01 June 2014 | Issue 12 | ISSN 2050-5744
The Business of Law
The Modern Law Conference 2014: Charlotte Parkinson reports on the legal industry movers and shakers from the second of Modern Law’s annual conferences. How to be a winner: George Bull outlines the pitfalls that law firms need to avoid in order to survive in the short to medium term. Across the pond: Lena Koke explains the changing nature of the legal services market in Canada, including the rise and rise of ‘Supermarket Law’.
Modern Law Magazine | June 2014 | Issue 12
“We try and make it as simple as possible for our customers... the industry tends to make the simple complex when it doesn’t need to” Roger Ramsden
Karl Chapman
“What we’re doing may seem innovative from the perspective of the legal market but that probably tells us all more about the legal market than it does about Riverview Law” Supported by
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ML // June 2014
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Introduction
03
Welcome T
his month’s edition of Modern Law is extra special and I am delighted to showcase our new, bigger and better magazine! By popular demand, we have increased the size of the publication so that we can provide even more comment from our industry experts and our readers can keep pace of developments in the legal sector.
In this issue, we have an exciting and diverse range of features and interviews. Our cover star, Karl Chapman, Chief Executive of Riverview Law, talks to us about whether the approach of the ‘new’ legal model is as innovative as the legal industry is making out (page 11). We also spoke to Roger Ramsden, Chief Executive of Saga Services Ltd and asked why they decided the time was right for the brand to branch out into a full legal services offering (page 18). The second annual Modern Law Conference took place at the Royal College of Surgeons and we were so pleased, not only with the turnout (400+ delegates) but with the calibre and standard of our speakers, who made the day a stand out success for all involved (full coverage of the event can be seen on page 50).
Modern Law Magazine Project Director Kate McKittrick
Group Editor Charlotte Parkinson
Accounts Director Karl Mason
Events Director Julia Todd
I am also delighted to announce that nominations for this year’s Eclipse Proclaim Modern Law Awards are now open; the ceremony will be held at the Hilton Park Lane on 15th October 2014! We have the usual array of cross-industry categories and have also added some brand new ones, including Law Firm and Chambers of the Year, as well as Best use of Technology and our Supporting the Industry Award. The full list of categories, entry requirements and instructions for nominating are available to view at: http:// www.modernlawawards.co.uk/ Nominations for this year close on Friday 1st August. Size definitely does matter with this issue of Modern Law, as, not only have we increased the size of the magazine itself, we have also been busy creating the first ever Modern Law Yearbook, which has been circulated with this issue of the magazine. The Yearbook has been a long labour of love for many of the team here at Modern Law Towers and I would love to hear your thoughts. As usual, if you have any comments, suggestions or ideas for Modern Law, or just simply want to be involved, drop me a line on 01765 600909 or e-mail me via: charlotte.parkinson@charltongrant.co.uk Charlotte Parkinson Group Editor Modern Law Magazine charlotte.parkinson@charltongrant.co.uk
Issue 12 – June 2014 | ISSN 2050-5744 Advertising Rachael Pearson Kate Netherwood Martin Smith
Design Production Victoria Lang-Burns Matthew Phillis
Consultant Editor Emma Waddingham IT Crowd Consultant Editor Charles Christian
Modern Law Magazine is published by Charlton Grant Ltd ©2014.
Contact t: 01765 600909 or e: info@modernlawmagazine.com Modern Law Events: www.modernlawevents.co.uk Modern Law Awards: www.modernlawawards.co.uk All material is copyrighted both written and illustrated. Reproduction in part or whole is strictly forbidden without the written permission of the publisher. All images and information is collated from extensive research and along with advertisements is published in good faith. Although the author and publisher have made every effort to ensure that the information in this publication was correct at press time, the author and publisher do not assume and hereby disclaim any liability to any party for any loss, damage, or disruption caused by errors or omissions, whether such errors or omissions result from negligence, accident, or any other cause.
ML // June 2014
04
Contents
CONTENTS 03-09 Intro & THE News Andy Poole considers the implications of changing the reporting accountant requirements, brought about from the SRA consultation.
The legal industry’s perception of innovation is something which has been widely debated in recent months. Charlotte Parkinson, Modern Law, spoke to the Chief Executive of new legal ‘model’, Riverview Law, about whether their approach is as radical as some may think, or whether it’s more a case of common sense.
15 Michael Burne
It might seem a bit off-message, in an age of outcomesfocused regulation, that a new legal services model has been built to make lawyers happy by increasing the control of their working destiny. However, create happy lawyers who are more efficient and part of an ‘ethicallywired’ partnership and you can flexibly offer outcomesfocused services to clients, as Michael Burne tells Emma Waddingham, Modern Law.
18 Roger Ramsden
Crispin Passmore, SRA.
23 Is Pricing Innovation possible in a highly commoditised market?
Richard Burcher, Burcher Jennings
23 The New Consumer Law Revolution
David Jabbari, Parabis
25 A new dimension
Tony Brown, AGB Legal
25 Stay Alert
11 Karl Chapman
11-19 The INTERVIEWS
21 SRA and Regulatory Reform
07 Andy Poole talks news
21-43 The views
Charlotte Parkinson, Modern Law, spoke to the Chief Executive of Saga Services Ltd about managing partner and client relationships, why the time was right to launch its Alternative Business Structure (ABS) arm, Saga Legal Services and his predictions for consumer legal services in the UK.
Rayne Tompson, Law League
27 Additional considerations
Matthew Williams, AmTrust Law
27 The economic cycle
Steve Arundale, NatWest
29 Turning full circle
Edward Goldsmith, Goldsmith Williams Solicitors
29 Watch this space
Simon Goldhill, Simon Goldhill Consultancy
31 Developing content
Dez Derry, mmadigital
31 Switch on or take the hit
Trevor Gilbert, Witness Box
33 Flourish and grow
Helen Glaze, Legal Eye Ltd
Colin Taylor, Legal Services Practice Group, Willis
33 A clearer view
35 Love at first sight?
Editorial Columnists
Nick Hodges, Oyez Professional Services Limited
Andy Poole Legal Sector Partner Armstrong Watson
Daniel Morris Director and co-founder Box Legal Limited
Helen Glaze Associate Legal Eye Ltd
Matthew Williams Head of AmTrust Law AmTrust Law
Priti Mehta Group CEO Acuutech Ltd
Barry Talbot Managing Director Informance Limited
Darren Gower Marketing Director Eclipse Legal Systems
Ian Hunter Managing Director Jellyfish Creative
Martyn Caplan Director Lawyers Inc.
Rayne Tompson Director Law League
Ben Holmes Managing Director Invest in Law
David Bott Managing Partner Bott & Co
Mike Batters Technical Director NETprotocol Ltd
Benjamin Arnold IT Manager Hardwicke
David Jabbari Partner, Head of Consumer Law Parabis Law LLP
Jill Scott Director Broadband Telephony Voip Auditing Ltd.
Steve Arundale Head of Professional Sectors & Financial Institutions, Sectors & Specialist Business RBS & NatWest
Charles Christian Editor-in-Chief The Legal IT Insider
Dez Derry CEO mmadigital
Chris Jeffery Eddie Goldsmith Head of Small & Medium Law Firms Partner Thomson Reuters, Legal UK Goldsmith Williams & Ireland George Bull Colin Taylor National Chair of Professional Executive Director, Legal Services Practices Group Practice Group Baker Tilly Willis
ML // June 2014
Nagib Tharani Director of International Expansion Clio Simon Goldhill Principal Noel Inge Simon Goldhill Consulting Jo Hodges Managing Director Head of Sales & Marketing CILEx Law School Tony Brown Redbrick Solutions Owner Nick Hodges AGB Legal Lena Koke Managing Director Barrister and Solicitor Oyez Professional Services Limited Tom Bingham Axess Law Professional Corporation Sales Manager Paul Wishart LLB (Hons) Ontime Group Martin Cheek Managing Director Managing Director COBRA Legal & IP Trevor Gilbert SmartSearch Chairman and CEO Phil Snee TRG Group (Trevor Gilbert & Development Director Associates) Linetime Jitendra Valera Chief Marketing Officer Advanced Legal
Contents
35 Sea change
Noel Inge, CILEx Law School
37 The perfect solution
54 Are you going to be
Jitendra Valera (JV), Advanced Legal
37 Knowing your goals
Ian Hunter, Jellyfish Legal Tom Bingham , Ontime Group
39 Food for thought
Ben Holmes, Invest In Law
David Bott, Bott & Co
41 Appropriate targets
Chris Jeffery, Thomson Reuters, Legal UK & Ireland
Daniel Morris, Box Legal Limited
42 The way forward
Benjamin Arnold, Hardwicke
Jeff Dawson, Elite Insurance Company
45-63 The Features 45 Business as usual?
Paul Wishart explores some proposed changes to Minimum Levels of Professional Indemnity Insurance (PII) cover and outlines how firms can ensure their renewals are successful this year.
47 Across the pond
Lena Koke explains the changing nature of the legal services market in Canada, including the rise and rise of ‘Supermarket Law’.
49 A new way of thinking
Martyn Caplan considers why the traditional Legal Succession Model of assistant solicitor, salaried partner and then equity partner is failing in the new legal market place.
50 The Modern Law Conference 2014
The second annual Modern Law Conference took place at the Royal College of Surgeons, London. Charlotte Parkinson, Modern Law, summarises the day’s proceedings.
53 Going green
Rob Attryde explains why having a greater understanding of the relationship between energy and functionality, could help your business in more ways than you first thought.
