time on social media.*

1. People are looking for guidance: we find ourselves in a situation that nobody has ever experienced before, so people are understandably confused and anxious. Social platforms provide another way for consumers to look for professional advice to guide them through these tough times – from relationship advice to how to draw up a will, or indeed the probate process. Professionals such as lawyers are ideally placed to use their compassion and expert knowledge to provide much-needed guidance.

2. More time: chances are that with the daily commute and face-to-face socialising removed, people are more likely to spend more time on social channels. For those unfortunate individuals who have lost their jobs, they are likely to become more active on professional networking platforms such as LinkedIn, to look for new opportunities and expand their professional network.

3. Promotion in times of a crisis: Now is a great time to be promoting your business. The competition is likely to scale back on advertising and marketing activities so there is a genuine opportunity to raise your brand awareness and obtain a bigger share of the market. Getting the messaging right is key here – you want to be seen as compassionate, helpful and professional rather than overtly salesy. in #ClapfortheNHS) and people are more open to sharing their own experiences and positive reviews with their network. So if you are offering free advice clinics or calls, encourage people to share their experiences on social media.

If you’d like any assistance, please get in touch with lara@consortiumbiz.co.uk ■

Lara Squires Consortium Business Solutions

*Source of data was https://econsultancy.com/stats-roundupCoronavirus-impact-on-marketing-ecommerce-advertising/

Xxxxxxxxxx Did you close your firm or retire after 30 September 2000 or are you now thinking about retirement or closing your firm?

If so, please read this important message from Nick

Gurney-Champion, Chair, of the Law Society Professional Indemnity Insurance Committee:

The Problem

At present, the Solicitors Indemnity Fund (SIF) provides ongoing professional indemnity insurance (PII) to closed firms from the expiration of their mandatory 6 year run-off cover. However, after 30 September 2020 SIF will close to new claims.

This means that unless alternative arrangements are made, principals of closed firms, their estates, and perhaps individual employees, may be held liable for losses arising from previous work.

If your firm is in compulsory 6 year run-off, take action now!

If your firm is still in run-off, contact your broker as soon as possible to see if they can extend the policy beyond the end of its 6 year term.

What is SIF?

When solicitors in England and Wales voted to move from a mutual insurance system to purchasing PII on the open market, the SIF fund was retained to meet claims and provide ongoing cover for firms that closed prior to that decision. Later, it was decided that SIF would extend ongoing cover for firms closing after 2000 until 2020 or when their mandatory 6 year run-off cover expired.

Why might you need post 6 year run-off cover?

Most general insurance policies operate on a ‘claims occurring’ basis. This means that they meet claims that occur during the policy period, regardless of when the claim is made. However, PII operates on a ‘claims made’ basis, which means that a policy will only meet claims that are made and reported during the period when a policy is in place. Unless you have a PII policy in place when a claim is made, it will not be covered.

When a firm closes without a successor practice, it goes into a mandatory 6 year run-off period. The 6 year requirement matches the primary limitation period within which negligence claims must be made. However, in certain circumstances claims can be made up to 15 years after the triggering event (and sometimes even longer). With the closure of SIF, solicitors may be found personally liable for claims made after 6 years.

What is the risk of claims arising after 6 years?

There is a significant risk of a claim arising after six years. Around 10% of claims arise after the compulsory 6 years’ run off has expired. If you operated in areas such as conveyancing, wills or child personal injury settlements, claims can occur decades after work was completed.

If you are currently protected by SIF, and are aware of any circumstances that could give rise to a claim, you should seriously consider contacting the former clients affected (or their beneficiaries), and encourage them to lodge claims with SIF by the 30 September 2020 deadline.

Who would benefit from a SIF replacement?

Solicitors carrying out certain types of work are more susceptible to post 6 year run-off claims. Two-thirds of claims arising more than 6 years after firms’ closures are in conveyancing, where negligence might not emerge until the property is resold many years later. The other long-tail claims category is wills and trusts. SIF’s records suggest the number and value of post 6 year runoff claims can be broken down by category as follows:

Area of Work

Conveyancing Wills, trusts and probate Personal injury Other litigation

Volume of claims (%)

66 28

5 1

Value of claims (%)

80 10

9 1

Firms that carried out work which does not fit into these major categories may be less likely to benefit from a SIF replacement, but should in any event consider their potential liability before deciding against making alternative arrangements.

