Modern Law Magazine - Issue 9 by Charlton Grant

The Business of Law

December 2013 | Issue 09 | ISSN 2050-5744 Michael Napier QC: Where have all the commercial ABSs gone? Modern Law Awards 2013: The stars come out for the biggest ‘gathering of friends’ the legal sector has seen to date. The consultants: the honest appraisal of outsourced expertise and how legal entities can maximize value from these relationships.

Modern Law Magazine | December 2013 | Issue 09

“We need to continually challenge ourselves to always be open to ways of, not only improving our services but perhaps by doing that in a radically different and unfamiliar way” Christina Blacklaws, Co-operative Legal Services

Shailesh Vara MP “We want to see a vibrant, innovative and competitive legal services sector that serves consumers well at home and allows us to compete for work abroad”

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Interview

Interview with... Shailesh Vara MP The newly appointed Parliamentary UnderSecretary of State for Justice speaks exclusively to Charlotte Parkinson about the government’s impression on the impact of reform, his hopes for the future of UK legal services and anticipated further reform in 2014.

In an interview with Modern Law earlier this year, your predecessor, Helen Grant MP said that ‘regulators – including the SRA, MoJ and Financial Services Authority [now the Financial Conduct Authority] are in dialogue with regulated organisations to help them change their models if suitable to ensure they are complying with the requirements of the regulators’. Do you think the sector has seen any more transparency from regulatory bodies in terms of what is actually required in practice for firms to be compliant, or is it still very much a guessing game? As a government, we are on the side of hardworking people and we want to do everything we can to help them with the cost of living. I was really pleased when I took up this role to see that my department has already been able to make a big impact as part of this. Our major programme of work around civil claims has already contributed to motor insurance premiums falling by an average of £80 (according to the AA) and I hope to see that trend continuing. A key part of this will be to ensure that firms continue to comply with the ban on paying or receiving referral fees which we introduced in April alongside the other changes in Part 2 of the Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act. We have been firmly on the front foot with this work. The MoJ’s Claims Management Regulator has carried out significant

“Encouraging people to make claims with cash inducements or gifts is plain wrong – it is the kind of dubious behaviour that we want to get rid of from the personal injury claims sector”

Shailesh Vara MP

Shailesh was first elected Member of Parliament for North West Cambridgeshire in May 2005 and reelected in 2010. During 2005-6. Shailesh was a member of the Select Committee on Environment, Food and Rural Affairs and in 2006 he served on the Standing Committee of the Companies Bill, scrutinising the largest Bill ever to go through Parliament. During 2006 he was Joint Secretary of the Conservative Backbench Group on Foreign affairs. He has also spoken in Parliamentary debates on a wide range of subjects – from tackling antisocial behaviour to better scrutiny of EU legislation, and from care for dementia sufferers to reform of the House of Commons. In the same year, Shailesh introduced a Private Member’s Bill to extend the age range for women to have compulsory breast cancer screening from the present 50-70 to the 45-75 age range. The Government did not allow the Bill to progress at the time but subsequently followed his lead and moved partway to meeting the aspirations he pressed for. Shailesh then introduced another Private Member’s Bill in 2007 to give greater protection to householders who sought to defend themselves and their property from intruders in their homes. Again, the Government did not allow the Bill to progress but Shailesh is still pressing for the change in legislation - a call being supported at a national level by the Conservative Party. From November 2006 he served as Shadow Deputy Leader of the House of Commons, speaking for the Conservative Party on Parliamentary matters from the Commons Front Bench. Following the 2010 General Election he served as a Government Whip until September 2012. In October 2013, Shailesh was appointed as a Parliamentary Under Secretary of State for Justice.

ML // December 2013

Interview

“The Government makes no apology for wanting to see a more efficient and competitive sector, with more proportionate regulation and reduced costs” consensus we will be holding discussions with the SRA and other regulators to explore options.

The Government is currently consulting over firms who demonstrate poor practice in Payment Protection Insurance (PPI) procedures as well as producing new conduct rules. What do you expect will come of this consultation and what else is the Government doing to stop rogue practices and unsolicited marketing campaigns? The recently announced consultation is part of a package of new measures designed to strengthen existing action to drive out and punish bad practices by CMCs and better protect the consumers who use their services. Firstly, the rules that dictate the conduct of CMCs will be tightened further to crack down on lazy and inefficient CMCs, by specifying clearly the need to carry out investigations to establish the merits of a claim (such as PPI). This should ease congestion in the system caused by a backlog of speculative claims. CMCs will also be required to ensure that leads received through telemarketing are legal; this will help tackle the problem of people receiving unwanted marketing texts or calls. Secondly, we’re reinforcing and expanding CMR enforcement tools with an additional power to fine CMCs for rule breaches. Lastly, the fees charged to CMCs for licenses to provide regulated claims services will be increased. This will ensure the claims sector – not the taxpayer – continues to pay its way and provides the sufficient resources needed to meet the cost of regulation.

enforcement work, and we have seen large numbers of firms change their practices and have closed others who would not. The regulator has also been leading by example by setting out clear information for companies to use to ensure their conduct is compliant, which is available on updated pages on our website. But we also want to make sure the ban is operating properly across the legal and claims sector. My officials are actively engaged with all the regulators of the ban and hold regular roundtable events with them. I know that the regulators are issuing guidance and FAQs to assist practitioners with compliance of the ban and formal Memoranda of Understanding are also in place between them, to help information sharing, evidence gathering and enforcement action. This collaborative approach should provide firms with adequate information to ensure they are compliant. If it becomes apparent that business models are not compliant, it will be up to individual regulators to deal with any breaches appropriately.

There is a lot of confusion in the sector at the moment surrounding enticements, especially because of the ban implemented to CMCs in terms of offering enticements to potential clients. Does the Government plan to intervene and/or work with the SRA in banning those other than CMCs from offering enticements? Encouraging people to make claims with cash inducements or gifts is plain wrong – it is the kind of dubious behaviour that we want to get rid of from the personal injury claims sector. That is why my department brought in a ban in April to stop Claims Management Companies (CMCs) from using them, on top of the other reforms I have already mentioned. We have applied this to CMCs but it will be up to the independent regulators for legal and insurance professionals to take their own steps to stop the practice among their members. The major claimant lawyer representative bodies, the Association of Personal Injury Lawyers and the Motor Accident Solicitors Society, have already called for the ban to be extended to cover lawyers and as there is industry

ML // December 2013

The recent decision made by the Government not to raise the small claims limit has meant that many PI firms have breathed a sigh of relief. However, Chris Grayling MP has since commented that ‘raising the limit in future’ cannot be ruled out. What effect do you think raising the small claims limit will have on the sector and why does the Government see a link between raising the small claims track and fraud? The Government position is clear - we believe that strong reasons exist for raising the small claims limit from £1,000 in personal injury claims. Doing so would reduce costs for defendants and would create the conditions to allow dubious or speculative claims - which are currently cheaper to settle – to be challenged. Reducing questionable claims would lower the costs for insurers and would in turn allow them to continue to reduce motor insurance premiums for hardworking people. However, the evidence also shows that the time is not right to do this now. More work is needed to support litigants in person in the small claims court and to establish how best to regulate the way the claims management sector operates in this field. We also want to take some time to assess the impact of the major reforms made in April. Those reforms will have a significant impact on this market and we intend to monitor their effect before returning to this issue. I must make clear that we have not ruled out further reform and intend to return to this in due course. Our main focus now is effectively implementing the measures we announced on 23 October, to stop questionable whiplash claims by ensuring independent medical assessment of injuries.

Interview

Q A

What is the Government doing to help bridge the current, ever-increasing divide between the insurers, claimant and defendant lawyers? I don’t think there is an everincreasing divide. We often see examples of the different groups working together. Insurers, claimant and defendant lawyers all recently came together, for example, in response to our whiplash reform consultation. They submitted a consensus approach to improving medical evidence and reports. I was pleased to see these organisations could put aside their differences and work together positively. It provides us with a clear mandate for reform and means we can work with all stakeholders to build an effective and rigorous new system. We are keen for this spirit of co-operation to continue and we will also be working with the insurance sector and lawyer groups to help the sharing of data on fraud. Sharing this data will provide immeasurable help to lawyers considering whether to take on a case and is a positive step forward in the fight against fraudulent claims. There is an opportunity for all in this sector to build on these positive collaborations. I want all parties to come together and work with the Government to create a personal injury process which elicits better value for money, deters fraudsters and provides the genuinely injured with the help and support they need.

At a the recent annual MASS Conference, its Vice Chairman, Sue Brown, said that more claims are progressing to the litigation ‘Stage 3’ process in the portal. Do you think this will continue to rise and do the costs involved in this defeat the object of the portal altogether?

The RTA Protocol provides a streamlined process and predictable costs environment at each stage of the litigation process. There have been a lot of reforms to Road Traffic Accident Personal Injury litigation this year and clearly they will have an impact on the way claims progress. At the moment, even though we have seen some fluctuations in recent months, it is too soon to be able to identify any consistent trends or the causes of them. We are carefully monitoring the impact of the reforms and would be grateful for any relevant evidence or data which MASS or other stakeholders can provide.

There is widespread talk of further reform to come to the legal sector in 2014. Do you think the sector is in a position where it can take further change or do this years’ reforms and others need more time to bed-in? We live in times of great change for all of us, and the legal services market is no exception. There have been significant changes to the sector, both in terms of the regulatory regime under the Legal Service Act 2007, and funding changes under the LASPO Act 2012. The Government makes no apology for wanting to see a more efficient and competitive sector, with more proportionate regulation

“The rules which dictate the conduct of CMCs will be tightened further to crack down on lazy and inefficient CMCs by specifying clearly the need to carry out investigations to establish the merits of a claim (such as PPI)”

and reduced costs. We believe it is in the best interests of those who use legal services – the people who the sector exists to serve. We will continue to engage with legal services providers, and their representatives, to make sure any further reforms are fit for purpose and deliverable.

Do you think there is any room for high street law firms amongst the more corporate organisations that are emerging; will these smaller and niche practices continue to feel the brunt of the extensive consolidation taking place in the market? It is not for government to determine the shape of the legal services market - aside from the procurement of publicly funded services. We want to see a vibrant, innovative and competitive legal services sector that serves consumers well at home, and allows us to compete for work abroad. The changes to the legal services market, enabling the authorisation of new Alternative Business Structures, as well as the entry into the market of a wider range of legal service providers - has led to greater competition across the market. There is room in the market for a variety of types of provider, but it is up to providers to compete effectively for work, rather than for the Government to arrange work for different types of provider.

Q A

Does the Government have any plans to step in and ban premedical offers altogether and will the medical reporting aspect of litigation be subject to review next year? We indicated in our response to our consultation on reducing the number and costs of whiplash claims, that we are attracted to the idea of creating a rule to restrict the use of pre-medical offers. We understand that insurers making such offers are usually doing so in order to control costs but we believe they also create perverse incentives for uninjured claimants to make speculative or fraudulent claims. We are going to work with stakeholders to explore a number of options, including amendments to the Civil Procedure Rules, new industry codes of practice and fixed fees for medical reports. We believe our reforms to the medical reporting aspects of personal injury litigation will create a robust system for the genuinely injured which will also deter those who make unnecessary, exaggerated or fraudulent claims.

ML // December 2013

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Interview

Interview with... Christina Blacklaws The Modern Law Award-winning Policy Director of Co-operative Legal Services speaks to Emma Waddingham about what it means to work co-operatively with customers to create a legal services offering that is both ethical, desired and fit for purpose, as well as her thoughts on the future for both legal professionals and consumers.

Q A

How has the vision for Co-operative Legal Services played out in the past 12 months? Has it all gone according to plan or have there been surprises along the way (especially in terms of client reaction and uptake of certain services)? Well, it’s certainly been a rollercoaster! Our vision is to make the law simple and accessible and that has required a radical rethink. We want to deliver the legal services that people want, in the way they want them, at a price they can afford. We undertook an enormous amount of consumer research before we even started to design our family law services; it took us nearly nine months of hard graft to put them together. We launched them just over a year ago and have been privileged to help over 10,000 people with their family law issues over that time. This is added to the tens of thousands we have helped and supported with the issues around all aspects of consumer facing law. I believe passionately in what we are trying to achieve and in doing this in a completely ‘co-operative’ way. The core values and ethics of the co-operative group are fundamental to our vision and give us a clear direction in terms of the way we do business. We promise to our clients that we will provide transparent, value for money, fixed fees and that we will do so in a way that respects their individuality and needs. As a legal aid lawyer at heart, one of the things I’m most pleased about is the fact that despite all the difficulties, we are one of the largest legal aid providers in the country. We have also led the way in developing is the widest range of fixed fees across all areas of family law offered on a national basis, including fixed fees for advocacy through our bar panel and mediation services. Putting this service together required a great deal of innovative thinking not only from us but also our partners. I am very proud both of the breadth and depth of the services we offer in this way which have proven to be a

“We need to continually challenge ourselves to always be open to ways of, not only improving our services but perhaps by doing that in a radically different and unfamiliar way. The only justification for our existence is to serve clients’ needs. As long as we continue to do that exceptionally well, we should continue to have a business” ML // December 2013

Interview

“My experience has been that the organisation is greatly enriched by having those at the top of their game from other disciplines, having an equal say in the strategic direction of the business” lifeline for so many people. Not only those who no longer qualify for legal aid but also the very many people who failed to access justice for fear of cost or accessibility. So, to answer your question: we have exceeded our expectations and are excited about the next period!