With mergers and acquisitions high on the agenda for many law firms, WIP has become a major factor in valuations, so, what IT tools can firms harness to ensure they manage their work-in-progress more effectively? Barry Talbot explains. Martin Cheek considers some of the biggest challenges faced by Money Laundering Regulations for the Legal Profession.
11
63 Unlock the potential
43 Who ATE al the PII?
Jill Scott asks whether monies overpaid to telecom providers can be recovered on a ‘No Win, No Fee’ basis.
61 Policing the front line
42 Is there a solution?
George Bull outlines the pitfalls that law firms need to avoid, if they wish to survive in the short to medium term.
59 Being responsible
41 Helping the ‘middle man’
one of the 50 winners?
57 By negligence or by design?
39 A bright future?
05
Charlotte Parkinson spoke to Tracy Blencowe, Eclipse Legal Systems to find out how law firms can use big data to change their practice.
65-69 THE IT CROWD 65 Work-in-progress – or is that
something to write off?
Charles Christian explains what IT tools law firms can harness, to ensure they manage their work-in-progress more effectively.
67 ‘DIY’ Legal Services
Jo Hodges, Redbrick Solutions
67 Problem solved...
18
Darren Gower, Eclipse Legal Systems
68 Defined risk
Priti Mehta, Acuutech Ltd
68 The whole rainbow
Phil Snee, Linetime
69 Out in the open
Nagib Tharani, Clio
69 An attractive alternative
Mike Batters, NETprotocol
70 5 minutes with...
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Andy Poole Talks news
07
Andy Poole Talks news Andy Poole considers the implications of changing the reporting accountant requirements, brought about from the SRA consultation. Background The SRA has released a consultation document which proposes to remove the mandatory requirement for firms to have their client accounts reviewed by an independent accountant and submit an annual accountant’s report to the SRA. I applaud the principle of the proposed changes, although the timing may not be right for the profession. The extension of self-regulation and of the SRA’s current risk based approach must be key to appropriate regulation with resources applied where they are required most. I therefore agree that replacing external reporting with selfcertification of compliance with the SRA Accounts Rules (“SRAAR”) by law firms is a good step to take in principle. The consultation document notes that “the SRA receives almost 9,000 reports annually and over 50% of them are qualified”. My view is that far more than 50% of the reports should be qualified. That 50% is a shockingly low number. If reporting accountants are carrying out their jobs properly, then non-trivial breaches will be found on the vast majority of reports. Perhaps the low number of qualified reports is due to a lack of knowledge of reporting accountants appointed by law firms. That indicates to me that the current system does need to be revised. If large amounts of money are being spent by the profession on the current regime and it clearly does not work, then it does need to change. I would however question how much goes wrong in law firms that the SRA does not know about. The SRA’s consultation document acknowledges that “the overall discipline of producing an accountant’s report may provide both a deterrent and a mechanism by which breaches are identified, thus modifying behaviour and mitigating risks”. I agree with that entirely. The vast majority of lawyers try to abide by the rules. I would hope that that is driven by the fact that it is the ‘right thing’ to do, and not just because of the reporting accountant regime. If it is due to the reporting accountant regime, then the proposed changes would cause huge issues to the profession as a whole; the vast majority of compliant solicitors having to pay the cost for the small minority that may not do the ‘right thing’. Desperate times It is true that desperate people do desperate things. I have seen client account fraud first hand perpetrated by
seemingly upstanding members of the legal profession. Usually such fraud happens as a direct result of a desperate need of the perpetrator as a result of personal circumstances. As large parts of the profession are currently struggling financially, primarily as a result of legal aid reform and personal injury reform in particular, there may currently be more desperate people prepared to do desperate things. The consultation document notes that the reporting regime “adds cost with only limited benefits”. In my experience, if carried out correctly, the reporting regime should help to improve law firms’ systems and improve their businesses. If a report is carried out by those that see how other firms are managed, then best practice can be shared. If that is passed to a COFA, they are likely to only have experience of their own firm and will lose the benefit of being pointed in the right direction. It could be argued that a more appropriate step might have been to implement
ML // June 2014
08
Andy Poole Talks news
a requirement that Reporting Accountants can only undertake such responsibilities if they have at least, say, ten such appointments. You might say that I ‘wouldn’t be a turkey voting for Christmas’ and that I am bound to oppose the proposed change. It is true that we do undertake a large number of SRAAR reporting assignments and that a certain amount of that income would be lost. However, many of our solicitor clients will choose to retain an element of external ‘auditing’, in order to support them in their responsibilities. I am sure that many COFAs in particular will want that comfort blanket and will continue to engage us. My main concerns are therefore for the legal profession. If the proposed changes are to be made, they must be made in the right way and at the right time. COFAs enhanced responsibilities The SRA’s consultation document notes that “COFAs are required to take all reasonable steps to… comply with…the SRAAR; keep a record of any failure to comply…; and report any material failure…to the SRA”. I am totally immersed in the legal profession and see a great deal of what is happening at ‘the coal face’. It is my experience that in the majority of cases, those requirements are not yet being met in practice. I commonly see empty breach registers, that is not because breaches have not occurred. It is because either the COFA is not undertaking their role correctly; and/ or reporting mechanisms haven’t been implemented for fee earners and accounts staff to report breaches to the COFA; and/or because fee earners and accounts staff are not aware when a breach has occurred because of a lack of knowledge of the SRAAR. If the proposal to remove the requirement for an accountant’s report is to be replaced by more responsibility for the COFA, then the current COFA regime needs to be fully embraced and implemented first. There also needs to be training provided to fee earners and accounts staff. It is not the sole responsibility of the COFA and accounts staff to notice and rectify breaches. Fee earners must take more responsibility in this regard. It is often fee earners that create issues that accounts staff later notice. The SRA’s consultation
ML // June 2014
document includes a proposal for “the firm’s COFA to declare that the firm’s accounts are compliant with the SRAAR”. The above statement requires clarification. In particular, the word ‘accounts’ needs to be defined; what is meant by that word? Is it the ‘accounting records’? Is it the ‘Financial Statements’? Is it the ‘client and office account records’? Is it the ‘client and office account ledgers’? It would also be advisable to extend the above statement to include ‘other than’, so that non-compliant matters can be disclosed and to include the word ‘materially’ so that nonmaterial items can be omitted from the ‘other than’ list. My view is that the proposals would place a huge amount of pressure and responsibility on the shoulders of the COFAs. I would not want to be in their shoes and I feel very sorry for them. In time, once the new COFA regime beds down and COFAs are happy that the systems they have implemented are working correctly, then they would be more comfortable in making such statements. I have generalised to a great extent in this section regarding the effectiveness of COFAs. Many are extremely competent and attentive to their duties. In time, they may well perform in the way envisaged by the SRA. However, for now, the vast majority of COFAs are not ready to take on the new proposals. Timing The SRA consultation document notes that the proposals are planned for implementation in October 2014. The proposal is for reports due after October 2014 not to be submitted. There are huge issues with that. In practice, that will mean that reports are to be submitted for accounting periods ending on or before 30 April 2014, but reports may not be required for accounting periods ending on or after 31 May 2014. We are already working on reports for periods ending on 31 May 2014 and will also commence work on reports for periods ending on 30 June 2014 before the conclusion of the consultation process. We will therefore need to charge for those services even though a report may not eventually be required. It also puts doubt in the minds of those running law firms as to whether to begin their accounts rules reviews if they have an accounting period due
to end during the next few months. If they delay the commencement of the testing procedures, and the reports are then deemed to be due, they may run out of time to meet the six month deadline and the SRA would then need to deal with the issues arising on a large scale. A better solution would be for the date selected to refer to the end of the accounting period for which reports are required, that would provide more certainty. For example, if 31 October 2014 is the date selected, it should mean that reports due for filing after 30 April 2015 would not be required. Enforced reporting The SRA’s consultation document notes that “if certain risk circumstances are present” an accountants report in the form stipulated by the SRA will be required. Should the current proposals be implemented, there will be a ‘de-skilling’ of reporting accountants as they will no longer be regularly carrying out such reports. I would therefore suggest that a predetermined panel of solicitor specialist accountants is appointed by the SRA to undertake such enforced reviews. The SRA’s consultation document includes a proposal to remove the detailed provisions in the SRAAR that dictate the form an accountant’s report will take when required. That is a sensible approach as it means that resources can be applied to match the perceived risk and the reason for the accountant’s report being required. A cautionary note however, when standardisation is removed, costs will rise significantly. Conclusion The principle of self-regulation must be applauded, although now is not the right time to make these changes. Too much pressure has been placed on compliance officers already and it would not be fair on them, or the profession as a whole, to increase that pressure right now. Andy Poole, Legal Sector Partner, Armstrong Watson. Andy focuses exclusively on advising lawyers and heads the specialist legal sector team at the top 30 UK accounting firm, Armstrong Watson. Andy covers all 15 of the firm’s offices and advises law firms throughout the country. The views expressed in this article are those of the author.
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Interview with... Karl Chapman
11
Interview with... Karl Chapman The legal industry’s perception of innovation is something which has been widely debated in recent months. Charlotte Parkinson, Modern Law, spoke to the Chief Executive of new legal ‘model’, Riverview Law, about whether their approach is as radical as some may think, or whether it’s more a case of common sense.