Replacement cover would not have to be on the SRA’s minimum terms, and less comprehensive cover may meet your needs.

Your chances of finding replacement cover will be improved if you can provide evidence of:

■ The amount of work in low risk areas, ■ Nature of risk management systems, ■ Details about the close down of your firm, ■ Having had a good claims history.

Evidence is crucial, so if you don’t have other records you should approach your previous insurer as soon as possible to request copies of your 3 most recent proposal forms, details of your last 6-10 years claims history and start gathering any other relevant papers that may still be available.

Who does not require replacement cover?

Firms that closed on or before 30 September 2000 will be covered by SIF in perpetuity.

How can you help?

I am anxious to ensure that as many people as possible who may be affected are aware of action they should take as a result of the closure of SIF. Please pass this information on to retired colleagues, legal networks, and others who may otherwise be unaware of the closure of SIF.

What is the Law Society doing about this?

The Law Society is still investigating whether it or the market will offer some form of replacement for SIF, but this may well not be possible. So, I recommend that you attempt to find as soon as possible a solution that will provide you with an appropriate level of cover.

As a result of the Covid-19 situation making any form of replacement for SIF even less likely, moves are underway to see whether the SRA would be prepared to alter their previous decision and postpone the closure of SIF. If the Law Society is successful with either of these, this will be announced on the website and in the legal press.

Where can you find further information?

Visit the Law Society website: www.lawsociety.org.uk/supportservices/advice/closure-of-SIF/ ■

LEAP software keeps law firms working remotely

Ben Aslet, LEAP UK Marketing Manager, explains

how law firms using LEAP’s cloud-based practice management solution are successfully adapting to remote working and how it’s as near as can be business as normal for law firms using LEAP. He said LEAP have talked to several law firms using the software to find out how they are managing with life away from the office.

The current health crisis means that more and more legal professionals are working from home. Many are showing resilience and agility in the face of the lockdown and those firms that are equipped and have remote-friendly software are faring much better than those have not.

Mike Leeman, BLJ Solicitors comments “We now have 50 members of staff working seamlessly from home, thanks to LEAP Legal Software UK.”

We have been working hard to support our clients to acclimatise during lockdown and the feedback that we have received has been incredibly encouraging with many very grateful that they made the transition to cloud software when they did so that their business can continue functioning remotely. Eliot Hibbert of Nexa Law adds: “LEAP is helping our lawyers continue to offer a seamless service in what is a challenging and unprecedented environment.”

Our Helpdesk and Client success teams have been touching base with our clients to ensure that they can continue to remain productive during the crisis and in many cases our clients are now beginning to understand the true value of LEAP. Paula Langley, Practice Manager, Bookers & Bolton says: “We love it! We are all happily working from home immediately and by taking our work machines home we have fully functioning desktops immediately.”

LawConnect, for secure document sharing and collaboration with their client. As Stephanie Richardson, Office Manager, Evolve Family Law Ltd puts it: “We are able to create correspondence with all the enclosures without printing a single piece of paper, building bundles and briefs virtually with a click of a button and sharing securely via LawConnect.”

Many LEAP firms are using RapidPay which lets your clients pay you quickly and conveniently online. Ms. Bushra Ali, Director and Head of Practice of Bushra Ali Solicitors and Immediate Past President of the Leicestershire Law Society says: “We can claim fees from clients much quicker and more efficiently. LEAP made it possible for us to shift all our staff to work from home and to be able to operate the entire firm remotely.”

We also hope that our clients will appreciate our continued development of the software to help law firms to work from home during this difficult time. Since the beginning of lockdown LEAP have launched some additional exciting new features that will benefit law firms when working from home. Via the LEAP Mobile App, iPhone and iPad users can now make FaceTime video and audio calls to clients and other parties, time record these calls and can invite clients to prearranged FaceTime meetings.

LEAP now integrates with Microsoft Teams, meaning law firms can work across multiple locations and staff can share and collaborate on documents and matters, conduct audio or video calls across the team and schedule client call backs directly from LEAP using Microsoft Teams’ instant messaging service.