Has the legal services arm attracted new customers (and members) to the Group; did the brand capture the member client base first? What impact does this have on the growth of the brand? The Co-operative Group has over seven million members as well as serving over 20 million people in this country every week. Of course, the brand has been around for over 165 years and I think, justifiably, is trusted in the eyes of the public. Trust is an absolutely critical component when an individual is considering which legal service provider to choose so, of course, it is an enormous advantage to be part of the Co-operative Group. However and interestingly, the majority of our clients are people we’re attracting to the brand, and thereby extending the traditional reach into new segments.

and with the new entrants, I think we are just seeing the beginning of radical change. I predict that the legal services market will be almost unrecognisable in 10 years time, but then, as Bill Gates famously said: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.” Well, I couldn’t agree more!

It’s almost two years since the SRA was granted the power to license ABSs; do you feel the sector is still running through the first wave of ABS modeling and what will come next? I believe that what we have seen so far is merely a glimpse of the future. Certainly it’s true of us. New services take time to engineer and resource. Many firms won’t want to commit to the development cost until they are sure their license is in place. Nonetheless, there has been a flowering of innovation in the legal services sector over the last two years and that has not been limited to ABS. I have been amazed at the ability of colleagues to adapt their business models to fit the brave new world. I am certain many will succeed and grow. Of course, ABSs are a catalyst

ML // December 2013

Are the ABS models licensed to date built on a reaction to reform (such as LASPO and Jackson) rather than built on a vision to cater for the need of the consumer and meet unmet legal need? I would say, inevitably, a mixture of both. We are all working within an environmental context, which has put significant pressure on those attempting to deliver legal services to the consumer. However, savvy ABSs will take the same view as us: unless you really build your services from the perspective of the consumer and what they need, you will fail. The Holy Grail of unmet need is what we are all chasing. I hope and believe the liberalisation of the market will lead to much greater consumer choice and empowerment and that will, in turn, lead to more consumers accessing legal services.

CLS recently announced its confirmed panel of barristers’ chambers. What offerings (other than price and expertise) were important in the appointment of these chambers and what tricks are chambers missing when tendering for panels? Are panels the future for collaborations with the Bar? We believe in working collaboratively with all our colleagues in the justice system to provide excellent services. Our bar panel tendering exercise was rigorous and time consuming but we felt it was important to get it right. The assessment was based on serving a geographical need, expertise in the subject area(s), innovation, administration (delivery of MI), service quality for existing members, overall value and added value services (training, seminars etc). The important thing for us was to have a common service level agreed with all chambers undertaking work for our various departments as well as price certainty for our clients. We also used external data sources as part of the assessment. The panel is not closed and we will run a further exercise as and when this is needed. We will always want to work with likeminded organisations who share our ambitions and commitments.

Interview

Have legal aid practitioners given up the ghost too early? Are practitioners distracted too much by what’s happening, rather than what they can provide and how to do that in the most cost-effective and efficient model for consumers? I have every sympathy for legal aid practitioners. I spent over 20 years of my life running primarily legal aid businesses. This is highly vocational work and, even before the current cuts, was undertaken by people whose sole motive was to help the most vulnerable and disempowered in society. There was no such thing as the ‘fat cat’ legal aid lawyer and I know many individuals who have sacrificed enormously to continue to do their important work. You will never hear me say a derogatory word about legal aid practitioners so I cannot agree that they’ve given up the ghost too early! It was very difficult to run a legal aid practice at even marginal profit before the LASPOA changes and now I fear it is almost impossible. The problem for many practitioners is one of scale. When I ran Blacklaws Davis, a large number of sole practitioners and partners from small firms joined with me in a hybrid virtual model. This enabled them to focus on doing the fee-earning without the worry and overheads. I think that model could well have greater application going forward. Like CLS, the practitioners could launch fixed price services - after all, they are used to the constraints of legal aid costs structure and should be able to adapt to fixed fees very easily.

You were named Lawyer of the Year at the Modern Law Awards 2013; what does it mean to you to be recognised by the sector – especially given the background and profile of the judging panel? What was the reaction by CLS? As I have never even won a prize on the tombola before, I was equally surprised and delighted! CLS is a very friendly and supportive place to work and our exec is a tight-knit group so they were all really pleased for me. When the news went out on

our internal communications, I received many lovely messages from colleagues across the businesses saying how proud they were to be part of a group that can receive such accolades and, of course, I agree. Without all the hard work and commitment of the team, none of us would ever win awards.

What about the role of professionals that support law firms in areas such as leadership, marketing, business development, finance and IT – the oft-termed ‘nonlawyers’. Does the legal sector offer an attractive proposition for those at the top of their game in other sectors? Are law firms missing a trick by not opening their doors and management boards to these professionals if not going down the ABS route? Most certainly, yes. One of the greatest advantages of ABS is the opportunity to bring experts from other areas into the decision making body. My experience has been that the organisation is greatly enriched by having those at the top of their game from other disciplines, having an equal say in the strategic direction of the business. Being open to and taking advantage of the skills and experience that comes from other sectors gives businesses competitive edge.

Q A

What can be learned from other sectors in terms of generating success in the liberalisation of legal services? I think it’s to be innovative. I think that, as lawyers, we know what we know. We need to continually challenge ourselves to always be open to ways of, not only improving our services but perhaps by doing that in a radically different and unfamiliar way. The only justification for our existence is to serve clients’ needs. As long as we continue to do that exceptionally well, we should continue to have a business. If we fall short, well, survival is not guaranteed! This means a wholesale re-appraisal of what we’re doing and why. We’ve been through this in CLS and, going forward, we expect to continue to launch ranges of new service offerings

“Trust is an absolutely critical component when an individual is considering which legal service provider to choose so, of course, it is an enormous advantage to be part of the Co-operative Group”

with new partners and through new methods of delivery.

Q A

Is the future bright for young lawyers and those looking to work with legal entities? Yes but people must be flexible and willing to embrace change. If so there are huge opportunities out there for those who aspire to a career in legal services. We recently launched our Academy, which gives structured, supportive and flexible career paths for all (not just the few high flyers) our colleagues in CLS. We hope to set new industry standards in in-house education and training for everyone involved in the delivery of legal services.

Q A

What will the next generation of consumers expect from legal services – in terms of accessing and working with lawyers? How is CLS geared up to support them? Above all, I think the next generation of consumers will want flexibility and cost certainty. High quality delivery should (and will be expected) and it is likely that aggregators will enter the market to give consumers more information from which to choose their legal service provider. I think there will be more national delivery that provides for consistency; certainly a number of consumers will want to choose a trusted brand for their legal services. However, I am certain that others will continue to look to their high streets for support from trusted local providers. Excellence of client service will be the absolute key to future success and prosperity for any legal service provider. I repeat those wise words of Bill Gates: ‘don’t get lulled into inaction’. My advice is, to keep developing and innovating and to stay on your toes!

ML // December 2013

Interview

Interview with... Adrian Fawcett Charlotte Parkinson, speaks to the Silentnight Chairman and legal financier about why he decided the time was right to dip a toe in the water of a rapidly changing sector and what drew him to become a stakeholder in personal injury firm, Smith Jones Solicitors.

Why did you decide the time was right to invest into the legal sector (particularly the personal injury sector), given the state of the market at the moment? How important do you think capital coming into the legal sector is in light of change? I look for sectors and businesses that are seeing regulatory, financial and legislative change, on the basis that this provides opportunities to deliver superior business models, services and customer relationships that add the most value in the new world - not just a repeat of what has been done in the past. The legal sector represents a significant opportunity for this.

What was unique about Smith Jones Solicitors that attracted you to invest in the firm? What sparked your involvement in the legal sector, particularly given your nonlegal background? With every company and sector I look to work with and get involved with, I have found that quality outs in the end. Smith Jones has sector-leading client outcomes and a tremendous ethos of seeking to deliver the best and most fair outcome for each of the stakeholders. Far from looking for the lowest common denominator, it has

sought to apply experienced legal knowledge and qualified solicitors with significant experience to every customer file. The big risk of the significant fee reductions in the sector is that service migrates to low-value ‘kids on keyboards’, rather than a high quality efficient model. I was delighted to discover that Smith Jones had both the commercial appreciation and the legal aptitude to ensure that quality and the customer came first. This is what set Smith Jones apart from the other companies I looked at and gave me the confidence to help with the business model.

Q A

With the bout of ABS activity and new market entrants into the legal sector, is the market still ripe and open for private equity/ private investment? The market is very challenging. The new structures do not fundamentally alter the commercial requirements of needing to do a lot of work, deploy resources and help the client, before you get paid. There is therefore a need for strong financial support and we have made significant investment in IT this year to streamline our processes. Outside influence can also offer the ability to look at new sources of funding, which should not be confused as a substitute for increasing the need

“The best bits of history must be retained by the sector but [external investors] can help with a focus on commercial cost management, outcomes focus and performance management not just of the legal elements but the whole client journey” ML // December 2013

for professionalism required to run these businesses, in what is a lower margin market place.

Q A

What can/are entrepreneur outsiders offer those in the legal sector, particularly in terms of changing and influencing strategic/management decisions? I think there are a whole range of things that commercial, professional and entrepreneurial management and leadership help can bring. We are effectively seeing a market place move from a fee system based on time taken to do the work, resulting in little focus or motivation to see the end result, to an environment which focuses on results and outcomes. This is actually magnified, as if you don’t get the

Interview

outcome, the business still incurs the implementation or activity cost and these often cannot be recovered. The best bits of history must be retained by the sector but external eyes can help with a focus on commercial cost management, outcomes focus and performance management - not just of the legal elements but the whole client journey. It is about the customer journey, not just the implementation of legal services.

Q A

What types of businesses and models (new or old) are attractive to investors? Investors will want to see repeatable models and ones where there is an underlying long term need and market place; the whole sector must arrive at a stage where there is support for all stakeholders. The real key is to encourage long-term relationships with clients and stakeholders amongst partners and firms.

Would you consider an involvement in purely online legal service models and what can be lost or gained in using these models as opposed to more traditional legal services? There are some activities that can be done more efficiently or cheaper and others that just cannot be undertaken with the level of quality, interpretation or tailoring required because they are relationship orientated. I am a massive proponent of systemising and adding quality and access via the web. Just look at how other service lines - from booking a holiday to managing your money, pensions and investments, even just ordering the shopping - have become a richer experience with more context and information available by being online. Real-time and better communication are added benefits. There is often the mistaken view that online means lower quality but in a regulated environment like ours there is massive opportunity to add context, colour, education and visibility via the web.

Peter Jones, Managing Partner at Smith Jones recently said of the firm that it is not just an ‘RTA bucket shop’. How does the firm intend to differentiate itself from the competition in a crowded market place and how do you anticipate your involvement will help to do this? We hope to be able to demonstrate what we are doing over the next two years or so. This [being branded as an ‘RTA bucket’] is, as Peter says, a completely incorrect view and positioning of our company. We look at it like this: we are here to help people or organisations who have found themselves in the difficult position of having been effected by an event or a situation - not of their own doing - that has negatively impacted their lives. Our role is to try and reinstate clients back to a position where they can overcome or at least live with the consequences of the impact someone or an organisation has had upon them and we help them, in any way we can, to do this. They can incur costs from loss of work time, inability to earn, the hardship of not being able to service loans and commitments or having to pay healthcare costs they didn’t envisage. We do not make claims against the NHS for medical mal-practice and have never supported a client claim against the NHS but we have supported clients getting their clothes, equipment and personal damages recovered from a massive cross section of organisations and companies. We are far from a bucket shop; that’s a media stereotype. We are here to positively enable and support the cost recovery and associated impacts unforeseen events have on our client’s lives.

Q A

Has the client been forgotten in light of changes to the wider legal sector and is it now simply a case of volumes through the door for many firms? I think it is very much for us as a company and our competitors and colleagues in the sector to make sure that doesn’t happen. Volume is vanity, Quality is sanity.

“The big risk of the significant fee reductions in the sector is that service migrates to low value, ‘kids on keyboards’, rather than a high quality efficient model”

“There is often the mistaken view that online means lower quality but in a regulated environment like ours there is massive opportunity to add context, colour, education and visibility via the web”

Q A

Are you actively seeking further involvement in the legal sector or will you wait and see how your role on the board of Smith Jones plays out? I will be actively seeking opportunities to develop the Smith Jones as a business over the next 12 to 18 months, then, with the team, looking at other opportunities in the market place.

Do you think the Government is doing enough to combat the ‘compensation culture’ and how damaging has the whiplash culture been for the reputation of personal injury firms? If you look at the recent media coverage the Government regulatory focus has had, the attention is beginning to move off this sector and is now firmly on the banking sector and energy market places. I think if the sector does a good job of following the new guidelines, utilising good client processes and intent there is every chance of a more measured frame of reference in the future regarding the claims market place. Even the insurance companies, who have largely now got the low-fee automated processes they were looking for, are now able to point to a reduction in legal costs from the sector. No one was ever saying legitimate reinstatement claims and support should be challenged, it was about the level of costs and fees it took to operate that process. I suspect the systems will need further development, overhaul and review and it will be something that more specialist legal companies should focus upon rather than being a small part of a wider general practice. Time is needed to see this evolve.