Q A
What makes the Riverview ‘brand’ stand out from the rest in the legal market and why is it different/innovative? I don’t think we’re a brand yet but we will be! At the moment customers, legal market commentators and even competitors tell us that ‘Riverview’ Law is associated with innovation, quality and transparency. We’re pleased by this and I think that the latter two accurately reflect the hard work, customer focus and sense of fun of our people. While it’s flattering we’re seen as innovative I’m not sure that this is quite the case. What we’re doing may seem innovative from the perspective of the legal market but that probably tells us all more about the legal market than it does about Riverview Law. We just think we’re applying common sense and well proven business principles to the legal market. However, I’m very confident that we’ll earn the innovative tag over the next 12-24 months given the research and development projects we’re working on.
Q A
Riverview Law was recently granted an ABS license (enabling it to own Riverview Solicitors), why was it important to obtain the license and what has been gained from it, so far? The ABS licence enables us to deliver legal services direct to our customers. This has many advantages; we can organise ourselves even more efficiently, with one company structure, which will benefit all our customers. It allows us to communicate one seamless message, under the Riverview Law brand, to existing and potential customers. As a regulated entity it makes our conversations with potential partners, here and overseas, much more straightforward. It simplifies a lot.
Q
What makes the Riverview structure work?
Karl Chapman Karl is Chief Executive of Riverview Law and has a long pedigree in starting, growing and managing successful companies. After reading law at Birmingham University, Karl joined Guinness Mahon Investment Management (GMIM) in 1985. In 1987 he was Money Observer’s top-performing UK unit trust fund manager. He left GMIM in 1989 to set up CRT Group plc (CRT), a consultancy, recruitment and training business. Under Karl’s leadership his team grew CRT, both organically and by acquisition, to a market capitalisation of over £600 million, sales in excess of £400 million with 2,500 employees operating from over 200 locations. In 1996 CRT sold 50.1% of its equity for £109 million to Knowledge Universe, a private US-based company whose major shareholders were Larry Ellison and Michael Milken. Karl left CRT in 2000 and set up AdviserPlus Business Solutions in 2001. AdviserPlus is a leading advisory outsourcing organisation providing HR, and H&S solutions to organisations ranging from FTSE 100 companies to SMEs. He joined Riverview Law with effect from 1 June 2011. Karl is excited by the changes taking place in the legal market: “Rarely do market opportunities like this arise. The legal market is large, fragmented and has few brands. New entrants like Riverview Law, with no baggage and a total focus on the customer, stand a very good chance of building big and sustainable businesses.” Karl is based in London and Lincolnshire and couples his passion for business with a longstanding love of Chelsea Football Club where, over more than forty years, he has experienced the lows and highs that come with an irrational attachment to a football team.
ML // June 2014
12
Interview with... Karl Chapman
‘We had the luxury of having no legacy systems, people or cultural baggage. We were able to start from scratch’
A
A
Q A
Q A
We started with a blank piece of paper. We had the luxury of having no legacy systems, people or cultural baggage. We were able to start from scratch. As a result we built Riverview Law from the customer up not from the law firm partner down. We were able to ask ourselves all the key questions. What customer problems are we trying to solve? What’s important to the customer? How should we price our services? How do we organise ourselves? What people and skills do we need? What technology do we need? What are the behaviours we want to drive and encourage? One of the best decisions we made was to go fixed price. It drives all the right behaviours internally (no time sheets!) and aligns our interests with those of our customers. Does Riverview have plans for international expansion, or is it more important to focus the brand impact on the UK before looking to move overseas? Our customers are largely FTSE100 and Fortune500 companies. Although we’re focused on growing our UK business, it is inevitable that we will be serving customers internationally in the coming years. We recognised that this was likely so from the outset we’ve had a presence in the US as part of our research and development and market testing; we’ve learnt and are learning a lot!
Q A
How does Riverview work in partnership with DLA Piper and AdviserPlus Business Solutions?
DLA Piper and AdviserPlus are minority shareholders in Riverview Law. Neither are involved in the management of the company and all are entirely separate businesses. Where it’s in the interests of a customer we collaborate with DLA Piper or any other law firm. For us it is a very simple question; what is the best solution for the customer? If the answer includes DLA Piper and/or another law firm then that’s what we’ll do! Otherwise we’ll compete with anyone.
Q
Is there a growing perception amongst the legal profession and therefore clients, that fixed price leads to poor service?
‘Those that claim fixed pricing leads to poor service are as naïve as those that claim that ethics are under threat because non-lawyers can own law firms’ ML // June 2014
Quite the reverse. Our customers will tell you that our quality is as good if not better than traditional law firms – and 90% of our work is fixed priced. Quality is not a function of the pricing methodology and it would be a nonsense to suggest that quality must be good because hourly billing is being utilised! Those that claim fixed pricing leads to poor service are as naïve as those that claim that ethics are under threat because non-lawyers can own law firms. As Professor Stephen Mayson wisely observed; “ethics is a state of mind not structure”. To paraphrase badly - quality is part of the DNA of a business not a reflection of its pricing model. We renew customer contracts because we deliver an all-round high quality service that adds value to our customers businesses.
Technology is a huge part of pioneering innovation in the legal sector, why did Riverview choose to partner with Legal OnRamp and how is this partnership assisting with innovating in the sector? We partner with a number of people in the tech space, including Legal OnRamp. We have a large and growing in-house IT team and a significant research and development budget. There is no doubt that technology will transform the legal landscape over the next five years. That’s why a significant part of my time is focused on understanding how we can harness the various technologies emerging. We intend to be one of the winners in this area to the benefit of our customers.
Q A
Has the sector fully embraced the window of opportunity for external investment?
Not yet but the sector is very fragmented. While there have been some big investments in claims management and insurance there has been little in traditional law firms. Neither of these themes should be a surprise. Claims management and insurance businesses are scalable propositions where technology can drive efficiencies. Most traditional law firms are un-investible. However, there is one very easy prediction to make - over the next five years there will be significant investment in the legal market but a lot of it will by-pass traditional providers and go into technology businesses and new entrants.
Q A
Which area of the business is currently receiving the greatest level of investment?
We have great people and will continue to invest heavily in our existing teams and the recruitment of individuals with the right attitude, antennae and spirit. We will invest in business development and all the other areas of our business. However, the biggest area of investment for us is technology: It’s a game changer.
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Interview with... Michael Burne
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Interview with... Michael Burne It might seem a bit off-message, in an age of outcomes-focused regulation, that a new legal services model has been built to make lawyers happy by increasing the control of their working destiny. However, create happy lawyers who are more efficient and part of an ‘ethically-wired’ partnership and you can flexibly offer outcomes-focused services to clients, as Michael Burne, Chief Executive of Carbon Law, tells Emma Waddingham, Modern Law.
Q A
How do you ‘re-engineer’ a commercial law firm to make lawyers and clients happy?
Carbon Law partners went live in April this year after extensive research with lawyers and clients with the fairly simple strap line: ‘creating the conditions for exceptional lawyers to flourish’. We aim to continue to innovate around these ‘conditions’ by listening, learning, developing and listening again to talented commercial lawyers and clients to develop the firm.
Q A
What worries commercial lawyers and what type of profile do they have?
We had to establish what they [commercial lawyers] like about the way law is practiced, what they thought about the future, what they didn’t like and what worried them about the future of practicing commercial law. Most are concerned about risk – the risks posed by ‘joint and several liability’, the risks of capital calls with no return on investment, the risk of not having the power to innovate, the risk of not generating enough value from the partnership at retirement level; the risk of not being able to work with clients flexibly as the market changes. We believe lawyers engaged in firms in the ‘hard-pressed middle’ in the commercial sector are those who will be most attracted to the Carbon Law Partners model, namely individuals in these firms that are: • Aspirers/perspires [those with ambition for change but without the control – partners or those heading towards partnership options] • Returners [those who are looking to re-enter practice after leaving, perhaps for family reasons]
ML // June 2014
16
Interview with... Michael Burne
• Retirers [partners who are balancing the liability risks, protecting their financial position as they head towards the later stage of their careers] • Frustrated teams [teams that feel marginalised, have little decision-making power or control in their current firm].
Q A
How do you help reduce ‘risk’ or put lawyers back in control?
With Carbon, the risk is low and control is high – the opposite in fact of most law firms. Lawyers work when you want, where they want and with the clients they want. They can charge clients in modern, flexible and innovate ways. Our core services include the provision of state of the art IT support that enables our lawyers to work anywhere in the world, on any device, so long as they have broadband access [Carbon Law Partners has procured state of the art systems with Microsoft and LexisNexis to provide business management on a secure platform managed by e-Know]. Our lawyers receive the essentials to enable them to practice and then have choice and control over other overheads that may suit the way they practice or the clients they work with. This is the opposite of the overhead-driven, hourly rate costed structures that you see in large commercial firms. Our lawyers don’t carry those overheads or that risk. Their ability to be flexible and align themselves with their clients is significantly increased – imagine what that can do for clients? This outcome –focused and smart use of resources creates the potential for lawyers to align the way they work and what they charge with their business client’s commercial objectives. It means a different conversation.
Q A
How does Carbon allow ‘exceptional legal entrepreneurs’ to flourish in the commercial sector?