At LEAP we are committed to making our software ever easier to use and more versatile so that our law firms can get on with doing what they do best – practising law. We were one of the first legal software vendors to utilise cloud technology and the fact that our clients are able to function remotely so well is a validation of the work our research and development teams have been undertaking for many years. Stay safe everybody, and keep your clients happy! ■

For over 30 years, Clive Emson Land & Property

Auctioneers have been offering a bespoke auction service across the south of England, with some 40 auctions held across the region publicised in eight auction catalogues, which includes eight sales a year held at the Solent Hotel at Whiteley covering Hampshire, Dorset and the Isle of Wight.

While the onset of the Covid-19 virus has stopped most conventional property transactions in their tracks, on-line auctions have allowed the opportunity for business to continue for those wishing to sell sooner rather than later.

The Leading Independent Regional Land & Property Auctioneers Covering Southern England

Clive Emson’s late March sales were hurriedly, but successfully moved to an on-line format and the sale, held on April 1st proved to be anything but an April Fool with strong success achieved and many sellers delighted at the prices that were achieved on their behalf.

With virtual tours, video and photography providing information to buyers, a good many would be buyers were still keen to bid and compete for many of the Lots that were offered, with the bidding window for each Lot extended if a bid was made in the last 5 minutes of on-line bidding, ensuring that all other interested parties had chance to bid afresh and that the seller had the satisfaction of knowing that best price had been achieved on the fall of the electronic gavel.

Land and run-down properties were particularly popular in the 1st April sale, but property of all types was successfully sold including Freehold Ground Rents, residential and commercial investments, lock up garages and even a former reservoir!

A further on-line sale is being held on 6th May with over 60 Lots from across the region being offered for sale and with a further on-line sale planned for 17th June, Clive Emson Auctioneers are doing their best to keep the property wheels turning for all of those with pressing disposal or purchase requirements.

For further details on the on-line auction process or conventional auction selling when life returns to normal, contact Rob Marchant, the Auctioneer and Regional Director for Hampshire, Dorset and the Isle of Wight, 01489 564606. ■

DISCOVER a great way to buy and sell land and property

Our next land and property auctions will be held on:- > 6th May - Catalogue available now. Bidding live from 8am on Wednesday 6th May > 17th June - Catalogue available from 29th May. Entries close 27th May

ENTRIES CONTINUALLY INVITED FOR OUR UPCOMING SALES

SUITABLE LOTS INCLUDE: Vacant Residential for Improvement; Residential and Commercial Investments; Vacant Commercial; All Types of Land; Development Sites & Conversion Projects; Garages (lock-up & compounds); Freehold Ground Rents and the Unique and Unusual.

Clive Emson Auctioneers was founded in 1989 to supply a high profile auctioneering facility. Selling by auction is often the BEST method of sale.

The knowledge you need, the service you value.

For over 20 years, Geodesys has been perfecting its comprehensive suite of conveyancing search solutions to clients throughout the UK.

Today our bespoke service – including impartial advice, EU-compliant due diligence, secure file management and dedicated support – provides total peace of mind and total compliance every time.

Geodesys. All you need to know.

Change is a constant in conveyancing Law Society outlines changes to the Conveyancing Quality Scheme

The recent Geodesys CPD event saw Eleanor O’Reilly

Joe, Head of Accreditation at the Law Society and Peter Rodd, CQS Chief Assessor, bring the packed room upto-speed on recent changes to the Conveyancing Quality Scheme (CQS).

What’s new with the CQS?

First launched in January 2011, the Law Society scheme offers a recognisable standard of excellence in the provision of residential conveyancing services.

In February 2019, the CQS Core Practice Management Standards were updated and expanded. All firms were required to update and embed the requirements by 1 May 2019.

Since the introduction of these changes, the Law Society has increased the level of support it has in place to drive continuous improvement. From November 2019 to January 2020 it carried out an assessment pilot to monitor compliance amongst members and provide feedback.

What did the pilot reveal?

The pilot included both desk-based assessment, focussing on typically high areas of risk such as file reviews, SDLT and leasehold conflict, and on-site visits, which also included the assessment of policies and procedures. Both types of assessment were designed to audit the law firm against the updated Core Practice Management Standards.