ML // December 2013

The Views

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The Views

ML // December 2013

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The Views

Myth of the Golden Age It’s natural to look back to the ‘good old days’, says Chris Kenny, but in terms of regulation – to protect the clients’ best interest and enable real innovation and the growth of legal services - did a Golden Age of self-regulation ever really exist?

n our ‘blueprint for deregulation’1, the Legal Services Board outlines major proposals for the future reform of legal services regulation. Submitted in response to the Ministry of Justice’s review of regulation, we argue for some immediate changes in the behaviour of regulators to lessen burdens on providers and encourage innovation; more comprehensive redress for consumers, some significant simplification of primary legislation and, in the medium-term; a move to a single regulator. Now that we have seen a number of other submissions to the review, one aspect stands out: demands for a return to self-regulation on the part of the profession. We stand now at a crossroad considering where to go next – what kind of regulation do we want in order to enable what kind of market? Regulation provides market rules Let’s start with some givens. Firstly, regulation provides the ‘rules of the game’ for the market. It ensures the protection of consumers, the broader public interest and the effective rule of law is central to its operation. Secondly, access to justice – not just the existence of rights, but having affordable services to ensure that they can be pursued - is central to civil society, the rule of law and the fundamental building blocks of our modern economy. Thirdly, the market is the most effective mechanism to match the

needs of consumers with services provided. Innovation ensures that services are created which meet the changing needs of consumers. Competition drives innovation. Effective competition can only exist within a functioning regulatory framework. It’s one of the jobs of regulation to drive both innovation and competition if the legal sector is to continue to adapt, into what both consumers and the public interest demand. Yet the market is starting to drive change. If anything, regulation is playing catch-up. Alternative business structures existed before the Legal Services Act 2007. They existed as unregulated firms providing nonreserved legal services and among providers like trademark and patent attorneys or costs lawyers. Now they are increasingly in a framework that both protects and enables. But the clocks can’t be turned back. Nor should every relationship between firms and their clients be micro managed to control risks. Regulators need to be honest about the limits of their capability and to target regulation at realistic aims. Their tools (‘before the event’ protection, ‘on-going monitoring’ and ‘after the event’ compensation) have different levels of effectiveness. But ‘before the event’ protection, with the effect of creating barriers to competition with little demonstrable benefit for quality or for the consumer, is too blunt an instrument for the future in most cases. When was Utopia? In their submissions, both the Law Society and Bar Council made the case for returning regulation to the

“Even today, the legal services market still fails to deliver affordable services in the way that individuals and small businesses want”

professional bodies to cut the cost of regulation. This misses the point; what matters is not who regulates but how they regulate. The problem is that self-regulation inevitably introduces more regulation not less, through –for example making greater attempts to restrict competition. This is how it was before the introduction of the Legal Services Act 2007. In all likelihood it is how things would be, should selfregulation return. Even today, the legal services market still fails to deliver affordable services in the way that individuals and small businesses want. LSB research has shown that one in three individuals don’t get the legal help they need. Less than one in five small businesses get legal advice when they have a problem. Only 13% of SMEs see lawyers as value for money, even though 54% see law as very important for doing business. Independent regulation has started to challenge this negative legacy of self-regulation by seeking ways to reduce unnecessary regulatory burdens, enabling businesses to deliver legal services for people who need them. Historically, professional bodies have designed gold-plated regulation to avoid risk and protect the profession. The reaction to initiatives such as the SRA’s Red Tape Challenge suggests that motivation still exists. The objective of the Legal Services Act 2007 was not unfettered free markets. That would have been a much simpler Act and would not have required either the LSB or the frontline regulators. Its objectives are less restrictive practices and more effective consumer protection. There should surely be agreement on this - but a return to unaccountable self-regulation takes those goals further away. Chris Kenny is Chief Executive of the Legal Services Board 1. http://bit.ly/LSBblueprint

ML // December 2013

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The Views

Outlook on risk Risk taking, is, in any sector, only worth doing if you have a clear understanding of the challenges and pitfalls, as well as sound evidence of the potential opportunities from diving into something new. Luckily the SRA has been busy gathering this evidence to make you risk aware, not risk averse. Andrew Garbutt reports.

How might the Outlook be helpful to firms? Firms need to take calculated risks to grow and, even in today’s difficult market, there are opportunities to be taken. We don’t want firms to become risk averse and stagnate, but we do want firms to become risk aware. The Outlook helps by explaining what we believe are the biggest risks now and which have the potential to cause us concern. Understanding our concerns - and the actions we will take to manage those risks - will help firms innovate and respond to changes in the market responsibly, in a way that safeguards the public interest. The Outlook is divided into two sections. Part A is our assessment of the characteristics of the legal services market that are driving change. Changes in the market mean levels of risk also change and new risks will emerge. Part B profiles the key current, emerging and potential risks over a twelve-month period. The first update to the Outlook was published on 7 November. How have key risks developed? In the Outlook, we identified the following risks where we already had evidence they were present and of concern: • financial difficulty • dishonest misuse of client money or assets • lack of a diverse and representative profession • failure to co-operate or comply with notification and information requirements Since July, it is clear financial difficulty has been the key risk we have had to manage, and the risk of financial difficulty remains high. This is true of firms of all types and sizes. We asked 2,000 firms from a cross-section of the market to provide us with information about their financial health – around 5% provided information indicating financial difficulty that could pose an immediate risk. We have already started to work with these firms and will contact others who provided information that

indicated a lower, but still concerning, level of risk. What is equally clear is that financial difficulty can create an environment where client money or assets are more likely to be misused. This link is borne out by recent increases in reports of misuse of client money.

“It is now more important than ever that firms who have to or wish to exit the market, do so in an orderly way. Planning for such an eventuality could avoid the need for SRA action” Emerging and potential risks Of the emerging risks we identified, two are of particular relevance three months later. Firstly, given the challenges in the market around the financial stability of firms some experience in obtaining professional indemnity insurance, it is now more important than ever that firms who have to or wish to exit the market, do so in an orderly way. Planning for such an eventuality could avoid the need for SRA action, particularly the need for intervention. The second is from research by the Legal Services Consumer Panel into legal services consumers with learning disabilities highlighted issues around the difficulty of getting specialist advice in a sector undergoing significant changes. In order to be more proactive in our management and to help firms manage these risks where they are relevant, we are publishing more detailed reviews alongside the update. These look at cloud computing and group contagion. What next? We are already looking at the 2014 Risk Outlook and the remaining updates on the 2013 Outlook. We will be talking to firms, academics and other market participants to get their view on the risks that are going to be most significant through 2014 and into 2015, which will feed into our analysis. Transparency around our approach to risk is a core principle of the work of the Risk Centre. We are committed to publishing further details of our risk assessment methodologies. In the meantime, our methodology for risk assessing the incoming reports that are made to us is available through the SRA website2. We continue to welcome your involvement in the developments we make. Compliance officers have already influenced our severity survey and further opportunities will present themselves. The chance to influence our approach to risk is one I hope regulated entities and individuals will increasingly take. Andrew Garbutt is the Director of Risk at the SRA.

ML // December 2013

1. www.sra.org.uk/solicitors/freedom-in-practice/ofr/risk/risk-outlook.page | 2. www.sra.org.uk/solicitors/freedom-in-practice/ofr/risk/reports-assessment-method.page

uly marked the publication of our first annual Risk Outlook1. This landmark publication represented the culmination of months of consultation, the distillation of the accumulated knowledge gained through our regulatory engagements across the market and analytical effort by our Risk Centre. Our Risk Framework explained how we would put risk management at the heart of our operations, while our Risk Index categorised the risks to the regulatory objectives we had identified. Both were published in December 2012. The publication of the Risk Outlook was the final piece in the jigsaw. It is our assessment of the most significant risks we expected to have to manage in the coming year.

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The Views

Q: How do lenders determine financial viability in the legal sector?

In recent months we have heard and read a lot about the need to understand the financial stability of law firms. This is not a new challenge for banks that need to assess the stability of any type of business before agreeing debt facilities. In general terms, the banking approach will be to consider the level of debt against the overall revenue of the business, the level of debt against the firms net worth or capital and the over arching ability of the business to repay its borrowings over time. Banks are usually happy to share their underlying risk criteria with customers. In doing so, customers begin to understand what levels of credit appetite exist and manage performance in order to finance growth. Professional Sector Relationship Managers at NatWest are encouraged to discuss and review the financial performance of legal sector customers and this year the bank produced a benchmarking report to assist in the development of performance ambition. Performance measures assessed by banks may include: • Working Capital Cover: This is used to assess the level of non property debt against a firms revenue. Obviously different types of legal activity require different levels of funding but in normal circumstances the level of debt would rest somewhere between 25% and 40% of revenue. Those firms who manage lock up effectively would be at the lower end of the scale. • Working Capital Gearing: This is a simple gearing ratio that measures the level of borrowing against the owners’ investment or capital. A typical measure against all business types is a gearing ratio of 1:1, although this may be higher for legal firms at 1.5:1. • Unfunded Capital Cover: If the owners of the business have borrowed all of their investment or capital personally then arguably they have no skin in the game and at some time in the future that borrowing will need to be repaid. The situation is arguably worse if the driver for increased personal debt is the need to make good following excessive drawings over available profit. Banks would normally like to see borrowings against capital rest at around 60% recognising that young partners may need to borrow above this level whilst senior partners should have a smaller debt need. Whilst lenders will look at a variety of measures to determine financial viability, any firm that performs well against the measures detailed is likely to keep their bank manager (and potentially the SRA) happy.

If you can’t measure, you can’t manage

eter Drucker famously said: “If you can’t measure it, you can’t manage it”. Most law firms either have too little information on their performance or are swamped with so much data, they can’t see the wood for the trees. So, If you were to pick five KPI metrics (key performance indicator) for a modern legal services provider, what would they be? Having a simple set of KPIs that really focus on what matters is critical. These should be the mainstay of a successful legal practice and act as a barometer for the health of the overall business. Here are five key areas that the modern legal service provider needs to remain focused on: • Clients and new matters: ensuring there continues to be an adequate level of new work coming in from both existing and new clients. The key question being - are we finding enough new business, is it the right type of work and are we retaining our clients? • Services delivery performance: this is probably the most important area for the modern legal service providers to focus on, given the rise in new entrants who will leverage technology to drive efficient delivery of legal processes and the rise in fixed fee work. Are we delivering our legal services efficiently, quickly and profitably? Are our clients satisfied? • Compliance: the burden of compliance is here to stay and can cripple a firm if it is not managed effectively. However, it can also be used as a competitive advantage and should be if it is measured and managed effectively. • Cashflow: are we generating enough cash to keep the business running and minimising our debts? Measure of cash generation and metrics around conversion of billings to cash is critical for profitability and survival. Healthy successful businesses are highly cash generative and legal service providers need to focus on this area more than ever. • People performance: do we have the right level of resources and mix of skills? Although performance is still important, the successful modern legal practice needs to look beyond that and put people at the heart of its practice. It helps them to achieve and excel in delivering value to clients and the firm alike. How are our people doing? Are they delivering value? Although each business will have its own preferred set of KPIs, experience in other industries tells us that the above core areas are universal and focussing on them really does make a difference. Jitendra Valera, Chief Marketing Officer, Advanced Legal

Steve Arundale, Head of Professionals at RBS and NatWest

ML // December 2013

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The Views

Q: Are legal brands fully embracing digital marketing - and in what ways are they successful? Or is there still too much fear of investment or lack of knowledge of how potential customers use online sources to look for legal support?

There is definitely more understanding and appreciation for digital marketing where legal brands are concerned. It certainly seems as if there has been movement in law firms, that realise change is needed; that the old-fashioned marketing ways, such as print, TV and even radio are not working like they used to. Importantly, that the shift towards digital is a real thing, not just a buzzword. Websites for law firms - and mobile responsive ones at that - are definitely on the rise. There is more attention paid to social media than before and more money is being spent on SEO and looking at Google rankings. But there needs to be more and on a wider scale. As for social media, businesses are using it, but they are not always using it to their full advantage. Legal brands that have understood and embraced the digital world are doing it well. They are investing and looking to grow and are working very closely with their digital agency to push this. Yet there are still many who are stuck in a different way of thinking. There is certainly a fear of investment. There are fewer avenues to explore for those who deal with personal injury (for example) but it would seem that, gradually, digital marketing is becoming the clear path. As for lack of knowledge, well, this is true to a point but it is down to the digital agencies and companies out there to educate. The legal industry should be looking towards those who are ‘in the know’ to educate them and teach them how they can harness the power of digital for the better. Potential customers are online at all times, or at least have access. From smartphones and tablets to PCs and laptops, there is always the ability to delve into the world of online. To ignore this is almost like saying you are choosing to stay in the dark ages. It is a two-way situation; digital agencies need to be educating and law firms need to have a real drive to use digital marketing for their businesses. Both industries need each other and in turn can provide something of real value to their potential customers. Dez Derry, CEO, mmadigital

Q: Are we now witnessing the reality of failed ABS business plans with the reversal / failure of ABS models such as InDeed? What does this say about business planning in the legal sector – even amongst the most ‘innovative’ models?

There have been over 200 ABS licences issued and, as far as I am aware, three ABS ‘failures’ so far. Does this really tell us anything? In the case of In-Deed, a group of people who had made a great success of the estate agency aspect of the residential market had a go at trying to do something similar with the legal element. For specific (and presumably unforeseen) circumstances, they decided that what they had set out to do couldn’t be achieved. So they cut their losses, sold the firm they had bought back to its previous owners and decided to look to invest their remaining money elsewhere. To me, that’s not failure. Rather, it’s prudent and sensible business decision-making. In the case of Hacking Ashton, a traditional firm converted to an ABS structure earlier this year has now gone into liquidation due to its inability to pay its latest PII premium. Whatever the reasons for its failure, the fact that it became an ABS doesn’t of itself have any significance. Finally, GPB Solicitors, a volume debt collection firm, has had its licence revoked on the grounds of suspected dishonesty on the part of an employee. Again, nothing to do with the fact it is an ABS. The vast majority of ABSs are not truly innovative; the pace of innovation in this market since the advent of liberalisation remains slow. New models, as opposed to new structures which also suit existing models, have not yet emerged to the extent that was expected. Any market will have its failures – otherwise it ceases to be dynamic and just stagnates. Innovation should bring a higher failure rate with it simply because things are tried that haven’t been done before. As Dale Carnegie said: “Develop success from failures. Discouragement and failure are two of the surest stepping-stones to success.” You’ll only see new models proliferate when entrepreneurs (most of whom will come from outside the profession) decide to try something new – and being new, it will carry risk. There will be some failures, most I suspect of the In-Deed nature, but many more new and successful operators. A sign the market has truly embraced innovation may actually come when we get more failures! Simon Goldhill, Principal, Simon Goldhill Consulting

ML // December 2013

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The Views

Q: Peter Drucker famously said: “If you can’t measure it, you can’t manage it”. If you were to pick five KPI metrics for a modern law firm, what would they be and why are they so essential?