It may seem odd to use the word ‘legal’ and ‘entrepreneur’ in the same sentence, but we believe that enterprising lawyers will succeed by evolving with and leading the delivery of legal services to their clients. We recognise that lawyers are generally risk averse and so we have sought to remove logical objections by replicating the things that are essential. So if they ask: have you got the systems? Yes we have. The brand, the website? Yes we have - and so on. We have all the essentials covered, with the addition of our Concierge Service we enable access to any other services lawyers may need outside of our ‘core’ support. So, ultimately, the decision to come to us is, therefore, an emotional decision – the reason why many, really, chose to move. You ask yourself: Can I make it work here? That’s our challenge – to identify and encourage great lawyers who can, who want to invest in themselves and help them overcome the emotional barriers to entry. Through our research and conversations we are yet to identify anything that lawyer’s need that we haven’t covered in one way or another. However, if we have missed something, we’ll listen, make a business case and potentially include it. It’s all part of our culture of dynamic innovation. Our ethos is about being inherently dynamic and I don’t want us, as an organization, to get left behind, so it’s central to the business that we keep thinking, listening to lawyers and developing our model – without resorting to change for change’s sake.
ML // June 2014
Q A
The brand has been introduced as a ‘virtual’ or ‘dispersed’ law firm. Do the existing legal services labels cause any perception problems for Carbon Law Partners? I like to think of the market as a spectrum. At one end you have service providers and at the other, traditional law firms. On the legal service provider end of the spectrum, you’ll have brands such as Axiom – which is a legal services provider, but unregulated and not a law firm. I would quite like the industry to talk about these labels. As a young upstart however, we’re not in a position to start defining labels so we have to fit in predetermined ones such as virtual (etc.) but I don’t think our model is like that. We’re in the middle of the spectrum. Our work is insured - we are a law firm and we believe that’s the right way to go. I prefer to use phrases like (as I don’t like the labels virtual or disbursed as they sound intangible, i.e. lacking in permanence, unstable) ‘legal services platform’ and ‘mutual law firm’. We are run for the benefit of our member and the management team are ‘trustees’ of the brand, so this sits well.
Q A
How can a new and relevant set of ‘conditions’ for lawyers working under the Carbon Law Partners brand have a positive impact on clients? We look at law from the perspective of commercial outcomes – our mantra is ‘start where the client is and define or understand the commercial objective’. I’ve been a poacher and a gamekeeper. My previous roles have included board level jobs where the focus is on the commercial result and defining success. I was always frustrated that external lawyers we worked with found it tough to talk this language and even tougher to articulate their advice for our board without it needing translation. In our recent research we still heard this from clients and even more surprising that the ‘clock was still ticking’! We’re looking for lawyers who are more enterprising than that. We want to create a tribe of like-minded lawyers who believe law should be practiced in a certain way and who genuinely have the spirit of partnership – hence Carbon Law Partners. The concept of partnership is firmly within our brand name but also ethos – as a concept of the community of likeminded lawyers coming together to do achieve great things with and for their clients.
Q A
Lawyers are generally slow to change and slow to make bold decisions. How do you overcome this challenge? There is a growing awareness of the opportunity to change but there’s still, I think, a lack of recognition of the extent of change that is underway. It calls for new thinking, not just tinkering. Commercial lawyers have the false hope that we’re all coming out of the recession but actually, I think, there’s been a paradigm shift that’s gathering pace. Despite that, we recognise that we need to articulate the alternative we offer and that lawyers will, in many cases, still perceive greater risk with us than in their current firms regardless of the facts. For us it’s steady process because we want the right people to join this brand. Ultimately, we’re here to deliver exceptional service to lawyers and clients through our platform and deliver legal services. We want to be measured by our lawyers and their clients about how good that platform is for them.
Interview with... Michael Burne
Q A
Is the change issue due to the fact that lawyers like to be in control?
Your point about control is important. In ‘old law’ firms (old style partnerships with established pyramids, inflexible overheads, financial issues, etc.), some firms don’t necessarily have the capacity, resources or desire to change. I recognise lawyers – and I am one – can be risk averse and at times, control freaks. They know how to give great legal advice but may not know how to run businesses – we’ve seen this with Halliwells, Cobbetts and Manches. In a traditional model, each partner thinks they have control but they don’t really. It’s a perception of control. So I talk about perception of control and the perception of risk; there’s actual and perceived risk. In a traditional law firm, take an example of an individual who’s been there for 25 years and a partner. As they head towards the end of their career why is it they stay with same level of personal risk as they might have been willing to take in their 30’s and 40’s? Why wouldn’t that experienced partner want to come into an environment where they only deal with the actual risk in their business and take control? Just in the same way that attitude to risk in investment decisions changes as we all age. With Carbon Law Partners, they’re not liable for collegiate decision making as that system doesn’t exist here. They come into the brand under their own limited company and are only liable for their own mistakes - without cash contributions or capital calls. We say, just come in, do great legal work under our umbrella and take the majority of the cash we collect on your fees to clients. Most lawyers came into the law to solve complex legal problems and don’t want or like office politics, red-tape and decision by committee - let’s let them do what they love and we’ll do the rest. For those who do want to run a business, our platform enables them to grow their practice and own the capital value they create. So, we welcome teams as well as individuals at Carbon.
Q A
If the brand is a collection of partners, how can you ensure consistency, quality and excellence to clients?
We make a promise to lawyers that join that we will only recruit another lawyer who is as least as good as them. It is our duty to police that promise and ensure we don’t let anyone down – clients and the other partners. We’re not a legal partnership but people do volunteer for a properly collegiate way of working where they, regardless of location, genuinely care about colleagues, want to support each other and refer work to each other. The model and brand values allow for this to happen.
Q A
If partners decide their own fee structures, what impact might differential rates across the brand have on clients? Will they seek out the best price and alienate other Carbon Law Partners? Well, clients will always want the best price so if they hear there’s another Carbon Law partner offering ‘pile them high, sell them cheap’ deals somewhere else then they may go to there - but ‘pile them high, sell them cheap’ deals don’t work. What we’re saying through the lawyers to clients is: you can expect flexibility
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‘Enterprising lawyers will succeed by evolving with and leading the delivery of legal services to their clients’ through Carbon Law Partners. Because our structure allows our lawyers the scope for change. We can’t mandate that each partner offers the same price. We press for the lawyer to have a relationship with the client – which is how it is anyway. I don’t think that what we’re doing is offering cheap. I don’t believe in more for less – I believe indifferent for less – hence our brand value statement, ‘same difference’.
Q A
Is the market ready for Carbon Law Partners?
We think lawyers are ready to hear about alternatives – we need to articulate the choices. Likewise, It’s time to persuade the client to think differently too. If you want a city firm, in a big glass building, then that comes at a premium rate. If you want that then you should pay for it. Just asking those high overhead law firms to do more for less makes for instability in the market. We encourage our partners to look at the outcome and assess what resources they need to deliver on that outcome, at what price and using what skills. If you work like that then the regulator should be delighted - this is what OFR regulation is driving at in the legal sector! We’ve got to work with clients to ensure they define the outcomes so we can align pricing to achieve the right outcomes using the right resources. We don’t believe ‘one size fits all’ we prefer the freedom in our structure that allows us to tailor so ‘one size fits one’.
Q A
How can the model ensure it attracts the next generation of lawyer?
What we’re not doing is telling people ‘we’re it’, but we are seeking to explain that ‘there is a spectrum of choices and we’re one of them’. It’s our job to explain that choice and to explain to young lawyers that it’s not a one-dimensional profession. Some lawyers may like that! We really like the idea of a Carbon apprenticeship, to train young lawyers in the way that we think – to start with outcomes first and work out how to deliver them. Our question to commercial lawyers is: what kind of lawyer do you want to be and how much choice, control and freedom would you like to have? Is our model interesting to you? If not then we need to ask ‘why not’ and ‘what should we do differently?’ Carbon needs to be attractive to tomorrow’s lawyers as well as todays. So long as they are enterprising people, they can come to Carbon Law Partners to do enterprising things and call their stories through the successes of their clients. www.carbonlawlawpartners.com
ML // June 2014
18
Interview with... Roger Ramsden
Interview with... Roger Ramsden Charlotte Parkinson, Modern Law, spoke to the Chief Executive of Saga Services Ltd about managing partner and client relationships, why the time was right to launch its Alternative Business Structure (ABS) arm, Saga Legal Services and his predictions for consumer legal services in the UK.
Q A
What was the main driver for Saga to obtain its ABS license, resulting in Saga Law?
The main reason for launching Saga Law was that we wanted to offer a wider range of consumer legal services and to operate as a law firm with an ABS is the first step for that. We are very interested in what the over 50’s think of the legal services market and our research shows there are certainly some things they would like to be done differently, particularly in light of the liberalisation of the legal services market.
Q A
The core Saga business is aimed at over 50’s; are you looking to expand the legal services offering to others outside of this demographic? Saga is an expert on the over 50’s and our whole business ethos is about continuing to provide more and more services to those customers. The over 50’s are an interesting group, they are experienced, savvy buyers as they have been buying legal and insurance services for many years. This experience means that they understand the difference between good and not so good service. Our demographic is one of the largest groups of consumers of legal services; everyone over 50 should have a will and as the population ages and life expectancy increases, powers of attorney become more important and that is why we are here.
Roger Ramsden Prior to joining Saga in August 2008, Roger was MD of the Household Insurance business of RBS Insurance and Strategy and Marketing Director for the RBS Insurance Group. Before that he was at Prudential as Commercial Director for the UK Life and Pensions business covering all marketing and product activities. Before joining the financial services industry his career was in food retailing as Marketing Director of Safeway and Management Consultancy for the Boston Consulting Group. He started his career at Unilever.
‘The fixed fee model offers our clients more transparency over the services they are buying and we are clear and upfront about what consumers will be paying for’ ML // June 2014
Interview with... Roger Ramsden
19
‘Conveyancing is increasing as the growth in the market continues. Although the market is currently focussed on first time buyers, the majority of home owners are the over 50’s and they do move!’