The assessments identified non-compliant aspects across all Core Practice Management Standards.

The solution: resolving non-compliance

If a conveyancing practice is found to be non-compliant, it receives a letter from the Law Society laying out any breaches and suggesting a corrective course of action. They are then given a fixed period of time to correct infractions (21 days for minor breaches and three months for major breaches,) after which they are obligated to provide evidence of the corrective action they have taken.

The assessor’s view

Peter Rodd stressed that risks in conveyancing had increased enormously in recent years and those involved in conveyancing could not afford to be complacent when it came to make the necessary changes to their processes. He urged firms to be particularly vigilant when it came to the following areas of risk:

■ Fraud: Peter advised that all conveyancing teams should have a list of red flags that could be indicators of fraud. For example, is it reasonable that the buyer could have saved a significant amount of money? There are various clues which should prompt a request to the seller’s solicitor to share due diligence. ■ SDLT: Every transaction should have its SDLT calculation double-checked to make sure it is based on the right information. SDLT threatens to become the next PPI scandal as unscrupulous companies encourage dissatisfied clients to put in a claim. ■ Client care: Client expectations are usually very different to the reality so it’s important to be as upfront as possible as to how long the transaction is going to take. To avoid buyers feeling that nothing is happening, conveyancers should agree levels of communication at the outset.

Conveyancing: change is a constant

Peter also stressed that change would continue to be a constant theme in conveyancing so those involved in property transactions should keep an eye on the Law Society’s website for details of practice notes. Further changes to CQS will be announced in 2020 and the Law Society will be offering a number of briefing sessions to all those involved in conveyancing compliance.

Over the last year Geodesys has been working with the Law Society to promote the CQS in order to help our clients. We have also introduced the Geodesys Compliance Service which can help conveyancing teams ensure they are complying to the updated CQS Core Practice Management Standards. ■

evil bots lurk in every corner.

Sending sensitive client data by email puts you in their reach.

Thankfully we can make sure you are properly protected.

From instruction to completion, protect, share and obtain signatures. Document Portal; a clever new solution, only available with Brighter Law.

poweredbypie accelerates introduction of online communication tool: Document Portal

With many law firms now working from home, search and software provider poweredbypie, has announced an accelerated introduction of its new online communication tool Document Portal. Document Portal enables simple and secure electronic exchange of all documentation within the conveyancing process, particularly helpful when email is not secure and meeting clients in person is not possible.

Carole Ankers, chief product & technology officer, poweredbypie explains: “Working from home creates a new set of challenges when it comes to communicating with clients. Document Portal is directly integrated into poweredbypie’s Brighter Law tool kit and helps law firms stay in touch with clients by providing a safe, secure alternative to email and post for the exchange of sensitive information. It allows clients to sign and return documents, speeding up processes and keeping you on top of your workflow in this unusual situation.”

Chris Thomson, partner, McKeag & Co Solicitors confirms: “As a beta client for Document Portal we recently had a homebuyer register for Document Portal for a new property transaction. They got the client care pack, opened the documents, signed and returned them securely within two hours! With this communication typically taking a week or more through the post, suddenly, we can see how to make the, often stressful, process of buying a new home much more convenient for customers, giving us as a law firm a real competitive edge and saving time throughout the workflow of the transaction. Online communication has become even more important recently and Document Portal now offers a convenient option to stay safe and communicate with our clients securely.” to communicate with clients has never been so essential. Document Portal removes the risk of fraud, providing secure 2 Factor Authentication to store and share legal documents which are accessible only to those with authorised access.

“Document Portal is both simple to use and set-up, we try and make life easy for law firms! A document portfolio can be created which includes intuitive, editable forms and digital signature facility provided by the leading eSignature brand DocuSign. Not only does this provide a secure, streamlined environment for client data, it also highlights to the client exactly what information needs to be filled-in, first time, every time. Clients can also upload their own documents, further negating the need for post.

“White label branding means that the end customer has a seamless experience of your brand: from getting a quote in our online calculator tool, to eSigning in Document Portal. The overall faster conveyancing process with real time notifications, leads to happier clients who are more likely to recommend your services in these tough market conditions. We take care of all the integration and setup, all that’s left for you to do is to use it and start to feel the benefits.”