I believe keeping on top of your five most important KPIs should not be a difficult task as they should be monitored daily. If your firm can’t do this then you need to seriously consider the options that are available to you. Getting live data is not beyond the realms of possibility and we have helped a number of law firm’s achieve this. Business discovery platforms make the management of KPIs a very simple task as long as the data is available. The benefits are then clear to see as performance is measured by the bottom line. So, here are my top five: 1. Lock up: keeping an eye on the assets that produce most of a firm’s cash is extremely important, as not knowing what state your WIP, debtors and disbursements are in will cause havoc. Most law firms think they have a good idea on how to manage their cash flow but they need to consider what their savings would be if WIP (for instance) was reduced by 10%. You may think this is not achievable with the current business processes you have in place and maybe wondering what is the missing ingredient? Is your data easily accessible to all those who impact upon assets? The lower total lock up is in terms of days, the better off your firm is from a cash flow point of view. 2. Profitability or gross/ net margin: This measure differs from firm to firm and if you can’t calculate it easily at matter or client level, how do you know if you are making enough margin to cover the cost and the expectations of the partners? This is usually expressed in numbers or as a percentage against target. 3. Utilisation and Productivity: Are your fee earners doing what they should be doing and what is the acceptable utilisation for your firm? A key element most firms miss in their calculation is that ‘realisation’ impacts the numbers significantly. 4. Time and billing: These are the standard KPIs that often form the basis for a firm’s budgeting and forecasting process but if you can’t compare the actuals against budget or forecast, something needs to be done, so that everyone knows what the numbers should be. 5. Net promoter score: This measure is based around the loyalty of your customer relationships and how satisfied your clients are with your firm. Barry Talbot, Managing Director, Informance

Q: Do law firms still spend too much time and effort on buying systems that ‘count beans’ (accounts, time recording) when they should focus on systems to help them make more beans (case management, marketing)?

Law firms rightly spend time on systems to ‘count the beans’. These systems ensure time is recorded and billed, credit control is tight, cash flow improved and fee earner budgets set. Without this stringent financial control no business can survive –cash is king. Ignore this at

your peril. But firms do need to widen their focus and view IT systems as end-to-end systems. These systems should assist the firm in its activities to attract new business, improve the management of files and provide selfservice to clients and support compliance. All of this activity should feed through accounting / time recording information, thereby providing overall management information. Our Liberate product set contains marketing (CRM) to support marketing campaigns, seminars and to provide analysis of the success of a particular marketing activity. When a ‘prospective’ client is successfully converted, their file can simply be switched to ‘active’ within the case system. All historic activity is retained, including a full electronic file with, time recording and a direct link into the accounting records. This tight integration improves billing rates, assists COLPs and COFAs in ensuring the practice compliance and risk standards are met and allows the beans to be counted. An area that has grown over the last five years is the uptake of client portals whereby clients can interact with their lawyer. There are many advantages. Clients can view (subject to permissions) documents and emails, latest case progress, exchange information with the fee earner, view the financial status of the case and more. This clearly saves the fee earner time in not dealing with queries and is attractive to clients as a value added service. An exciting extension to this concept of selfservice is the provision of online form fills allowing clients to provide information electronically and even make payments online. So, back to the start, to back-end accounting. All of the above resides in the same database, one easy to manage central repository. One client view with simplified, tight processes, managed billing and control of all financial aspects - including credit control. Firms providing end-to-end systems are more likely to flourish in this increasingly competitive market and still be around to count the beans. Tony Klejnow, Managing Director, Linetime

ML // December 2013

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The Views

Q: Costs Budgeting: What are the main sticking points to enabling a successful costs overview throughout the whole process of a case?

There are three significant ‘sticking points’: culture, technology and knowledge.

Culture: The greatest sticking point by far, because solicitors are simply not used to thinking about costs until the case is finished. Now, budgeting must be in the forefront of our minds every time we review a case. Do not think that because the Court has no jurisdiction to deal with pre-action costs at the budget hearing, that costs already incurred are not important. Although the Court cannot limit historical costs, the amount already incurred will influence the overall budget figures considerably. This is clearly supported in the way the precedent H splits incurred and estimated costs in each work phase. Some courts are also ordering the parties file breakdowns of pre action work before the CMC. Pre-action behaviour must change - our clients and opponents need to be notified about proposals or steps that may avoid or reduce costs. Warnings should be given to clients/opponents if their behaviour is likely to result in additional costs. In other words we must comply with the spirit of the overriding objective long before any litigation, by ensuring that the case is conducted efficiently and costs are proportionate to the issues in hand. Technology: Investment in case management systems - which enable accurate recording of WIP, coded in line with the budgeting phases - is the only efficient way to understand how pre-action costs are accruing. Further technology can provide accurate tracking in each phase once the budget is approved and a solution to identifying cases that are approaching budget stage. There is no doubt that early preparation of the budget will be crucial for compliance with CPR and proper consideration of all case management issues which will ultimately shape the budget. Knowledge: It is vital that multi track cases are with experienced fee earners. Your system for new case allocation is essential. Good supervision of fast track work is necessary too, as some cases may grow into more valuable or complex matters as they develop. Additionally, the retainer must face budgeting head on. Consider agreeing with your client the litigation budget from the outset, a system for periodic review and a strategy, should the Court not approve the budget. Sharon Denby, Director of Costs, Ontime Group

Q: Are lawyers good at asking for help? What are consultants finding when they are brought in to support a law firm? Will a failure to identify when practices need support from the outset hold back creativity, effective implementation and long-term success?

It’s all too easy to generalise by saying lawyers aren’t very good at asking for help when it comes to the commercial aspects of their business. This makes the assumption that an issue, problem or need has been identified in the first instance. How does anyone know and what are the signs? It’s a question that cannot easily be answered but I would say that lawyers sometimes do need help to identify there is a need for support, advice and guidance. The worst-case scenarios are those who simply refuse to acknowledge there is a problem, or need for help. Let me make it very clear, this is not unique to lawyers or the legal services sector; this is an issue for many businesses! Other consultants I have spoken with find that lawyers fundamentally want to practice law. Yes, I did get an A-Level in the obvious, but lawyers in the main don’t have a huge appetite or tolerance for the non-lawyering aspect of running a business. It’s certainly not because of a lack of skill and expertise, quite the opposite in fact. It’s more to do with the amount of time that is now needed on perceived low value or non-fee earning tasks. Increased oversight and regulation has meant that managing partners and directors, to some extent, have been forced to have a greater awareness, involvement and accountability for how their firm and business operates: business planning by practice area; accounting and understanding management information; finance and cash management; administration; IT; compliance; performance management and; internal HR issues, to name but a few. Not a single billable hour in that little lot but without an awareness of these things how do you know you need help, what help do you need and where do you go for it? Experience tells me that most managing / senior partners and directors, deep down, already know what is good about their firm and what needs to be improved but have pushed it on to ‘the too difficult to deal with today pile’. Sound familiar? Take a look at your firm through someone else’s eyes and be prepared for some home truths. Are you brave enough to take this leap of faith? Ironically if the non billable hour is used to get the business structure and foundations right it takes away the need to micro manage and, lo and behold, the majority of time can be spent with clients and fee earning. Maybe that’s the answer to the question? Tony Brown, Owner, AGB Legal

ML // December 2013

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????Views The

Q: Has the professional Indemnity insurance (PII) ‘crisis’ been as widespread as expected and what impact has it had on the sector? Are more firms looking to strategically exit the market in some fields / does a significant book of WIP for sale exist?

Who would have thought that Balva would have its licence withdrawn in June and then that Berliner, its suggested unrated insurer, would too fail to assist firms at the eleventh hour?

Many firms faced an extremely turbulent time in September when Berliner, the unrated PII provider informed them, just weeks before the deadline of the 1 October, they needed to find a new insurer. Firms spent the last few weeks of September trying to find an alternative insurer. Most found that premiums had doubled or tripled overnight because the market had become a ‘seller’s market’. As of the 1 October 2013, Assigned Risk Pools (ARP) was no longer available, which meant firms could only obtain PII via a participating insurer. Those firms who had not managed to secure insurance in time of the deadline were given a four-week extension, the ‘Extended Indemnity Period’ (EIP), to secure alternative insurance. If the firm was unable to secure insurance in this time, it would then enter the ‘Cessation Period’ (CP). At this point the firm can no longer take on new clients and would primarily be working towards closure if it could not secure qualifying insurance by the end of the cessation period. The smaller firms who couldn’t afford such high premiums have been worst affected; unable to find an insurer, resulting in the closure of the firm. On the 31 October, the SRA confirmed it had been ‘notified of 226 firms that wished to invoke the 90day EPP, with 73 having since secured insurance. The 30-day EIP ended at midnight yesterday (30 October), meaning the 153 remaining firms should have entered the CP. These firms now have until 6 November to notify the SRA and their insurer of their situation…’ Firms impacted by the professional indemnity crisis will now be facing a very uncertain future where they would need to consider their options: maybe a merger is the best way forward; perhaps it should transfer its book of WIP - allowing the firm to leave the legal sector in a dignified manner, or; should the firm leave the legal market altogether? These are some of the decisions law firms will now need to make. Ayishah Khalil, Associate, Legal Eye Limited

ML // December 2013

Costs budgeting: is the phoney war over?

battle commence?

osts budgeting has been with us since 1 April 2013, yet so far any reported decisions have mainly arisen out of the pilot projects in the Technology and Construction Court and in defamation proceedings. So what have been the skirmishes so far and when does the real

There is a resources problem. Many part time judges have received no training in and are not permitted to deal with costs budgeting. Listing costs management hearings for 1.5 hours simply adds to the delay in the consideration of the budget and to the pressure on county court lists. Budgets need to be served and filed on time. Whether the appeal in Mitchell v News Group Newspapers (the ‘Plebgate case) is allowed or dismissed, there seems little doubt the Court of Appeal will send out the message that the rules are there to be complied with and any indulgence granted to the appellant on this occasion is likely to be accompanied by dire warnings about failing to comply in the future. Any application to vary the budget should be made at an early stage with very good reasons for the variation. The treatment of budgets in the TCC indicates that making mistakes when putting together the budget is unlikely to be a good reason for allowing an amendment to an approved budget. The Court of Appeal in Henry made clear that the outcome might have been different post-Jackson. Budgets will be used tactically by parties depending on their view of the likely outcome of the matter and on the respective financial position of the parties. There is anecdotal evidence that costs budgeting is leading to earlier settlements. At the end of a trial, having a schedule of costs within that approved budget may result in a summary assessment of those costs - although there is already some divergence of judicial views on this point. Clients may well be less willing to accept a significant level of irrecoverable costs when a budget has been approved by the court. The real battles are about to commence. Getting the budget right and in on time is critical. Early planning of the litigation with early co-operation from all participants including counsel and experts is essential. PJ Kirby QC, Barrister & Deputy District Judge, Hardwicke

The Views

A fully rounded education Is the pressure on students (often not armed with full market and legal model information) going to prevent many from a fully rounded education and, ultimately, have a detrimental effect at the start of their career and on the recruiting firm?

The assumption underlying this question is that breadth as well as depth of legal education is desirable. Perhaps it is true. However it is equally understandable that employers want competence in their particular field of practice and are reluctant to fund training in disciplines that are entirely redundant in the workplace. With the market for training contracts so biased towards the employer (and the cost of law degrees and LPCs becoming increasingly unaffordable), it is no surprise that law undergraduates who are offered a training contract by a commercial firm - together with sponsorship through the vocational stage - will snap up the opportunity. Even though, in theory, they may be more suited to another specialism. The current move in the market place is for specialisation at an even earlier stage, directly from school. Bright A’Level students are now being recruited as apprentices by firms, who will train them in its specialist practice area. However, there is an opportunity for those apprentices who show aptitude for study and who demonstrate development

potential. They can use the apprenticeship qualification as a building block to qualify as Chartered Legal Executives going from specialisation to a broader knowledge as they develop their careers and responsibility in the workplace. Those Chartered Legal Executives who wish to switch practice areas, are able to study additional CILEx Level 6 law and practice courses at any time, if they wish to retrain in another area. These courses (set at honours-degree level for law subjects) and LPC-level for practice subjects are available to all. They are also available to and used by, qualified solicitors who wish to move into a different area at a later stage in their careers. A CILEx Level 6 Single Subject Certificate is awarded to those passing the relevant exam. To conclude, it not just the fact of specialisation that is important but the level at which training is delivered as well as the potential for an individual to access qualifications that allow for personal and professional development. In this respect, apprenticeships and the CILEx professional qualification may be the answer for those who want to reconcile the need for specialisation and breadth. Noel Inge, Managing Director, CILEx Law School

Q: In its recent review of six years of the Legal Services Act, the Legal Services Board commented that innovation in legal service provision was most prominent in ABS and larger law firms. Is this true and is there anything smaller firms can do to compete?