Q A
Why did you decide to use the ‘fixed fee’ model? While this arguably offers clients greater transparency, will it keep the lawyers happy? Our primary goal is to help consumers navigate the legal market and they have told us systematically that pricing is particularly confusing. The fixed fee model offers our clients more transparency over the services they are buying and we are clear and upfront about what consumers will be paying for, which is working well for our providers and customers. Ultimately, we want our model and pricing to suit the customer rather than the provider.
the risk that a purchase would be made without people understanding what they are buying, which would, of course, affect our long term vision for the business. We try and make it as simple as possible for our customers and a large proportion of them have used our services previously. The industry tends to make the simple complex when it doesn’t need to. Saga has a very good record of positioning our products (through our holidays and insurance services for example) in a way that means users in later life and experienced customers will understand what they are buying.
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Saga Legal Services works with Parabis and has a diverse range of services, including Probate, and Conveyancing. Are you looking to add more firms to the panel you currently have and are Saga actively looking to increase the volume of transactions it undertakes? We are certainly looking to grow and are very pleased with what has happened since 2012. At the moment, we are very happy with our provider group. As and when we look to increase our volume of transactions, we will certainly be looking to deliver this in the best way for our customers. What does Saga gain through its partnership with Parabis and its other of joint ventures?
We have worked well with Parabis for many years. They already facilitated certain aspects of our business, such as our legal helpline, meaning they were a natural choice to bring in. They are very much aligned with our outlook and focus on the customer and we have and continue to work very successfully with them, they are a first class organisation.
Q A
What is the most lucrative area of the Saga Legal Services business and why?
To date, the area that has been our surprise hit has been lasting power of attorney, which reflects the growing recognition that there is a need for this type of service, in line with people living longer but not always maintaining good health. Will writing also continues to go well because people are increasingly recognising that they do need a will. Finally, conveyancing is increasing as the growth in the market continues. Although the market is currently focussed on first time buyers, the majority of home owners are the over 50’s and they do move!
Q A
You claim that Saga Legal Services will not use the usual ‘jargon’ associated with legal professionals but isn’t this just part and parcel of the nature of legal services? As with all technical services, the issue should be, “Does the customer understand?”, because if the customer doesn’t understand then we would run
What are your predictions for the future of consumer legal services in the UK?
It is an area which is bound to grow, the impetus, mainly through regulation and the ability to create Alternative Business Structures (ABSs), is likely to drive a much more consumer-centric industry over time. Saying that, existingand new model consumer providers will have to become more consumer-centric or they will not survive.
Saga is a data driven organisation, with such a strong data holding and brand name, how are Saga planning on utilising the data to expand its market share? What technology is the company using to do this? Technology supports what we do and we have about 10.5 million people on our database, which is constructed on an ‘opt-in’ basis, rather than bought in; of this number about 2 million are regular customers. Our key customer base is largely repeat buyers, for example, they may start with a holiday or insurance purchase and then move into other areas. Many of our customers do already hold a legal product from us, legal expenses, through our home and motor insurance products meaning the transition into a full legal offering was a natural one. We recognise our customer’s loyalty and our pricing structure does recognise this.
Q A
How are big brands impacting the legal profession, for consumers and practitioners?
Clearly, there is a growing recognition that consumers are not as well served as they could be through the existing structure of the industry and we will see more and more consumer-centric companies emerging because of this. Legal services is clearly a key area for our demographic of customers and as the population ages, we will continue to accrue an ever increasing customer base in that market.
ML // June 2014
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21-43
The Views
Features
00
The SRA and Regulatory Reform The SRA has announced a major programme of reform to make it a more proportionate and targeted regulator. Crispin Passmore, SRA Executive Director for Policy, explains what the programme will involve and the drivers for change.
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e have set out our plans for a wide-ranging programme of work to improve the regulation of solicitors and firms. Proposals are published in a policy statement, Approach to Regulation and its Reform. This paper provides clarity about our purpose, our approach to regulation and our priorities. It provides the foundation for significant change in the way we regulate and puts into context our programme of reform. The last few years have seen the emergence of legal businesses that look less and less like traditional law firms - not just in their ownership structure but how they operate and what they deliver. It just isn’t possible to write a detailed rule book that applies either equally to every type of firm in every circumstance, or different but detailed rule books for each type of firm. The market is too dynamic and the costs would be too prohibitive. For a more plural market we need more targeted regulation. The level playing field is about tackling risk and fair and consistent regulation rather than the same rule book for everyone. For example, it makes little sense to apply the same PII requirements to a tiny sole practitioner and a global law firm.
‘The last few years have seen the emergence of legal businesses that look less and less like traditional law firms - not just in their ownership structure but how they operate and what they deliver’ A raft of responsibility Regulation does not come free. It imposes burdens on existing firms through direct costs of regulators that they pay for. And there is another cost, the cost paid by consumers and the wider public. Regulation can restrict competition, reduce innovation and limit choice. Parliament has given us statutory functions to regulate. We have regulatory objectives in legislation that we must have regard to when exercising our duties. We have the better regulation principles that apply to all regulators: to be transparent, accountable, proportionate, consistent, targeted. And soon a duty to promote growth will be added to this menagerie. We are here to protect consumers that need protection; and we are here to protect the rule of law and proper administration of justice. We are now focusing on the core regulatory purpose of the SRA, testing our regulation against the better regulation principles to ensure that
we are targeted and proportionate. Our relationship with the high-impact firms is much improved, as shown through research. But we do want to replicate that better understanding, openness and co-operation with other firms. That might mean that they contribute more to our policy-making or letting us know what they think that we should reform. Or it might mean that they find it easier to engage with supervision when issues or concerns arise. Accountability What is doesn’t mean for large or small firms is that we should or will duck difficult conversations, investigations or enforcement activity. I suspect most solicitors will welcome this, but we have to engage much more to refine our thinking about how we regulate smaller firms. We have made some early proposals. These cover changes to our minimum terms on professional indemnity insurance, changes to rules to increase MDPs in the legal market and reforms to continuing professional development requirements. There is more of course that we have been consulting upon so far in 2014. We have no doubt that we can do more. We will continue to look at education and training to ensure it provides flexible routes to qualify at the right level of competence. We will look again at the separate business rule and we need to think again about the 100 pages of rules relating to handling client money. So we want to reduce the costs of regulation as part of making it more proportionate and targeted. You have seen the range of consultations so far in 2014 - we need to listen carefully on consultation and I want everyone with views (supportive or otherwise) to respond to them - we do listen as we showed on the issue of ratings for insurers. We will develop other significant changes over next two years covering issues such as rules for regulating in-house lawyers, changes to the separate business rule, how we get the balance right on firms holding client money, and how we simplify the handbook. All of this is part of a change to regulatory approach with less prescription, more freedom and associated responsibility for law firms, and of course holding to account those that deliver services in a manner that is consistent with consumer protection and the rule of law. We are of course open to suggestions on other areas of regulation we can look at. Anyone wishing to put forward ideas for us to consider can e-mail reform@sra.org.uk. Crispin Passmore is Executive Director for Policy at the SRA. Further information on the Regulatory Reform programme is available at www.sra.org.uk/reform The consultations can be found at www.sra.org.uk/consultations
ML // June 2014
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The Views
Is Pricing Innovation possible in a highly commoditised market?
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lmost anything is capable of differentiation. If this were not true, how is it that Fortnum & Mason can charge £5.25 for a pot of strawberry jam, compared to £0.29 for substantially the same thing at Tescos? The name gives a clue; ‘Tesco Everyday Value Strawberry Jam’, doesn’t have quite the gravitas of ‘Coronation Royal Sovereign Strawberry Preserve’. But clearly there is more to it than that. The problem the profession is grappling with has its origins in the conflation of two completely different concepts; efficiency and effectiveness on the one hand and genuine commoditisation on the other hand. On the issue of efficiency and effectiveness, there is no doubt that there is a very real need for the profession to address its production and delivery methods. Initiatives such as process improvement and legal project management aim to identify waste and duplication in the production process, thereby reducing production cost for the benefit of the firm in improved margins and the client in terms of reduced fees, or both. With an eye to resisting undifferentiated offerings and the resultant commoditisation of their services, some firms have focused relentlessly on becoming known for certain practice areas. In the US for example, think Skadden, Arps, Slate, Meagher & Flom that ranked first in BTI Consulting’s ‘Client Perceptions of the Best Branded Law Firms’ report for successfully branding itself as “the transactions firm.” Other firms have chosen to spotlight their business models. Jones Day, which ranked second in BTI’s survey, is recognised for client service, value and experience. For an example of how this works in practice, in an industry that is every bit as ferociously competitive as law, one needs look no further than the airlines. As with law firms, they impose a minimum standard on themselves (get you and your luggage safely from point A to point B) but by offering widely divergent service experiences (on-board and peripheral), they can achieve pricing innovation with a differential of up to 500%. While technical capability can be a factor justifying a pricing differential between firms, it is far less of a point of difference than firms might think. In future, service and all that this entails will be where the pricing battle is won and lost. Richard Burcher, Chairman, Burcher Jennings
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The New Consumer Law Revolution
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magine that a new national fashion retailer launched on the high street announcing plans to sell ‘clothes’, or a new national butcher heralded its plan to sell ‘meat’. We may laugh but that is what most law firms do when they provide consumer law services: they provide ‘law’. What a state of affairs when one considers that we are talking about a market worth over £12billion in the UK! Nearly three years on from the legal services reform, and despite the Co-Op’s setbacks (all unrelated to its legal services arm), serious Consumer Law offerings are now being firmly established and they are winning customers from law firms. Now is the time for the old consumer law brands to get nervous. Over 60% of people still cannot name a single national law firm despite intensive T.V and radio advertising. The amount of money that any national law brand would need to spend to achieve similar visibility to leading consumer brands does not really bear thinking about. Strong regional law firms by contrast have a good future, combining locally sourced work with membership in B2B networks such as Connect2Law, which allows them to access national work generated by the big consumer brands. Establishing a leading brand starts with philosophy. Law firms have never had customers! They have clients. The word ‘client’ is a subtle way of saying “we know that you are an important person but not quite as important as we are”. The new Consumer Law on the other hand is all about customers! Law firms will struggle with the level of service demanded by the new Consumer Law. Providing legal services in the new model means being a custodian of the brand and ensuring that the legal customer enjoys the experience enough to sell it to other people. Every single bit of ‘leakage’ in the customer’s experience of the legal service must be identified and followed up to a level that would intimidate most law firms. It is only when you work closely with a leading brand that you see the true difference. These brands have the ambition to do to law what they have done with every other service they sell, namely to highly differentiate it by reference to what their brand stands for. It is this connection with the brand’s values, established over many years, which allows the legal product to be designed in distinctive and innovative ways, and to be joined with the brand’s lifetime journey for its customers. No consumer law firm can do this because national law brands don’t stand for anything, and probably never will. Only the most unfortunate individuals have a lifetime customer journey with a national law firm! David Jabbari, Head of Consumer Law, Parabis
ML // June 2014
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The Views
25
A new dimension
Stay alert
Do non-Lawyer positions within Law Firms offer more scope for firms working towards internal and external investor targets? With external investment into firms on a steady increase, is target driven practice on the increase?