To find out more or to book an online demo with your account manager please see: https://poweredbypie.co.uk/lp/document-portal.html

In response to the current situation, we have also updated our online CPD training programme with several new courses to help you while working at home. To view available sessions and book your place, please see: https://mailchi.mp/poweredbypie/training

Cash Flow Modelling – Vital for Financial Planning and particularly on divorce

Akey role, arguably the key role, of a financial

planner is to help a client meet all of their financial objectives throughout their lifetime, and one of the most important objectives for most clients is to ensure that they have sufficient money saved to provide them with the retirement that they want.

The two key questions that need to be asked, and answered, are “When do you want to retire?” and “How much income will you require to live comfortably when you do?”. Without having the answers to these two questions I do not know how any financial planner can comment or advise on a client’s pensions, yet I often speak to new clients who have come to me for various reasons, whose previous adviser had never asked them these questions. Can you imagine a pilot flying a plane without knowing the destination or time of arrival?

With these two answers confirmed it is then possible to realistically create and work on a financial plan, which specifically targets the client’s objectives. Knowing when a client wishes to retire and on how much per month or year, enables me to calculate how much they need to have built up in their pension funds to enable them to generate the income that they need. From this it is then possible to calculate how much the client needs to save per month and what annual investment return is needed to achieve their retirement objectives.

I have met clients who have a personal investment manager (IM) who manages their portfolio, and at a review meeting the IM compares their performance against the benchmark, against the sector, against the FTSE 100 etc, thinking they have done a good job because they have provided a slightly better return compared to those. But the key return they should be focusing on is the return that the client needs to achieve their objective. If the IM hasn’t achieved this return, then their clients are not going to achieve their goal. So, whilst it is nice to beat a benchmark, it has no real relevance to a client’s financial plans, yet so many people focus on comparative returns.

A key tool that I use with clients to help calculate what annual return is needed for their portfolio is Cash Flow Planning. This involves software which takes account of a client’s current situation (assets, liabilities, income, expenditure) and then models how these factors will change up to and through retirement. This then allows me to analyse various key outcomes and make changes to the client’s financial plan to improve their situation. Areas such as minimising Inheritance Tax, calculating how much a client needs to save each month, how much can they spend in retirement, how much life cover they need, how resilient their investments are to a market crash, tax efficient decumulation, and as previously mentioned, what annual return do they need to meet all of their objectives and not run out of money.

28 HAMPSHIRE LEGAL Notably, Cash Flow Planning is also a hugely powerful tool when it comes to helping a client financially navigate their way through a divorce. I recently met a new client, Mr Stevens, in London who is going through divorce and he understandably wanted to discuss how any pension split would affect his retirement plans. Having input all his current information into the software, we looked at how his existing pensions were projecting to perform and whether he was on track for his desired retirement, which he was. I was then able to factor in a large loss in his pensions (in this case he was expecting to lose 40% of his pensions to his ex-wife), which allowed me to clearly illustrate how the divorce would affect his retirement plans. Unsurprisingly if Mr Stevens did lose 40% of his pension, this would have a noticeably detrimental impact on his retirement plans. Facing the prospect of running out of money midway through his retirement, or having a lot less to spend in retirement than he would like, I was then able to use the Cash Flow Planning software to calculate how much extra money he would have to save from now until retirement to ensure he had enough money accumulated to provide a suitable retirement income.

Mr Stevens was then able to use this newly calculated monthly pension contribution amount when it came to his financial settlement negotiations, because one major concern for him was being faced with a significant spousal maintenance obligation. He was planning to use this figure to argue how much of his income he needed to retain to ensure he wasn’t going to suffer in retirement.

In conclusion therefore I hope this article has demonstrated that without knowing what a client is trying to achieve, it is impossible to know whether their portfolio is performing well for them, and that a financial planner, using cash flow modelling, is vital to work with family solicitors to assist both divorcees and divorcers to move forward with their financial lives post-divorce. ■

David Gibb Chartered Financial Planner & Chartered Wealth Manager STEP Affiliate

If you would like to find out more about cash flow modelling from Quilter Private Client Advisers or be put in touch with your local office please email QPCA@quilter.com or call Jane Birchall on 07471 354933. QPCA, as SIFA Professional members are proud to be feature on the SIFA Directory of Professional Advisers: www.sifa-directory.info

The Winners will be the firms who embrace Transparency and go beyond what is required

On the 5th of March the SRA issued an update reminding

firms of their obligations under the ‘Transparency’ rules, that came into force in December 2018.