Agility, accessibility, innovation… all areas where the size of the firm involved matters not a jot. And sometimes smaller is better. Allow me to expand! Generally, I think it’s easy to understand why larger legal players - especially the new wave of ABSs - tend to be the innovators that get all the attention. These firms will likely have sizeable IT and marketing budgets and may (in the case of some ABSs) bring with them pre-existing expertise from other sectors; be that insurance or other consumer services where traditionally the uptake of innovative IT solutions is greater than that of most law firms. Yet there really isn’t a barrier for smaller, ambitious, legal services firms to show this same level of innovation. What is needed is a focus on the things that are true differentiators. For example, it’s much easier for a smaller law firm (or ABS) to be agile in its developments. Is a particular strategy or concept not working? Then change

it and change it fast – there’s no need for weeks of meetings with various levels of management. React and react quickly. Accessibility… this is where smaller firms can really benefit. Show yourself to be open for customers, respond to queries quickly. Get your quote sent out before the PLC down the road has the chance to react to the new enquiry. Get in first and show yourself to be the most customer-focused. The technology to implement customer-facing innovations is here and it is not prohibitively expensive. Smaller firms now have access to the same systems that larger organisations have spent years (and megabucks) creating, for a fraction of the cost. What is required for smaller firms to innovate is the desire to provide an exceptional customer experience, and that’s something where size is invisible if you’re doing things right. The LSB may not pick up on your efforts, but your growing customer base will! Darren Gower, Marketing Director, Eclipse Legal Systems

ML // December 2013

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????Views The

Q: Has the professional indemnity ‘crisis’ been as widespread as expected and what impact has it had on the sector? Are more firms looking to strategically exit the market in some fields / does a significant book of WIP for sale exist? A damp squib but a real Shakespearian tragedy for some

The figure for the Firms entering the EIP (Extended Indemnity Period) has ranged from a speculative number over 1000 down to somewhere between 180 and 200, with a lingering suspicion that the final number could be higher than 200 - nothing like the initial estimate. A damp squib then; so has it been overegged by those with an agenda to big up the problem? Well yes, possibly a little bit perhaps but its not so much the final number that will be of interest, more the type of firm which has been affected. Overall, the Law Society’s assessment is that the market has been overall benign with flat rates but with two clear markets operating. The large firms on the whole have generally had a choice of insurers queuing up to insure them and have therefore had the benefit of competition to drive down premiums or at least keep them down. It’s been quite a different story for the rest of the profession where choice has largely been illusory. It’s been a question of staying with who you know or beggars not being choosers. We are all aware of the reasons for the hardening of the market - with some of the established players withdrawing - but it has felt quite different this year. With the risk an insurer now takes without the Assigned Risk Pool and the attitude of different underwriters as they insure various types of work (some wanting to stay clear of conveyancing whilst others preferring non contentious to contentious work), there has never been a more appropriate time to get the benefit of expert advice from good quality brokers. I can highly recommend ours! For those firms who have not been able to obtain cover then good luck to them in finding someone to allow them an orderly retreat from the market. In reality, any offering now is a fire sale with a very short window. That will unfortunately only benefit the buyer, who will smell the real sense of desperation - that is not a healthy place to be. Eddie Goldsmith, Partner, Goldsmith Williams Solicitors.

ML // December 2013

The importance of brand workshops

ith today’s constant pressure on law firms to stay ahead of the competition and grow their businesses, marketing activities are always under the spotlight. But in order to create a strong brand and marketing strategy, firms need a clear understanding of their objectives and a common consensus on where they are and where they want to be. Which is where brand workshops come into their own; they are a detailed process for firms to really understand their business, brand position, capabilities and business direction. A brand workshop enables firms to understand where they want to be moving forward. They challenge objectives and beliefs, evaluate current propositions and help firms understand what they need in order to create a different, relevant and credible brand. During an audit workshop you can delve deep into your business and create a visual personality that reflects your brand values. You can test, refine and measure everything you do which can then be taken forward into your marketing communications and activities. During a workshop there are five important areas to consider: 1. What’s driving change? What has brought you to this point in time and where do you believe you need to change your brand or marketing strategy? This is a great opportunity for you to review your existing business plan, discuss its objectives and assess what’s involved in its delivery. 2. Stakeholder analysis. This is a really important part of any ‘change’ process as it makes sure you have the right stakeholders and sponsors engaged in the project, which will reduce the chance of errors and escalating time frames. 3. Business structure. During the workshop, the structure of your firm can be looked at and a breakdown and range of your current and future clients assessed. Business development strategies can be identified to develop your client base. 4. The market. Who you are targeting is key, so you need to review what your scope of reach is and what type of brand/s you want to create. 5. Review marketing communications. Review what has worked, what hasn’t and why? Delve into previous marketing initiatives against budget and identify those with the best return on investment. Do more of what is working and stop doing what isn’t. 6. Look at success. Do you believe your current brand is capable of delivering against its objectives? What do you think needs to change? You can review your current budget and discuss whether it still fits with the marketing deliverables. Ian Hunter, Managing Director, Jellyfish Creative

The Views

In pursuit of profitability

or many firms, the Professional Indemnity Insurance (PII) renewal on 1 October passed without incident. Unfortunately for many others, this has been one of the most difficult renewal periods experienced in recent years

A few significant incidents that occurred during this period caused major difficulties to the PII insurance market. The withdrawal of insurer XL from the participating insurer list resulted in over 1000 firms having to find alternative cover. Then the market problems were further exacerbated by the collapse of Balva. Many firms insured by Balva believed that their broker had sourced alternative replacement cover from Berliner Versicherung Aktiengesellschaft, only to find that this was not in fact the case. These firms were then thrust into the market less prepared and certainly later than would have been ideal. At the time of writing this article, the first 30 days of the Extended Indemnity Period (EIP) have come to an end. The EIP was one of the changes to financial protection arrangements introduced by the SRA earlier this year. It provides extended cover for firms that are unable to obtain cover within by the renewal date by extending the existing policy by up to 90 days. Within the first 30 days, firms can continue to accept new instructions and continue to practise without restrictions, while they attempt to find insurers willing to offer them cover. If cover has not been found within the EIP, then a firm enters into the 60-day Cessation Period (CP). During this period, a firm may continue to seek cover but it cannot accept new instructions. If at the end of the CP, a firm has still not obtained cover, it must close (under the watchful eye of the SRA). The SRA recently reported that there were over 153 firms in this precarious position at the end of the EIP during the most recent renewal period1. It is clear many firms face considerable challenges in the pursuit of profitability. As such, it has never been more important to ensure that firms keep costs to a minimum and manage their risks effectively. Therefore: preventing claims from occurring; taking careful consideration of insurance implications of mergers, acquisitions and lateral hires, and; working with a specialist broker and risk management advisor will help prevent PII becoming the issue it has become for so many. Colin S. Taylor, Executive Director, Prime Risk Solutions, Willis Group 1. http://www.sra.org.uk/sra/news/press/pii-cessation-period-figures. page

Q: Obtaining buy-in from more senior partners in traditional law firms still remains a stumbling block with many IT projects (i.e. why should they invest in technology that will serve the firm after they’ve gone when they want maximum drawings now?). What tips can you offer management to overcome this issue?

Investing in a new IT Solution sounds like an expensive project that won’t deliver immediate return. If that’s the reaction from senior partners in your law firm, I have two key pieces of advice for you to consider. My first tip is simple. Don’t assume that you need to make a big financial initial investment to obtain quality legal technology. There are different options available and at Redbrick Solutions we are keen to make case management technology accessible to even the smallest of firms. We do this by removing initial investment and annual license fees and replacing them with a simple transaction fee (cost per file). There is no large initial outlay and many firms choose to pass on the transaction fee as a disbursement to their client. So the use of our technology can essentially cost nothing! My second piece of advice is that investment in IT Solutions doesn’t have to take years to generate a return. If you have issues and challenges that IT can fix, the right technology should deliver benefits immediately. For example, if you are worried about compliance, electronic Lexcel compliant workflows will immediately improve your processes and help you manage risk. If your fee earners spend a disproportionate amount of time on manual tasks, a solution which automatically creates documents and populates forms will quickly free up their time and allow them to focus on more profitable activities. Automated SMS and email updates, together with online tracking, will revolutionise the service you provide to clients and really set you apart from the competition. Of course, to achieve quick returns you need to be very clear about the issues you want technology to address. If you brief suppliers on your problems, issues and requirements, they should be able to design a solution for you and demonstrate the immediate, quantifiable benefits. Don’t forget, technological change is moving at great pace and the last thing you want to do is invest in a solution which is obsolete in a year or two. Check what it will cost to keep your technology up to date. We offer free upgrades, training and support for life – essential to future proof your investment. Jo Hodges, Head of Sales and Marketing, Redbrick Solutions

ML // December 2013

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The Views

Who do you think you are kidding, Mr Witness…

ver my 22 years as an expert witness, I’ve spent more time under cross-examination than I might have liked. Giving evidence in the witness box can be a dreadful experience for the unwary and at the risk of satirising barristers - some of them can be terrifying. Others are in a class of their own: aggressive interrogators who stop at nothing to embarrass, discredit or refute you, harass you on the smallest inconsistency or hound you to the ends of the earth - I like to call them the Rottweilers. While some of you may laugh at these comical images, you might also feel a bit of sympathy for the everyday witness. Unlike experts, witnesses of fact are often at a disadvantage as soon as they step into the court. This fact alone can lead to anxiety, panic attacks or worse - overconfidence! Going into the witness box unprepared is like playing cards with a loaded deck. During cross-examination, an opposing barrister will know exactly what hand he/she intends to play and when to play it. Most witnesses won’t even know the rules. It’s an unfair playing-field in many ways, which is why I decided to take my training as an expert and offer it to the public. Witness Familiarisation is a relatively new concept and is becoming a standard risk-management tool in the public and private sectors. Its purpose is to educate, inform and familiarise witnesses for the courts, and their likely sequence of events - including cross-examination. Many of you will know that witness preparation or ‘coaching’ is strictly forbidden under UK law and the act of rehearsing witnesses, which you see in Hollywood films, is against our legal Code of Conduct. This is highlighted in the case of R v Momodou 2005, where one training firm was called into question for providing witnesses with case scenarios that were identical to their matter in court. Fortunately, case law distinguishes between ‘preparation’ and ‘familiarisation’, a process which it actively encourages. Over the years I’ve worked with a number of solicitors, businessmen and government employees, some of whom were already competent in the subject. The general consensus was that even if you can remove 1% of the risk in high-cost or complex proceedings, it is well worth the cost and effort involved. Many of these courses not only involve the basics of courtroom layouts, legal process, writing a witness statement and giving evidence, they also feature mock-cross examinations, which can be of great benefit to first-time witnesses. As a rule of thumb, these should be carried out or supervised or by a trained legal professional, who is often a solicitor. As an absolute surety, they should not contain facts that resemble the upcoming hearing. My own take on training combines my knowledge as an expert witness with that of a criminal QC, who provides an insight into the aims of a cross-examining barrister - that said, you should make sure to choose a course that will suit your particular needs. If you’ve been called as a witness in a court or a tribunal, then consider this line from Sun Tzu’s Art of War: ‘Anyone that rushes to the fight, hoping for victory, assumes the ground of defeat.’ If there’s an art to war and advocacy, then there’s an art to giving evidence. Learn it.

Q: What can be learnt from the recent acquisition by Penningtons of Manches?

It appears that Manches was in discussions to merge with Penningtons but at some point hit cash flow issues. These issues were so severe that Manches went into Administration and the assets were then sold to Penningtons. The full reasons for the Administration may never be fully known but the main reasons appear to be: 1. HM Revenue & Customs (HMRC) issuing a notice of action after the firm had not paid its tax bill in full. 2. The firm expecting to exceed its overdraft facility. 3. PII becoming due in October. 4. The joint administrators analysis of Manches remaining WIP and established that a significant proportion was over 120 days old and therefore difficult to recover. The above in part or whole led to Penningtons paying £500,000 for the business. If Manches was a personal injury, crime, conveyancing or family Legal Aid firm, we would probably not bat an eye. As we all know that the costs in these areas have been cut to the point where the economics are borderline. Manches was mid-sized and it turns out mid-sized is no magic wand in the face of cold hard economics. The facts are that rent, PII, the cost of the Practicing Certificate, heating, travel in fact almost all expenditure is going up, whereas what lawyers can charge (and this does appear to be across the board) is going down. Manches with all of its reputation and good name was powerless as, in short, the firm appeared to have run out of money. I don’t think Manches is the only one to be in or about to be in this boat. Lawyers are no different to any other business and there is a basic law of cash flow that says any business that does not have a firm grip on the spending and collection of money, will struggle. No-one went into administration for lack of profit, most went in for lack of cash flow. As the slow crawl out of the recession continues, it is imperative that debts are collected and a tight rein is placed on recovery of WIP. On one analysis, if Manches had kept all WIP under 120 days then we would now be talking about one of the only true mergers to have taken place, rather than the actual acquisition that happened. David Bott, Managing Partner, Bott & Co.

Trevor Gilbert, CEO, Witness Box (a legal training firm)

ML // December 2013

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” You expect quality....We deliver! “ ” “ ” Having worked with the team at Atrium Legal Services for almost 5 years, I can confidently say that their prime concern is the wellbeing of each potential client who contacts them. From a solicitor point of view, they offer a very slick service enabling me to fully assess the merits of a claim at the outset.

Steven Eldred, Partner Thomas Eggar A Legal 500 firm

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Karen Jackson, Director Roberts Jackson Solicitors.

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The Views

Q: My corporate client is bringing an action for breach of contract. I have discussed with the directors options on funding and the potential for ATE insurance. They have expressed an interest in applying for cover ‘at some point’. In this post recoverability era, what should we keep in mind?’