Should ratings indicators, such as TrustPilot be compulsory for law firms across the board, in order to give the consumer a clear indication of client feedback prior to instructing a firm?
T
he subject of non-lawyer roles in traditional firms divides opinion when it comes to attracting and managing external investment but does it offer more scope? In my view yes, but it very much depends on the role and position the non-lawyer holds plus the level of autonomy he or she is given to think strategically and implement plans tactically. Many firms have realised that bringing in gravitas and expertise from the wider business community does attract opportunity and allows more creative thinking. However, what about delivery and performance management to achieve a return oninvestment, quickly? As you would expect, it depends on the calibre of the individual and the business model and strategy of the firm. But assuming the firm has a solid business plan and strategy being driven by energetic leaders it will (should) deliver a good return on investment provided key (specific] milestones and targets are achieved. I am often asked are lawyers more target focussed than in time gone by, often referred to the ‘good old days’. Generally I would say yes but it’s been slow progress, especially in bringing in additional expertise at board level. In the board room there is still resistance to change, or is it perhaps the fear of being found out. To create a high performance culture outputs and productivity must be managed, dare I say micro-managed. Typically this would be every month as a minimum and in the case of under-performance weekly to allow swift remedial action to be implemented. It’s far easier to address income shortfalls if actions are agreed at the first signs of fall off. How are the fee earners and income generators (including partners) performance managed? An investor is more likely to be patient about a profitable return if they can see evidence of a true performance management approach working. This will include, but not be exclusive, to the regular review of the strategic business plan, use of high level management information and application of key performance indicators. Investors want to see a return, usually a quick one, nonlawyers with skills and expertise operating at senior or board level brings a new dimension and energy to a firm that should not be underestimated. Tony Brown, Owner, AGB Legal
R
atings indicators, particularly online review sites, are solely dependent upon customers taking the time to rate a firm and provide an objective appraisal of their experience. As you can’t make it compulsory for customers to rate firms there’d be little point in introducing new legislation at the law firm end. Isn’t the real question “what do firms and customers gain from ratings indicators?” If you’re a firm with positive feedback then, of course, you have a lot to gain – assuming that your target market of prospective clients are looking at the website displaying your reviews. Positive comments are free marketing. They introduce or reinforce your brand and comfort prospective clients that your firm is worth approaching. But be aware that since the TripAdvisor review scandal (whereby the threat of a bad review is withdrawn in return for free services), the great British public is wising up to the validity of the more middle-ground reviews. Some negative feedback might be fair but once a disgruntled client takes to cyberspace, real brand damage can take place. We’re all more likely to halt a purchasing decision based on negative comments than pick up the phone based on good feedback. Take comfort in the fact that googling “UK lawyer reviews” brings up multiple websites, so unless your prospective client has a lot of time on their hands the chances are your negative review may not be read. The problem is that there’s no clear ratings leader for the legal marketplace. Even TrustPilot has placed “Lawyers” under their “Other” section. But that doesn’t mean it’s not a future growth market and one to keep your eyes on. Until a clear leader makes its mark, ask all your customers for their feedback, listen to what they say and improve your customer experience. Use testimonials across multichannel marketing and monitor social media channels. LinkedIn company pages are a must for those involved in Commercial work and encourage your lawyers to update their profiles and ask for recommendations to make it easy for people to develop working relationships with them. Twitter isn’t a fad; its information sharing and recommendation so engage with your Followers, keep them on side and they’ll reward you. If creating loyal customers is the focus, the ratings will come in time. And rightly so. Rayne Tompson, Director, Law League
ML // June 2014
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The Views
Additional considerations When looking for ATE on a multi claimant commercial claim, are there additional points to keep in mind?
‘Y
es’ Multiparty claims cover a broad spectrum, from two or more joint claimants on a single claim form, to substantial court managed, litigation under a group litigation order (GLO). It is not unusual for them to involve an element of funding, and after the event legal expenses insurance (ATE). Such actions can facilitate claims which may not have been viable as standalones, but the multiplicity of interests give rise to additional considerations. • ATE insurers are likely to want the following points addressed: • Identification of each claimant, and each party who will comprise the ‘Insured’. • Identification of the issues to be covered and whether these are common. • Own and adverse costs estimates tailored to the circumstances, and which lead to a level of cover being sought that is sufficient to take the matter through trial. • Agreement between claimants on cost sharing and the allocation of adverse costs. • Identification of a simple process by which the lawyers can take instructions. • Agreement between all interested parties on the distribution of claim proceeds. • Confirmation each claimant has, entered into the required agreements, authorised the issue of proceedings, and authorised the inception of ATE on terms offered. A case management conference in the RBS shareholder actions, reported earlier this year included consideration of adverse cost allocation [2014] EWHC 227 (Ch). The actions are subject to a GLO and at the time, two claimant groups had issued claims with others indicating an intention to do so. Arguments on liability for common adverse costs (paragraphs 24 – 37) are of general interest. In those actions, and with an objective of fair alignment of risk and reward, Hildyard J decided the fairest course was for each claimant to have several liabilities, in proportion to the amount they paid for their shares. That departed from the GLO default position (CPR 46.6(3)) where group litigants pay in equal proportions, and from the position contended for by one of the groups which involved splitting adverse costs between groups, then sub dividing between group members equally or as stipulated by group agreement. Submissions included comment on whether that would, in effect, ‘lay off’ part of the adverse risk from a larger group, onto the ATE cover obtained by a smaller group. The judgment makes interesting reading and provides food for thought.
27
The economic cycle
F
ive quarters of economic growth provides encouraging signs that the UK economic recovery is steady and sustainable. Against this backcloth I meet many legal firms who are now talking about growth on the back of increased transactional activity. Indeed the Banks Benchmarking Report detailed that 94% of respondents believe that revenue levels will increase in 2014. An improving demand for legal services has prompted many firms to consider a growth strategy and once again this fuels the market for lateral hires. I recently spoke with a Recruitment Manager who confirmed that the legal market is now more active than at any time in the last five years. The ability to achieve growth on the back of lateral hires is not risk free and a number of firms have jeopardised their financial stability on the back of a bad strategy, poor financial planning and ultimately the employment of non performing partners who fail to integrate within the new firm. Given the known risks associated with lateral hires and the obvious effects on overheads the question that should be asked “is it too early in the economic cycle for firms to be considering taking on lateral hires”? Before considering growth via lateral hire possibly a firm should consider the following: • Gearing, within SME firms the gearing ratio is on average 2x. Firms should consider their staffing ratios to establish if work can not be allocated to paralegals or less expensive employees thereby freeing up partner time. • Robert Mowbray suggests that there are some 1600 chargeable hours available in a year and yet many fee earners fail to record more than 1000 chargeable hours. The suggestion here is that many firms have unutilised capacity within their existing fee earners which could negate the need for lateral hires. The impact of fixed fees is that many firms have become poor at time recording and as such they can not measure time efficiency which has to be a poor management practice. • Instead of investing in people, why not explore what technology is available to save fee earner time and create additional capacity? Investment in technology is likely to be cheaper than investing in people and appropriate impact/benefit assessment will provide for an easier risk appraisal than that associated with a lateral hire - after all technology can’t tell fibs. So, in summary - before rushing in to a growth strategy involving lateral hires, firms should consider their own efficiency and how this can be improved. As ever, this will involve firms holding up a mirror to themselves and as we know, many firms fail to do this often enough. Steve Arundale is Head of Professional Sectors & Financial Institutions, Sectors & Specialist Business, NatWest
Matthew Williams, Head of AmTrust Law
ML // June 2014
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The Views
Turning full circle In the legal marketing sphere is content still king or is the correct delivery channel the key defining factor in marketing a law firm?