“The aim is to help people, who currently struggle to shop around for legal services, more easily find the information they need to help them find the right legal help for them. The rules also include using our clickable logo, which became mandatory last November, which verifies that you are a law firm that we regulate and tells the public about the protections in place.”

It is crucial to understand that these rules were established to serve in the solicitor firm’s best interests. The regulator wants to ensure that potential customers are better able to compare different legal services providers. Indeed, the SRA highlighted that 71% of the consumers they surveyed spent over I hour researching providers. How positively your firm responds to the principles of Transparency may define future success.

This current climate where client activity is likely to be limited is an excellent time to reflect on how your website has embraced the rules and perhaps to go far beyond what is required and to differentiate yourselves from competitors who may not be recognising the opportunity.

The SRA’s first website sweep exercise in the spring of 2019 showed that 17% of regulated firms, after 6 months, had not done anything in compliance of the new rules. The regulator has now completed a second similar exercise and whilst the full outcome has not been published as I write, the following sound bite from the SRA suggests firms are still not embracing rules, aimed to benefit them and assist them attract new clients:

“The second of these has been completed and where we found non-compliance, we are considering potential enforcement action. More checks on firm websites will follow.”

Obviously since November, in line with the new Standards and Regulations, we now have the whole picture, regarding exactly what is compulsory. This now includes prominently displaying the SRA Digital Badge, your own, the SRA’s and Legal Ombudsman complaints procedures and all the core areas when you must show costs, who is delivering the services, likely timescales and disbursements. Therefore, this article is not to cover old ground or the basic requirements of Transparency, more to look at some tips to embrace the challenge and show your business in the best possible light to potential customers, in need of legal advice or services, that are undertaking web based research.

The following ideas will be included in a new marketing leaflet for our SIFA Professional financial advisory members, to reach out and support their legal colleagues. Here is an insight and I hope it gives you food for thought:

SIFA Professional Guidance on going beyond ‘Transparency’

■ It is not always about a low price; it is about value – So include as much information as you can about the services you are describing. Be aware that SRA research, however, does show consumers are attracted to known, fixed costs.

(SRA research indicates 32% of consumers see price as a key factor.)

■ Plain language is advisable – Avoid legal jargon and describe the processes and stages in easy to understand ways. ■ Why limit the exercise to the compulsory services in the rules? – To have full details on the costs and aspects of the compulsory services and not in others seems pointless. The SRA began with core, most utilised services but this was just the start of the reforms but to a consumer, having full information for some services and less for others may look odd or even suspicious. ■ Staff Biographies are strongly recommended – You are required to include details and qualifications of the individuals involved in delivering the described services but why not go further. Full biographies with pictures of the solicitor and any support staff a new client is likely to deal with in the course of the process, personalises the experience from outset. More so if you can include personal non work-related background as well. ■ Encourage your key solicitors to write blogs about how they deliver their service and work with clients and use these on your website. This is a further comfort and personalisation factor in the potential client’s research. ■ Use social media – a profile demonstrating your firms and individual solicitors’ credentials and expertise linking back to your website could be a differentiator. ■ Display your firm’s awards, consumer service standards and kite marks of quality. ■ Ensure you have a testimonial section on your website.

Ideally one for each area of law/service. (Happy and

satisfied clients are a crucial factor for consumers, with the SRA indicating that 42% of those surveyed seeing reputation as the key factor.)

■ Be proud to show work with other carefully selected third parties – Modern clients think holistically and require a holistic approach to their problems and needs. It is therefore

beneficial if your website informs them that you operate that way and will refer them to other professionals, such as financial advisers, if a financial planning need arises from the legal service you are providing.

In essence, your website is the modern-day shop window and the more enticing and welcoming it looks, the more likely new customers are to walk in. Particularly important if your window is not the only one, they are looking in! ■