Some basics points are best considered at the outset:

BTE: If the client has any ‘before the event’ legal expenses cover, then you should see if this can be utilised. Prospects: The claim will need to have good prospects to appeal to underwriters. Realistic quantum: The formal claim will put quantum at its highest, but underwriters want to understand what is considered to be the realistically achievable range of damages. Similarly the directors will want to be satisfied that potential returns are sufficient to justify expenditure, not only on an ATE premium but also on all the other non-recoverable costs. This includes any success fee and other own cost elements that may prove irrecoverable (e.g. costs disallowed as in excess of an approved budget, not awarded on assessment or not provided for in any settlement). Own costs: What is your estimate of the costs the client would incur if it had to take the matter to trial? Generally an underwriter would be looking to see that those costs do not exceed the amount likely to be achieved. It remains to be seen how the courts will ultimately interpret the new CPR rules on proportionality. Whilst the approach of the court and the approach of an underwriter may differ the two are related. If one method of funding could cause proportionality issues, is there another way? Could costs be reduced, for example, by opting for a premium paid ‘upfront’ (at a reduced rate) and a standard or fixed fee retainer or a discounted rather than full CFA and /or a lower success fee? Timing: If the client wants/needs protection against opponent’s costs, consider making an application at the outset, look for sensible staging so that premium payable is limited should the matter resolve early. If an application is put off until settlement opportunities have been exhausted, it is likely to be significantly more difficult to obtain cover and for the cost of that cover to be considerably higher.

Q: The recent Penningtons Manches merger has led to fears for mid-sized firms and their ability to withstand the pressures from ABSs / larger and niche practices. Is M&A the only choice for the mid-sized law firms?

Mergers are fashionable. I am sure the word has never been uttered so often at partners’ meetings as it has been this year. They can work but only if they are done for the right strategic reasons, never when they are done just to break an impasse or for lack of anything else to do.

My business is helping firms to merge and so I should probably be encouraging firms to merge, merge and merge again. I know that, while they are difficult to do, it’s far more difficult to make them work after the event. Usually the benefits take three years or more hard slog to become apparent. Some appear to view mergers as the solution to their problems, as if putting two poorly run firms together will suddenly create a panacea of profit, but this is not so. Tie two falling stones together and you get one stone, falling faster - just ask the LeBoeuf partners. The Penningtons / Manches merger was a rescue, as was the Penningtons / Dawsons deal. Just look at the make up of the board afterwards. The Penningtons partners are lucky to have good leadership under David Raine who has transformed the firm from the sick man of the profession last decade, into a force to be reckoned with today. David had vision then, and the partners backed him. Conversely, while this was happening, Manches was busy wallowing in management disputes, losing the best partners and inheriting the ‘sick man’ mantle. The recent Peppermint Technology survey of commercial clients showed that 4 out of 10 felt no real loyalty to their current law firm. This is an opportunity for well-run firms who will listen to their own clients and adjust their offerings to suit. So, the problem is not one of size, it is one of management. One person makes all the difference, and the partners need to chose the one amongst them who has vision, and then back him or her. We act for lots of firms in this market segment who are very successful and they have one thing in common, a leader with vision who is backed by the partner group. Andrew Roberts, Managing Director, SSG Legal

Matthew Williams, Head of AmTrust Law, AmTrust Financial Services.

ML // December 2013

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ML // December 2013

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Features

E C L I P S E

The Eclipse Proclaim Modern Law Awards 2013 On 25 September, the inaugural Eclipse Proclaim Modern Law Awards took place at The Dorchester in London; individual and business industry leaders joined together in a night of celebration to acknowledge and congratulate those who are making strides in the new legal era. Charlotte Parkinson, takes a look at the winners and summarises the groundbreaking event.

odern Law’s first annual awards ceremony, sponsored by Eclipse Proclaim, welcomed a formidable guest list of lawyers, professors, MP’s and business leaders in the new legal arena to The Dorchester ballroom. The last year in the legal arena has not been easy for many in the profession, but the awards sought to gather together those who have taken on the challenge of providing legal services post the Legal Services Act (LSA) and to acknowledge and reward those who have been successful in the new age. The evening was chaired by Michael Napier QC and humorously steered by the host, Gyles Brandreth. Themed around the new era of law and in particular Alternative Business Structures (ABSs) the awards reflected those in the legal sector who are embracing the new and exciting modern era which is emerging postreform and it was those critical factors – quality, client service and innovation, which underpinned the first awards. Darren Gower, Marketing Director at Eclipse Legal Systems, the headline sponsor for the evening, said: “These awards are a great way to celebrate achievement and innovation in a fast moving and challenging sector.” A sentiment echoed throughout the night.

Guests enjoy the entertainment

The Ballroom

“These awards are a great way to celebrate achievement and innovation in a fast moving and challenging sector” Darren Gower, Eclipse Legal Systems

Kate McKittrick

The awards

ML // December 2013

Features

The Winners

Gyles Brandreth

Michael Napier QC

The full list of winners: ABS of the Year Up to 50 employees Winner: Brilliant Law Highly Commended: Pudsey Legal

ABS of the Year 50 – 100 employees Winner: Just Costs Solicitors Highly Commended: SGI Legal

ABS of the Year over 100 employees Winner: myhomemove Highly Commended: Knights Solicitors

Lawyer of the Year

Winner: Christina Blacklaws, Co-operative Legal Services Highly Commended: Peter Garsden, QualitySolicitors, Abney Garsden

Non-Lawyer of the Year

Winner: Amanda Illing, Hardwicke Chambers Highly Commended: Gladys-Swaim Rutter, Roberts Jackson Solicitors

Team of the Year

Winner: Bott & Co Solicitors Highly Commended: Hardwicke Chambers

Rising Star of the Year

Winner: Coby Benson, Bott & Co Highly Commended: Gladys-Swaim Rutter, Roberts Jackson Solicitors

Innovation of the Year

Winner: Knights Solicitors Highly Commended: Fasttrac Solicitors

Entrepreneur of the Year

Winner: Tim Oliver, Parabis Group Highly Commended: Karen Jackson, Roberts Jackson Solicitors

Client Care Initiative of the Year

Winner: Emsleys Solicitors Highly Commended: Winn Solicitors

Deal of the Year

Winner: NewLaw Solicitors Joint Highly Commended: Berrymans Lace Mawer & Quindell

COLP or COFA of the Year

Winner: Robert Mares, Quindell Highly Commended: Just Costs Solicitors

New Entrant of the Year

Winner: Zebra Legal Consulting Highly Commended: Brilliant Law

Best Marketing Campaign of the Year

Navi: the evening entertainment

he winners were selected by a cross-industry panel of experts in a Judging Panel which included: Steve Arundale (NatWest), Samantha Barrass (SRA), George Bull (Baker Tilly), Jaunita Gobby (Legal Eye), Edward Goldsmith (Goldsmith Williams), Jonathan Gulliford (former director of Co-operative Legal Services), David Jabbari (Connect2Law), Michael Napier QC (former Chairman of Irwin Mitchell), Bridget Prentice (former MP and Minister of Justice), Adam Sampson (Legal Ombudsman), Lucy Scott-Moncrieff (Scott-Moncrieff & Associates and President of the Law Society 2012-13), Bippon Vinayak (Doctors Chambers) and David Wolfe QC (Matrix Chambers). The Chair, Michael Napier QC said of the judging process: “The enthusiasm that prompted so many lawyers and non-lawyers to join together in ABSs as the new way to provide legal services to their clients is reflected in the excellent nominations we received for the seventeen categories that presented the judges with an enjoyable but very difficult task.” Professor Richard Susskind OBE, was the winner of the Lifetime Achievement award. Susskind is an author, speaker, and independent adviser to major professional firms and to national governments. His main area of expertise is the future of professional service and, in particular, the way in which the IT and the Internet are changing the work of lawyers. It was for his services to the legal profession, IT and modernism in the sector in particular, which was recognised by the esteemed judging panel and made him the stand out winner. Douglas Silas was awarded the Outstanding Achievement award, because, said Napier: “Of his niche firm’s exceptional service to vulnerable clients, particularly through its very user friendly website which is an excellent example of the thoroughly modern delivery of legal services.” Among the other big winners on the night were myhomemove, the winners of ‘ABS of the Year – over 100 employees’, Tim Oliver, for ‘Entrepreneur of the Year’ for his work as CEO of the Parabis Group, which is widely recognised as an industry leader for innovation, Zebra Legal Consulting, who scooped New Entrant of the Year and Christina Blacklaws, The Co-operative Legal Services, who picked up ‘Lawyer of the Year’ for her services to family law. Perhaps one of the more surprising categories was ‘NonLawyer of the Year’, which was deservingly awarded to

Winner: InjuryLawyers4U Highly Commended: Fox Williams

Outstanding Achievement Douglas Silas

Lifetime Achievement

Professor Richard Susskind OBE

ML // December 2013

Knights Solicitors collect their award

Special guests enjoy the entertainment

Features Amanda Illing, the CEO at Hardwicke Chambers. As Napier said: “Who would have thought that we would be recognising a non-lawyer at a legal awards? It is testament to the modernisation and incredible change which has taken place within the legal sector under the new ABS regime, for which non-lawyers can now be recognised.’ There was a wide array of entertainment on the evening, including the singing waiters (pictured) and Navi, the world’s number one Michael Jackson impersonator, who brought the house down with his set and made sure everyone was up on the dance floor, cementing the fantastic atmosphere. The silent auction raised £5,000, which was split between the two charities for the evening, Candlelighters and Great Ormond Street Hospital. Managing Director of Charlton Grant (the award organisers), Kate McKittrick said of the evening: “On behalf of all the team at Modern Law, we would like to say once again how grateful we are for your ongoing support.” The spirit of the evening was summed up fantastically by Adam Sampson, Legal Ombudsman, who said: “Lawyers have always been good at client care and bringing their intelligence to bear on helping the client but what we have seen tonight is lawyers bringing their intelligence to bear on new models and that’s very inspiring.” Modern Law would like to thank all those who attended, sponsored and made the evening possible and we very much look forward to welcoming you to next year’s awards, watch this space! To view all the images of the evening or to register your interest for next year’s awards, please visit www.modernlawawards.co.uk or call us on 01765 600909.

James Marsden and Kieran Magee

Richard Susskind, second from left, collects his award

The Singing Waiters

Tim Oliver (centre) collects his award

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Features

The perfect blend? Since the introduction of ABSs, the legal and accountancy blend is becoming an area of widespread interest, particularly for the legal sector. Peter Gillman explores the synergy between the two professions and explores the potential that lies within collaboration.

o there I was quietly sitting at my desk getting on with a few tasks to help the economic recovery when the phone rings and it’s those awfully nice people over at Legal Futures, wanting to chat about our ABS licence. Fair enough I thought, but I then became aware that the reason they specifically wanted to talk to someone at Price Bailey was because we had become the very first UK accountancy practice to receive an ABS licence. What followed over the next few days was a media frenzy – well not quite in the manner of a scandal at the BBC, but for the professions pretty well up there as frenzies go. You can imagine the line of questions – is this the first step in a strategy to provide a full legal service alongside our accounting, audit and tax services? Are we about to announce a merger with a law firm? Well so significant was this development that I had to put down my cup of tea and biscuit – I remember saying out load, ‘crumbs’. My concern with the news was that we have a key sector specialism in acting for law firms and so you can imagine the potential for negative impact if it was thought by our clients that we were about to launch a rival legal service. Reasons for change So a hasty drafting of announcements, Blogs and a few Tweets made the next few days rather hectic in order to set the record straight. My cup of tea went cold. At the time of applying for the licence some 9 months earlier, our intentions were quite innocent – we’ve always provided employment law advice as part of our payroll department and we had recruited a solicitor to augment that established client service. We also thought that given our legal sector specialism it might help our clients if we went through the ABS licence procedure ourselves so that we could advise

them given that it was becoming an increasingly hot topic. So no plans to offer a full legal service and no plans to merge with a law firm, our message to the market and our clients was clear. The wheels in motion But then we got to thinking, if the media interest is so strong and with the knowledge that some law firms did see our news as just a little threatening, maybe we should be thinking about a legal service rather more. The logic of combining accounting and legal services is clear to see – the “one stop shop” approach needs little explanation as to its potential market attractiveness. The attraction to our core markets of SME and family businesses, particularly in our regional base (we are East Anglia, London and the Channel Islands) is clear to see. Many of our clients have only

“The logic of combining accounting and legal services is clear to see – the “one stop shop” approach needs little explanation as to its potential market attractiveness.”

occasional recourse to a law firm and do not have an established relationship with any particular firm. Most Price Bailey clients have regular needs to contact us in the annual accounts, audit and tax return services and so if we offered legal services there is undeniably a chance that they would use us for that as well. But, of course, there is the potential down side of a really negative reaction from our law firm clients and we really do not want to upset them and the other law firms that regularly refer work to us. So is that it then? Well, probably not. We‘ve already had an approach from a law firm wanting to have exploratory talks about a merger and I can’t help but feel that someone is going to actually do this and when that news breaks, everyone is going to get very excited. I also believe that several overseas based accounting firms are considering the potential for opening in the UK and you can bet they won’t come in with particular regard to the long established understanding between the two professions. If they see a market advantage in the multi-disciplinary practices then why would they not go for it? Developments like these are not necessarily “good things” to happen, but it may not stop someone trying and even if it fails, it will have a profound impact on the two professions. So, what is our next step? There isn’t really one, except it certainly makes sense to keep a close watching brief and conduct a thorough strategic review and have understanding of what a combined legal and accounting service might look like. Will we do it? No plans to do so, but we do have the licence and politicians are determined to liberalise the provision of legal services, so we’ll never say never. Peter Gillman – Executive Chairman, Price Bailey

ML // December 2013

Features

The only way is... M&A? Recent mergers have led to fears for mid-sized firms and their ability to withstand the pressures from ABSs / larger and niche practices. Sajid Hussain asks, is M&A the only choice for the mid-sized law firms?