T
he world has moved on significantly from 1984 when my firm Goldsmith Williams was founded. Back then marketing legal services was straightforward. Our most successful advert was headed “Important Notice” and it brought in plenty of work. If only it was as simple as that these days. The combination of unrelenting technological advance, recent economic uncertainties and the unprecedented changes in the legal services landscape have created a challenging environment for marketing a law firm. Where to begin? The starting point for any marketing strategy should always be customer insight. Insight about legal services clients regularly reveals some negative preconceptions – be it trepidation about the complexity of issues to be grappled with and decisions to be made, or a concern about the final bill! In response to that, at Goldsmith Williams, we’re on a mission to make legal services more accessible and transparent. We’ve addressed this in a variety of ways including the repositioning of our website and the production of marketing collateral including brochures, videos and infographics. By allowing clients to choose how they consume information we have put content at the heart of their overall experience ensuring they are well informed and understand fully the basis for costs incurred. Content is king then? Well, not exactly - as insight also gives us information on the client’s service delivery preferences. Client behavior shows us that whilst many prefer to go online (and the sector’s focus on the application of technology has in many ways facilitated this), there are clients who still want to use more traditional channels (face to face or over the phone). Therefore, providing a range of channels to offer to clients is also critical in the effective marketing of a law firm. After all clients taking up legal services are in essence looking for two things – legal expertise and service. A cornerstone of service delivery is channel choice so the client can do business the way they want to do it. Turning full circle, reflecting channel choices and service focus with examples of professionalism and a personally tailored approach is a key part marketing content. My conclusion is this, in the legal marketing sphere neither content nor the correct delivery channel is THE defining factor. The combination of both in addressing client needs and preferences differentiates a firm’s offer and secures the client’s business.
29
Watch this space Is true innovation possible in a highly commoditised marketplace?
T
his rather begs some questions. What is true innovation? Is the legal market (or parts of it) highly commoditised? To what extent has there actually been innovation in the legal market? Innovation involves doing thinks both differently and better than the rest of the market. There are some pockets of innovation emerging, but it’s still early days. The one exception to this is in the RTA personal injury sector, where the particularities of that microcosm, driven by the economics of a runaway referral fee model coupled with a large volume of claims that were little more than pure process, created the perfect conditions long before the Legal Services Act came into force for innovative commoditisation. The innovation process there is nearly at an end, with 2 different volume models now dominant – the vertically integrated full accident management model and the volume legal process outsourcer/JV model. So what about the rest of the legal market? There’s a degree of commoditisation in the conveyancing sector – again, process, volume and acquisition driven – but other than creating the drive for fixed fees (which is big news in its own right) there are few signs that the process, let alone the experience for clients, has yet changed for the better. That apart, not much of any scale or significance has emerged. The Legal Services Act has opened the door to innovators in the mainstream market. The first shoots are starting to emerge, but much more is on its way. This will be driven by both the influence of successful business process and management from outside of the market and the pace of technological innovation. Once these two forces start to have an influence on the way that legal services are delivered, the landscape will be transformed. Commoditisation is generally thought to be dependent on simple process and high volume. It will soon become available to providers who deal in more complex matters with a substantial degree of bespoke input. Any process can be driven by technology. Just glimpse into the future with the developments that are currently taking place in introducing Artificial Intelligence, not just in document creation but also knowledge management. So the answer is yes. Just keep on watching this space. Simon Goldhill, Principal, Simon Goldhill Consultancy
Edward Goldsmith, Founding Partner, Goldsmith Williams Solicitors
ML // June 2014
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The Views
31
Developing content...
Switch on or take the hit
In the legal marketing sphere is content still king or is the correct delivery channel the key defining factor in marketing a law firm?
have a difficult relationship with my mobile phone. We don’t talk much these days and sometimes I think we were wrong for each other from the start. Being a child of the ‘60s, I like the idea of the phone being rooted to the spot. Call me at the office, ring me at home - but don’t expect to catch me on the move - mobility is freedom! The irony is… I’ve just developed a mobile app. ‘The moral?’ you ask. Technology always wins.
W
hen it comes to deciding which works best, the content you create or the channels you pass it through, the answer is both. Content (blogs, videos, web pages) works in parallel to the channels (social media, emails, websites) you use, they are not mutually exclusive. What you do need to do though is understand the type of content that works and the channels your audience uses. We already know that modern law firms get the best results from using the most modern forms of communication. The days of long articles full of legal jargon are on their way out. What is replacing this outdated content are blog pieces on various aspects related to the law or a law firm’s business and videos about their services. The blogs and webpages are short and to the point. They are full of easy to understand, useable information telling the reader everything from the impact of a recent regulatory change, through to the reasons why one legal process might be favoured over the other. Videos, however, tend to speak directly to potential clients about the services a law firm is offering in a personal and friendly way, showing that while professional, they are also approachable. After spending time in getting your content perfect, you want to make sure it does hit the right people. Just sending random messages across multiple platforms is not efficient as not all channels will be used by your audience. For example Facebook is excellent for attracting a consumer based audience but business based audiences are usually found elsewhere. Pay Per Click (PPC) campaigns are a great way of targeting specific groups of people. While Google’s PPC offering is used to good effect, the same PPC systems on Facebook, Twitter and YouTube are heavily underutilised. These are therefore currently cheaper and allow you to send messages to a very narrow but highly receptive target group, in a non-evasive but efficient way. Developing content and the way you share it across channels is determined by who you want to reach. There is no ‘onesize-fits-all’ here and understanding that means the hard work you’ve put into your content won’t be wasted.
I
I’ve named it Pocket Witness. It’s an app for those who may be giving evidence in a court, tribunal or inquiry. As we’ve recently discovered, apps are a valuable resource, a great brand-enhancer and an effective way of learning on the go. We’ve also discovered that the average witness may be at a disadvantage from the moment (s)he enters the courtroom. Jargon, alien procedure and inquisitors in 17th century garb are unsettling and let’s face it - the courtappointed witness service is basic at best. With first-hand information on this subject sparse, we decided to solve the problem with a friendly mobile app – a source of specialised knowledge and quick training for the courtroom predicament. With everything from Archbold to Sun Tzu’s Art of War now available on your phone, what used to be science fiction is perilously close to reality. But I’m getting carried away here. Those of us in legal services can recognise the value of something that explains complex ideas to our clients in a simple, enjoyable way. With Pocket Witness, I have taken the courtroom experience and broken it into a step by step guide: complete with illustrations, courtroom layouts, examples and expert advice, all of which are in plain English and designed for Joe Public. The law may not be the greatest environment for change – it’s not the most customer-friendly business, either – which is why small advances like mobile apps can help us engage our clients and bit-by-byte, improve the business as a whole. If all of us start doing it, we might even get a reputation for being fun (or cool)! In the meantime, Pocket Witness will be coming soon to Apple and Android devices. Try it when it comes out but please remember not to take it into court! Trevor Gilbert, CEO, Witness Box
Dez Derry, CEO, mmadigital, online marketing for modern law firms.
ML // June 2014
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R E A L LY
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The Views
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Flourish and grow
A clearer view
xperts in different fields have their own opinions about how mid-sized law firms can overcome the problems arising from continued market consolidation. Financial experts will refer to sound financial planning. Customer service specialists will tell you that client care is at the very heart of success. There are other experts and other equally valid opinions out there, too numerous to mention. All of these opinions are correct. There is no magic formula which enables firms to succeed, but an amalgamation of different, often competing, factors.
With the SRA announcing their consultation process on Professional Indemnity Insurance (PII) minimum terms, how can we expect to see the landscape change for solicitors and what should we be doing prepare for it?
E
Legal Eye’s area of expertise lies in assisting law firms with their compliance requirements, be that strategic, operational or regulatory and it is investing in these, as well as the other key areas referred to above, which will help mid-sized law firms embed their position within the current and ever-changing legal market giving them firm foundations on which to flourish and grow notwithstanding the heavy consolidation that continues apace. Operational – quality standards, Lexcel, CQSetc ensure fee earners have a rigorous risk management framework within which to operate. With clear reporting structures, sound supervisory arrangements, adherence to policies/ procedures and an endemic system of file reviews, allows senior management to drive the strategic direction of the firm, content in the knowledge that each fee earner is working to the same high standard and each client receiving the same quality of service. Negative trends are highlighted enabling corrective measures to be implemented prior to damage to a firm’s reputation. It also demonstrates the firm’s commitment to managing and reducing risk and ultimately reducing what, for many firms, is a significant annual burden - PI insurance. Regulatory risks are those to be considered as a result of the regulatory framework that impacts on the business. Keeping up-to-date with these regulations, ie: Code of Conduct 2011, Data Protection Act etc, ensures the firm does not fall foul of the SRA’s radar. Finally, strategic risk is arguably the most important element of risk management in enabling mid-sized law firms to overcome problems arising from market consolidation. However, without careful attention to the aforementioned areas, all the strategic planning will be for nothing. Strategic planning requires considering the viability and success of the business having regard to such factors as the current economic climate, the socioeconomic profile of the area and ensuring there is a sound financial strategy, effective marketing to maintain and improve the firm’s position, business continuity planning (tested) and succession planning etc. There is no guarantee for firms of any size but for midsized firms, sound risk management principles will stand them in good stead for years to come.