Outspire Group has been approached by firms who are looking for exit strategies, considering M&A for the reasons described as well as to have assistance in negotiating the sale and acquisition of WIP. Firms may want to exit the market if they are financially unsound or have failed to secure Professional Indemnity Insurance. If they did not look at M&A as an exit strategy the value of their assets (WIP) would be depreciating on a daily basis, acting like a proverbial ticking time bomb facing those heading towards administration.

he ability of mid-sized firms to withstand pressure from the proliferation of the ABS in the legal business market, as well as larger and niche practices expanding, is not solved purely by entering into M&A alone but in diversifying current business methodologies which have become redundant, saturated and ineffective as the commercial environment has changed. Is your model holding you back? The option to enter into M&A is not new and was prevalent prior to the emergence of the ABS model. Why then has so much emphasis been placed on this form of expansion and growth? I suspect the reason for this is a sense of fear afflicting mid-sized firms to a degree that was not apparent in the past, as well as a genuine desire to expand for others. On the other hand, since LASPO, the LSA, Professional Indemnity Insurance deadlines and the SRA clamping down on financial digressions, firms may now be considering mergers as a way of obviating this fear and that restructuring their business models would be the only way to survive and thrive. Opportunities for change, before a merger In light of the fears highlighted above, and the fact that firms are earning less due to these changes and looking closer at their finances, they have found that M&A has provided a means to an end in obtaining very cost effective deals, often the only possible exit strategy before administration and has proven a strong opportunity for firms with their finances in order. Those firms who have a business model strategy and have their financial books in order are more prepared for such a venture, while others may need to reshape their models and ensure they are adaptable to make commercial sense.

A great deal of the motivation behind M&A can arguably be out of fear which is either actual in fact or borne out of what such firms have been reading and hearing. Such firms can see the opportunity to expand or use it as an exit strategy depending on their individual internal structures. It is important to strip unprofitable elements of the business and to use strategies to identify redundant areas to understand how to become more cost effective. Firms realise then that they need not enter into M&A to purchase an entity that does not add to profitability or can in fact hinder such objectives. This allows them to explore various financial modelling strategies and firms will be able to build a business case for M&A depending on the firm to be acquired. Fuelling long term growth Growth can then be achieved by streamlining to displace redundant technologies, for example, and instead implement new IT models. Firmâ&#x20AC;&#x2122;s can then identify whether they are diverse and adaptable enough to M&A opportunities or whether they should grow organically and identify if M&A is too much of an initial risk with regard to the goal of capturing market share.

M&A is on the rise The choices available for such medium sized law firms are to acquire, be acquired or reconstruct their financial models in order to put organic growth in place. The ABS solution is moving ahead at a swift rate, with mounting pressure on firms to look at M&A as a viable option as well as possibly acquiring or selling their WIP. This is visible from enquiries to Outspire Group with medium sized and large firms looking for opportunities. As a result a network of likeminded firms has been set up to provide a variety of negotiation options for firms looking to acquire WIP assets and to look at merger opportunities. Such a panel provides an efficient and confidential negotiation as opposed to negotiating solely with one firm. We will see an increase in M&A related activity, especially over the short term, as well as firms (and collectives) trying to build public facing brands and services to compete and grow. One caveat is that any M&A proposition is inherently risky, look at the recent Lloyds and TSB split for instance. Law firms do not have the luxury to withstand such incredible risk. Sajid Hussain is Managing Director of the Outspire Group

ML // December 2013

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Features

How to manage risk In the increasingly cutthroat world of delivering legal services there is nothing more important than learning to manage the risks associated with the ‘full life’ of a case. Charlotte Parkinson, Modern Law, spoke to Darren Gower, Marketing Director at Eclipse Legal Systems, about the importance of recognising potential risks and ensuring the correct processes are in place from the outset.

hatever your involvement in the legal profession, it is impossible not to have noticed the ‘compliance culture’ which is rapidly emerging amongst law firms. From COLPs (Compliance Officer for Legal Practice) to COFAs (Compliance Officer for Finance and Administration) and everything in between, the life of compliance and risk management for law firms in light of legislative change is becoming an increasingly important issue. And of course ABSs don’t escape - similar applies for them (but the titles are HOLP and HOFA - Head of Legal Practice and Head of Finance and Administration respectively). But, contrary to popular belief, the risk process does not stop at taking a

“The software system you utilise must be end-to-end and cater for every stage - and the compliance elements must be an integral part of your core case” Darren Gower photocopy of a clients’ passport. At a recent conference, Samantha Barrass, Executive Director at the SRA said that there needs to be a ‘change of culture within firms and that managing risk and compliance is everyone’s job’ and that the SRA are looking to adopt a more flexible approach to regulation to align themselves with the modernising legal services market. These comments from the SRA, who are calling for a more open ‘two way dialogue’ with law firms, has left some in a state of confusion. Although it is

now compulsory for accredited and licensed firms to have a COLP and COFA (HOLP / HOFA), many feel that they are either not in a position to make the (sometimes difficult) decisions that the roles can require or feel they will be second guessed by the SRA if they do. While there are obvious benefits of a more flexible approach to regulation, there is also a greater potential for holes and possible pitfalls. Some of the key risks which law firms must be aware of as the market continues to evolve are the risks associated with financial difficulty, lack of correct succession and exit planning and a poor standard of service to clients, particularly vulnerable ones. Furthermore, as more and more law firms look to reap the benefits offered by cloud computing, the safeguarding of sensitive client information should be a key concern. So, the question that many firms are asking is, how do we manage our risks and how do we maintain a compliant approach? There is risk everywhere in the life of a case and the life of a law firm

“Some of the key risks which law firms must be aware of as the market continues to evolve are the risks associated with financial difficulty, lack of correct succession and exit planning and a poor standard of service to clients” Charlotte Parkinson and your firms’ systems must manage this effectively on a ‘full life’ basis. Darren Gower of Eclipse Legal Systems comments: “These days, Compliance is an ‘always on’ function and must be considered at every single step of the way. The software system you utilise must be end-to-end and cater for every stage - and the compliance elements must be an integral part of your core case, matter or practice management systems - not just a standalone bolt-on.”

ML // December 2013

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Features

The Marketing Mix In the ever-evolving world of legal services, the right marketing strategy can make or break a firm. Charlotte Parkinson, Modern Law, speaks to Jonathan Brewer (JB), Founder and Chief Executive, Evident Legal and Andrew Twambley (AT), Founder and Owner, Injurylawyers4u to find out which elements are essential to the marketing mix.

Q A

How essential is online marketing to legal services businesses? AT: Although online marketing must form a key part of any firm’s strategy, successful marketing is a constant and gradual process of test, refine and measure. There is little point in spending £25K on a lovely TV ad in the middle of the X-Factor when you only have the budget to show it once or twice; that would be insanity and vanity. It would be better to produce a less expensive advert and put it out to more consumer hungry media, so that you reach the maximum number of eyes and ears at the least possible cost. My motto is spend, measure, assess, and proceed. JB: Millions of people find, start and develop personal relationships online before they ever meet someone face to face. So why won’t prospective clients expect to find and develop their professional relationships online as well?

The Legal Services Board survey in April identified 43% of SMEs turn first to the Internet when they have a legal problem, so it sounds as if it’s already happening? JB: Absolutely. Bruce Hayter, Managing Partner of Rix & Kay in Sussex put it well in launching his firm’s free online service, when he said: “The market now demands access and support 24/7 and we are finding that business owners and managers do not necessarily pick up the phone to a

“In our first year of trading approximately 84% of marketing spend went on TV, now it’s under 50%, having said that, TV remains an essential part of our marketing strategy as it drives internet traffic” Andrew Twambley

L to R: Jonathan Brewer (JB), Andrew Twambley (AT) lawyer in the first instance. Law firms that are not prepared to adapt to this new reality are going to find things challenging going forward.” But not everybody is looking for a relationship: 72% of businesses searching the Internet are doing so in order to help themselves and avoid the cost of a lawyer.

Q A

How important is it to consider other marketing channels like television and radio? AT: In our first year of trading approximately 84% of marketing spend went on TV, now it’s under 50%, having said that, TV remains an essential part of our marketing strategy as it drives internet traffic. Despite having existed for 12 years, we have never been able to make radio work. We have tried it in small doses over the years but have never been convinced. Maybe we have been too nervous to commit big, as it undoubtedly works for some. Maybe I should try and hoodwink the public and offer a free iPad or £2m up front but don’t get me started on that!

What about the notion of brand versus the notion of marketing? Do the two go hand in hand or are separate entities entirely? AT: Marketing and brand are different animals. Marketing involves pushing your product out to the public and asking them to buy. Brand is the communication of value which says to the public, ‘This is what I am; I am here when you need me.’

“I think legal services providers that provide some part of the legal solution online at little or no cost are likely to be the ones that reduce the risk sufficiently and will see better results” Jonathan Brewer At Injurylawyers4u we were essentially a direct marketing company and for many years paid only scant attention to brand. However, without spending a specific penny on brand we became the leading PI lawyers brand in the UK and that took years of shouting ‘buy me’ to the public, on many occasions. You can tell we have a brand as the public recognise the name, comedians write jokes about it and Terry Wogan had a regular gentle jibe at the concept, all at no direct cost.

Jonathan, earlier, you mentioned the concept of building a relationship online. What do you mean by that? JB: I’m talking about building trust. Any online marketing strategy needs to address three key areas, which are; intimacy (what we say and how we say it), credibility (what we do in relation to what we have said we will do); and the risk of doing business with that person or organisation. It means offering mechanisms that encourage and incentivise online interaction and gather the information needed to be able to categorise the prospect and their problem and communicate in a more targeted fashion. So, I think legal services providers that provide some part of the legal solution online at little or no cost are likely to be the ones that reduce the risk sufficiently and will see better results.

ML // December 2013

Features

It couldn’t happen to us – could it? The change to entity-based regulation allows the SRA to regulate both the firm itself as well as all the individuals operating within the firm; including the partners and solicitors. This change is monumental but, as Steve Carter explores, its significance is often overlooked.

he reasons behind the numerous high-profile failures of law firms have been reported to include having arrears on VAT bills, failures to hand over partners’ personal tax liabilities when due and being over overdraft limits, amongst others. It has also reported that both fixed and non-fixed share equity partners have been completely unaware of the issues which led and contributed to failures. The consequences of these failures will, no doubt, reverberate through the profession for some time, yet one thing is clear already; individual partners in firms can no longer expect that being a good lawyer is enough. With the rise of firm failures and the recent change to entity-based regulation, all partners must ensure they have a full understanding of the financial affairs of their firm. In the current environment where commercial pressures are greater than ever before and law firm failures are becoming commonplace, individuals in law firms can no longer be confident that following good practices themselves is enough; they may ultimately be held responsible if the firm breaches the new regulations that apply to the firm as a whole. In December 2012 the SRA published its Regulatory Risk Index (RRI). The RRI provides an insight into the mind-set of the regulator and how it will be approaching entity-based regulation. At the beginning of July 2013 the SRA also published its Risk Outlook which showed its view of current and emerging risks. Many of these are risks that focus on the whole firm rather than the individuals. Partners should satisfy themselves that their firm is meeting its regulatory obligations in full. In a law firm failure the consequences for the individual partners, both financially and professionally, can be catastrophic. For example, if partners’ personal tax

“In the current environment where commercial pressures are greater than ever before and law firm failures are becoming commonplace, individuals in law firms can no longer be confident that following good practices themselves is enough” liabilities are not paid over they will still be due as personal liabilities. So, in addition to losing capital invested in the firm, the partners will still have to find the tax due on their earnings even though it was deducted from them in the first place. Added to this calamity, the SRA may impose fines and sanctions upon the partners in a firm if they feel the firm was in breach of outcomes-focused regulation. In reality the entity-based regulation obligations are sound financial practices. The obligations encourage partners to take an active interest in, and to raise questions about, the whole firm not just their specific area

of work. The obligations ensure issues are not left in the “too difficult” pile and gives partners the opportunity they need to make sure changes happen that may have previously not been open for discussion. Entity-based regulation should be perceived as the opportunity needed to ensure the stability firms need. Given the recent high profile failures, it is clear these issues face partners in both small and larger firms and they should be eager to address the firm’s financial stability issues regardless of size. Partners who have responsibility for the firms’ finances can take positive steps to reassure other partners that the firm is meeting its responsibilities ensuring a stable environment. One option is to instruct an independent firm of accountants to produce a report reviewing the financial stability of the firm; an Independent Business Review (IBR). This is quite different to the annual accounts or the SAR report; both of which do not directly address the issue of financial stability. IBRs can be tailored to the needs of the individual firm and designed to challenge the firms’ forecasts and highlight any areas of concern. Many of the financial problems firms face can be overcome if the warning signs are spotted early and action taken in good time. Baker Tilly’s Professional Practices Group has recently reviewed the legal sector in light of the growing number of law firm failures. Our report on the financial stability pitfalls, indicators and advice will be available shortly. Our sector expertise makes us well-placed to offer the most suitable solutions for partners and firms. If you have any concerns regarding the financial stability of your firm and want to discuss these confidently, please contact us. Steve Carter, Partner, Head of Professional Practices Group, North

ML // December 2013

Features

Value added Emma Waddingham speaks to two legal sector consultants to understand the importance of when to buy-in skills and when value can literally be added for those legal entities looking to develop a competitive advantage.

s a consultant myself, I understand the importance of working with clients that fully embrace the idea of an external advisor at a senior level. If those on the Board aren’t up for the support a consultant can bring or have failed to communicate why a consultant has been brought on board to the wider firm, the relationship is doomed to fail from the start. With a number of advisory and management roles in fast-adapting legal structures coming from the commercial sector, rather than legal, it could be that accessing this expertise is best obtained through a long or short-term consultancy role. Not only to maintain a ‘fresh pair of eyes’ approach but to keep costs down and for law firms to develop their own skills to generate a new business focus / model / workflow / processes going forwards. Why, how and when to consult? Tony Brown, Owner of AGB Legal and former consultant CEO of Pellys RJP Solicitors, knows only too well the ability for consultants to bring something unique to law firms that in-house leaders might not have in their armoury. “A consultant can bring perspective, challenge and objectivity. They will be uncluttered by internal politics and will (or should) take a much broader, longterm view. A good consultant will also bring an awareness of external market

make up the functions of a modern successful business.”

L to R: Tony Brown, AGB Legal & Simon Goldhill, Simon Goldhill Associates factors across a wider spectrum – a key reason to use them. “Most consultants would seek a longterm client relationship to be able to deliver sustained value but they must be careful not to become part of the ‘business as usual’ fabric of the business. Culturally, a good consultant would seek to understand the nature of the business, its people, brand values and its drivers. In essence they have to ‘know your client’ and adapt to the culture and earn buy-in; that way change is easier to influence,” he explains. Simon Goldhill, Principal of Simon Goldhill Associates, adds: “That cosy world of a generation or two ago has changed. The outside world has changed. Unfortunately, most solicitors firms have not changed. Sole practice or partnership predominates and the owners/equity partners are expected not only to be good lawyers, but also experts in business, marketing, HR and the myriad of other specialisms that

“All too often, businesses need support and help but don’t really have clarity of what the desired outcome will be” Tony Brown ML // December 2013

The need for law firms to juggle a variety of business planning, development and marketing roles has created a fork in the road for some senior lawyers and partners. They have to manage a team as well as the business; overseeing existing marketing / business development and practice management functions as well as supervise departments and even fee-earn. It’s not surprising that many are calling upon proven advisors to see where they can realign their business direction to meet consumers’ needs, compete with the flourishing competition as well as run a profitable business in the future. “Legal entities are not ‘unique’ in a business context; the same commercial realities affect us all. Any business that aspires to be successful and create long-term sustainable wealth needs a broad range of expertise, experience & skills across a number of sectors,” states Brown. Barriers to success The most common barriers to the success of a consultant-legal entity relationship, claims Brown, are: a) a poor original brief b) lack of senior level buy in and c) lack of team engagement. “From the very outset of the engagement strong leadership, clear and concise communication and a detailed brief/scope is an absolute must. Effecting change is a top to bottom process and everyone needs to be engaged and part of that process so it comes down to communication.” This means that managers / partners, etc. need to clarify the role of the consultant across the board

Features

“With any investment, the best return can be achieved if law firms / entities have a clear vision of what they want; clarity on their desired outcome from working with a consultant” Tony Brown (adapting the message slightly if there are sensitive issues, such as restructuring). Consultants should not be seen as the enemy. In many cases, they might be used to develop a neutral ear to those on the ground floor, in a ‘sit by Nelly’ approach (where the consultant takes the time to get to know how each department works in practice; literally sitting next to fee earners, secretaries, etc.). This provides valuable information and often a sounder appraisal of the firm’s mechanics and inner workings.

“In most cases it will simply be buying in what is needed, for however long it is required” Simon Goldhill Goldhill has his own ‘vision of the firms likely to succeed in the liberalised market’; those that ‘understand the need to bring in expertise’. He says: “It’s not about ownership or capital, although that can be one route for introducing those skills. In most cases it will simply be buying in what is needed, for however long it is required.” Brown agrees, adding: “A consultant will be successful if it’s made very clear from the outset they are there to work as part of the leadership team, have a very specific mandate/brief/desired outcome and to work collaboratively across teams and departments. However, it’s critical the consultant does not become ‘too close’ to any single individual, team or element.” There is value then, in being slightly aloof. Value added Something consultants are often asked to do is extend a recommendation of their legal client and assist with lead

generation. While a consultancy role might incorporate this (for example, through marketing and business development), things can get a bit sticky if personal contacts are a target. So how can this expectation be managed? Brown admits it’s ‘very difficult to quantify and depends very much on the nature and scope of the engagement’. “A good consultant, he says, “will always try and add value but not at the expense of, or create a conflict of interests with other clients. I personally wouldn’t make this a reason to engage a consultant and it shouldn’t be the main reason a business engages a consultant.” As a consultant, offering your little black book of contacts isn’t a longterm solution either. It’s an addedvalue proposition if it’s agreed at the outset but really, the advice a consultant can bring to help establish an effective, relevant lead generation and marketing strategy is of more value than a one-off client that might leave with the advisor. A ‘clear separation’, Brown adds, is also needed in terms of remuneration for the consultant; dismissing the idea of repayment in the form of shared equity or other incentive. He explains: “A clear separation is a must and should not be clouded by additional incentives. A consultant will charge the fees required to achieve the brief. Therefore additional incentives shouldn’t be necessary, under normal circumstances. However, a fee scale aligned with specific targets, milestones and a completion/outcome based final payment is potentially a good way to engage a consultant!” Moving on from the practicalities of the relationship, the employment of a consultant in legal services is increasingly geared towards non-practising roles such as CEO and COO. Goldhill believes this is due to the fact that ‘it would be a rare solicitor’ who wanted to take on such roles in order to run a business.

“Contrast that,” he says, “with the ambitions of people who start their careers in specific business disciplines. When the choice becomes one between a professional in business who has substantial experience in operations, marketing, sales or finance or a solicitor who is very good at conveyancing or contracts, I know where I believe the trend [to use consultants] should be heading…” “Similarly, functional roles in setting up systems and processes are not what any lawyer has been trained in or most are qualified to deal with. Hire in the skills. Likewise with HR roles,” he adds. Moving on Once the shelf-life of the consultant’s role has expired – either because the project is completed or the firm / consultant believe there is nothing further to add, what should the newlystructured and focused legal entity have to bear in mind? Is there a role for the consultant on-going in terms of a review? Brown thinks so as often, there is a loss of focus or confidence in the way forwards. Like any major project, he says, ‘regular post project completion reviews are a must to ensure momentum is maintained’. Any issues can be dealt with by someone who understands the culture and objectives as well as capacity so the ‘desired outcome is embedded’. With any investment, the best return can be achieved if law firms / entities have a clear vision of what they want; clarity on their desired outcome from working with a consultant. As Brown advises: “Be clear on the objectives, ensure it’s aligned with the overall business plan and strategy. Finally, ask for regular progress updates and a clear plan/timeline from the consultant. “All too often, businesses need support and help but don’t really have clarity of what the desired outcome will be. This leads to confusion and potentially a longer and more costly engagement.”

ML // December 2013

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Features

Employing for change New legal business structures are presenting both current and future legal professionals and those who work with them, with a raft of new challenges and career paths but are recruitment opportunities and expectations changing as fast as reports would have you believe? Rachael Mann reports. The changing environment: structural impact In response to the new market, a number of national firms have undergone significant process reviews, some within individual departments, others across the whole practice. They have structured themselves to deliver services efficiently, ensuring lawyers and paralegals work at the right level to be cost effective and applying systems that take the administrative burden way from them. This gives them more control over the entire scope of client work and means they are able to undertake work that they previously might have seen go to ‘mid-tier’ commercial firms for financial reasons. General practices haven’t been immune either; challenged by funding changes, they have had to adapt with increasing pace. Those that handle volume work are increasingly using experienced managers and lawyers to drive the work amongst more junior teams. The above helps firms to remain financially competitive, one way of dealing with the ‘threat’ posed by ABSs - the other is how they source their work. One of Riverview Law’s major investors is DLA (something that will surely open doors into the commercial world) whilst Brilliant Law feels its ‘unique’ route to market will be a combination of its online strategy and the combined interests and contacts of their financial backers - all well established in the business and financial sectors. It’s going to be critical for more traditional practices to evolve both their business-winning strategies and their pricing structures to compete with newcomers as they strengthen their market position. What makes a valuable lawyer? Today, lawyers are expected to be much more than technically competent, this is almost taken for granted. There are a raft of other skills taken into account, including management, client delivery, client development, specific sectoral knowledge and commerciality. Senior lawyers who rely exclusively on technical

Modern law firms need to embrace the fact that it’s not enough to nominate a partner to be the de facto marketing board member, if they don’t have any real understanding of the discipline. A change of mindset is starting to be reflected in the number of jobs on the market but there are many more firms who have yet to fully recognise this need to change. Recognising the increasing importance of this, we recruited Pat McLean from Michael Page to launch a dedicated marketing department within Sacco Mann, focusing on the legal sector.

skills can often find themselves exposed during any ‘restructurings’ as they can become an expensive luxury! There is also a discussion to be had around ‘what makes a firm attractive to lawyers’. There are still a good number of lawyers looking for things that they perceive to be an alternative to traditional opportunities. I don’t however see that this will lead to a mass exodus to the ‘new style’ ABSs, as many are modelling themselves as volume-based entities with limited senior opportunities with a significant base of junior lawyers and paralegals. Lawyers generally want to join progressive firms, but ones that have retained the ‘human’ touch. Bringing home the bacon There is now a much greater expectation of lawyers to help with business development, even from a junior level. Lawyers’ skills in this respect vary greatly, not only from firm to firm; but even from team to team and ‘networking’ isn’t generally enough. Many firms want to see a targeted approach to client and business development. This may mean focusing on specific sectors, looking to build a presence and contacts within them. This responsibility is echoed by the greater presence of dedicated marketing and business development professionals within mid tier and niche specialist firms.

Alternative entry to law Perhaps partly driven by the need to deliver efficiently but also driven by the desire to attract the best talent and increase social mobility, a number of firms have been recruiting apprentices. Speaking to a number of clients that have specifically targeted highachieving A Level students they have found limited competition for them amongst other professional service sectors. With a rigorous selection process their apprentices have been incredibly successful. Other firms are creating career structures and training paths for career paralegals, offering a genuine career alternative but still with considerable opportunity. Getting it right: placement is crucial The legal sector is evolving faster than ever; not only are there new firms and organisations but consumers of legal services seem to be more sophisticated than ever. There are identifiable knowledge and skills gaps within the market; it’s our role to work closely with our clients to deliver solutions to their recruitment needs. Often these require creative input, i.e. varying the skills or level of experience sought to make the recruitment achievable. We can only do this when we truly understand our clients and candidates but this is where we can help them build a real competitive advantage. Rachael Mann is a Director at Saco Mann Legal Recruitment

ML // December 2013

Features

5 minutes with… Michael Horne, Managing Director, Kidwells Law Solicitors Q: Did you expect the legal services sector to change so dramatically since you joined the sector? A: Yes; I could see that the need to change was there. Many business colleagues and I were becoming more and more frustrated with lawyers and their inability to provide direction for business. As opposed to strict legal answers, lawyers needed this business direction as a provision of a legal service and they could not provide it. This is demonstrated in the run down rented offices most were occupying. Legal services simply had to change and those that are not or cannot are going out of business; just look at the statistics. This was obvious to me in 1996 when I decided to study law. Q: What has been the key positive or negative impact of the liberalisation of legal services?

A: The fear of change; there are few law firms that are prepared to change and fewer that can. Business is moving so quickly in this modern world that normal high street firms have already been left well behind and when their elderly clients pass so will their businesses. Q: Who inspires you and why? A: My mother; my parents started with nothing and learned new skills to survive creating businesses. My mother could stop now if she chose but still works, running her hotel after my father passed away several years ago. Her work ethic is sound and nothing is insurmountable to her. I hope I still have her drive when I am her age. Q: Have you had a mentor? If so, what was the most valuable piece of advice they gave to you? A: I have had many people that may appear to mentor me in the different business arenas I operate within and I listen to them all. In law though, when I was training a barrister who took a great deal of time to assist

me at that time, he gave me the best piece of advice that I now pass on to other lawyers trained at Kidwells. That is, never stop thinking about your clients! Thank you John Stenhouse, Nightingale Chambers. Q: If you were not in your current position, what would you be doing? A: Who knows? I hate holidays but I love to fly aeroplanes and helicopters and skydive from both but most of all I love to work and so I would be busy being busy. Michael Horne is a Solicitor and Managing Director of Kidwells Law. A committed family man, Michael comes from a commercial background, having run his own businesses prior to training as a solicitor. He’s no stranger to considered risk taking, being a fully trained free fall parachutist, helicopter pilot and experienced in fixed wing aerobatics. According to Michael, Kidwells Law ‘prides ourselves in training from the local community and have the best practice in this part of the country; watch out the rest of you!’.

Bolstering practice confidence Williams Thompson Solicitors LLP takes Eclipse’s Proclaim solution

hristchurch-based law firm, Williams Thompson Solicitors LLP, has implemented Eclipse’s Proclaim Practice Management Software solution to bolster its private client practice and continue its client service delivery confidence. The specialist firm offers a range of private client legal services, specifically in the areas of property, family and probate. It needed to replace its incumbent system with a solution that could provide new client service tools, cross-practice matter consistency and reporting. Eclipse’s Proclaim system was chosen as Williams Thompson’s core Practice Management solution, with dedicated Matter Management casetypes in conveyancing, family and probate being introduced, as well as a bespoke casetype solution to cater for nonstandard work areas. The integrated Proclaim Accounts solution will provide firm-wide financial management, while Proclaim’s Credit Control Centre will ensure tight management of client payments. As part of the

ML // December 2013

implementation, Eclipse is carrying out a migration of data from the incumbent financial system. “This is major investment in the future for our firm. It reflects the confidence we have in our business and our recognition as to how essential it is to ensure that we continue to provide an exceptional quality of service to our clients. Having investigated the market widely, we came to the firm conclusion that Eclipse’s Proclaim software was best placed to enable us to take full advantage of the latest IT developments available and will assist us in improving both our administration and our client services. We are really looking forward to the benefits that we believe this investment will bring,” said Stephen Bowden, Partner at the firm. Williams Thompson is also taking the Proclaim Lead Management and Compliance toolsets to provide seamless client inception processes, with ongoing adherence to SRA regulations. For further information, please contact Darren Gower, Head of Marketing at Eclipse Legal Systems via darren. gower@eclipselegal.co.uk, or call 01274 704100. Alternatively, visit www.eclipselegal.co.uk

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