F
ollowing the announcement of the consultation paper on May 7th, we are beginning to get a clearer view of the stance the Solicitors Regulation Authority (SRA) is taking towards Professional Indemnity Insurance (PII) and its perception of protecting clients. The two key issues they have turned their attention to recently are the use of unrated insurers and the need for a minimum £2m (or £3m) limit of indemnity. Unrated Insurers The SRA has, somewhat surprisingly, decided to allow the continued use of unrated insurers for the present time although it has said it will keep this subject under review. As 25% of the profession is currently insured with unrated insurers this decision will come as welcome news to many. Solicitors do, however, need to be aware of the risks associated with unrated insurers. It is important to investigate options and obtain advice from an independent specialist broker in this regard. Limit of Indemnity The other issue currently under consideration is the proposal to reduce the minimum limit of indemnity required to £500,000 and possibly permitting aggregate cover. Of course it is logical to think that this will lead to cheaper premiums for small firms and sole practitioners. Solicitors may be disappointed, however, to find their premiums reduce by a smaller amount than anticipated (or not reduced at all). The reason for this is that 98% of PII claims fall below £500k. As such, insurers may feel the risks are fundamentally the same and charge similar premiums. If premiums are reduced for the lower limit but claims remain unchanged this may put considerable pressure on the underwriting results of Insurers andunrated Insurers in particular. 2014 Renewals As we head into the 2014 renewal season the SRA consultation and potential changes to the PI landscape only serve to reinforce the importance of accessing specialist advice. For the larger firms these changes will make little or no difference but for smaller firms it could have a dramatic effect. We support any measures that help firms reduce the burden of PII premiums but need to ensure they remain adequately protected. Facing a claim of £2m with only £500k of insurance is not a prospect any firm would want to experience. Colin Taylor, Executive Director, Legal Services Practice Group, Willis
Helen Glaze, Associate, Legal Eye Ltd
ML // June 2014
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The Views
35
Love at first sight?
Sea change
Who has the advantage when it comes to better buying?
Do ‘non-lawyer’ positions within law firms offer more scope for firms working towards internal and investor targets? With external investment into firms on a steady increase, is ‘target driven practice’ on the increase?
W
ith clients demanding fixed prices rather than hourly billing, why is it that clients always want more for less? Never mind Tesco Law, are we about to see the advent of PoundLand Law? Whatever the reason, law firms are under constant pressure to reduce their costs. This is no problem for larger firms who have procurement directors and teams of people with expertise in everything from archive storage to utilities and from office products to telecoms. But where does this leave mid-sized and smaller firms who don’t have the expertise or network of supply contacts. At first sight there is one answer to this; they are disadvantaged. In a recent survey of mid-sized and smaller firms carried out by OyezTeam cost and quality were the main factors in buying decisions. Quality was put much higher by law firms than commercial firms in a similar survey. Good news, at least these law firms were aware of delicate balance between cost and quality. However looking deeper that cost and quality this is where the problems begin. Small and medium sized firms chose ‘using someone they knew’ or ‘prefer a local supplier’ as their next most favoured factors. This loyalty is fantastic if borne out of knowledge and informed choice, but without this it can just mean buying from whoever you have always bought from. What is the answer? The rise of the buying networks and groups is one answer. The likes of Connect2Law and Spiral claim to research the market, and offer competitive negotiated terms with selected suppliers. Cost reduction consultants are another option and are fact of life in the legal industry, some offer great value, some not so. However on the whole they tend to concentrate on the richer pickings in the large firms where they split the savings they can make from any cost reductions. E-bids and online sourcing may seem attractive at first sight but come with associated overheads that need to be considered. Don’t underestimate the tricks played by suppliers in this sector. What appears to be alchemy is probably just that. Once signed up the problems start, substitution of inferior quality products when the specification was for branded products, and poor quality service. We have just launched our own buying network, the OyezTeam Buying Club, with the rationale of negotiating with suppliers across numerous areas such as utilities and telecoms, cost draftsmen to furniture on behalf of the 60% of law firms that have an account with us; a sort of ‘comparethemarket.com’. But anything is better than PoundLand Law isn’t it?
I
t has long been the case that trainee Chartered Legal Executives who have passed some exams, but are not yet qualified lawyers, have been given a level of responsibility at work commensurate with their knowledge. The CILEx professional qualification is split into two levels: a foundation at Level 3 consisting of ten units, and a specialist higher qualification at Level 6 comprising six units. The Level 3 qualification includes a broad range of compulsory law units, a minimum of two and maximum of three legal practice units and two mandatory professional skills units. Success at Level 3 delivers a good understanding of legal concepts, and those who have passed a number of units of Level 3 are an excellent resource for law firms seeking to place straightforward matters into safe hands at a lower cost than employing law graduates or fully qualified lawyers. Until relatively recently, the Level 3 CILEx units have been used only by students seeking to become Chartered Legal Executives. Employers have recognised their achievement along the way and given increased responsibility as they worked their way through their Level 3 and then Level 6 qualifications. Over the past five years there has been a sea change in how the CILEx units are being used by many legal services providers. Since the qualification was unitised in 2008, progressive firms have seen the benefits of training staff in selected CILEx units, without any intention either on the part of the member of staff, or the employer, for them to become Chartered Legal Executives. CILEx Law School runs academies within many client organisations where support staff are taught the CILEx Level 3 units that are relevant for their jobs, be it tort and civil litigation for personal injury practices, or contract and civil litigation for debt recovery and dispute resolution. The reward for the firms who train support staff in this way, be they young school leavers or seasoned legal secretaries, is that low-value matters can be progressed by relatively inexpensive personnel, who will tend to be extremely loyal and satisfied employees. In many cases this is a much better alternative to employing either unfulfilled law graduates or unqualified support staff who are trained only to carry out tasks and procedures without any understanding of the law that is being applied. Noel Inge, Managing Director, CILEx Law School
Nick Hodges, Managing Director, Oyez Professional Services Limited
ML // June 2014
The Views
37
The perfect solution...
Knowing your goals...
How can small firms with fewer investible resources, best keep up with the pace of technological change?
In the legal marketing sphere is content still king or is the correct delivery channel the key defining factor in marketing a law firm?
I
n the space of a 12 month period, small law firms will have faced two of their biggest technological challenges of the last decade, the retirement of both Windows XP and Windows Server 2003. These stalwarts of IT have proved sound investments for firms but with their passing smaller practices are left questioning how they can remain competitive when the rate of technological change is accelerating. The impact of broad brush technological changes such as the replacement of server infrastructure will be more pronounced on small firms because, put simply, they do not have the funds readily available to replace their IT infrastructure wholesale. But because they are small shouldn’t mean that these firms are kept at a technological disadvantage compared to larger firms. By deploying business applications to the cloud, small law firms can directly address the challenge of remaining up to date with their tech. Software patches and updates are done for them, the cost of storage space (the digital kind) is made irrelevant and storage space (the physical kind) is freed up as on premise servers and rack space is no longer required. Furthermore the headache of data security is handed over to experts in that field, meaning that anti-virus and malware patches will be deployed on a firms applications far quicker than if it was handled in house. Of course the deployment of a hosted solution also brings with it financial benefits for small firms. As on-site IT hardware can be drastically reduced capital expenditure can be replaced with predictable operational cost and monthly payment schemes. There is no longer the need for a large pot of money to be set aside for IT refresh projects, allowing those funds to be spent on more customer-centric activities. Varying commercial models exist to fit the circumstances of the firm be that a monthly SaaS model whereby contracts can be ended at any time or a monthly payment plan with a minimum agreed period.
W
henever a law firm embarks on a marketing strategy, market research and data gathering will always play an important role in a campaign’s success as comprehensive market research to identify market trends, client demographics and buying habits combined with a database of content that is cleansed, up-to-date and segmented, gives the firm a head start to its marketing success. However, firms also need to select the right channels to market in order to get their products and services in front of their target audience. As there are so many channels to market- and it’s not practical to manage them all – firms need a comprehensive marketing strategy with a list of activities that will give them the best return on investment. When developing your marketing channel, it is vital to understand who your customer is and what they are going to see, read and engage with. Once you have this information, you can develop a message around the people you are targeting, whilst still being aware of your budget, as you need to be aware of cost per acquisition which is the number of enquiries you need to pay for your campaign. When developing marketing strategies for our clients, we always advise them to identify what they want to achieve and help them craft the right message and marketing channels to achieve their goal. We look at the current channels they use and grade other potential channels for fit and potential return. Once we have the right messages we then select a number of channels that will have the best impact to reap the rewards of retaining their existing clients and gaining new ones. Ian Hunter, Managing Director, Jellyfish Legal
The combination of predictable payment options, combined with the knowledge that their IT infrastructure will always be “relevant” is a perfect solution for smaller law firms looking to be adaptable and wanting to remove the heavy burden of an owned IT infrastructure solution. Jitendra Valera (JV), Chief Marketing Officer, Advanced Legal
ML // June 2014
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The Views
39
A bright future
Food for thought
believe that a thriving community of mid-sized law firms (MSLFs) is essential in our sector, and actually has a very bright future. MSLFs will give the sector the flexibility and creativity it needs to develop, innovate and grow. They provide competition and choice in the market place, at a time when consolidation threatens it. Through their niche positioning, they can attract good quality talent through innovative working environments and packages. One example of a MSLF really succeeding is Express Solicitors. Specialising in personal injury and clinical negligence only, but doing it right, and embedding itself at the heart of its local community Express has built an enviable story of growth, satisfaction and talent management at a time when many believe these specialisms were doomed. Express has achieved this by not behaving like some of the big boys, continuing investment in people and engagement with clients.
How can mid-sized law firms overcome problems arising from continued market consolidation?
I
Of course the ‘bigger players’ seek to attract highprofile, big-ticket clients, but in doing so they necessarily lose connection with the growing number of start-up companies or individual clients who still like to express a freedom to choose representation. Clients like to choose lawyers whose values best fit their own. When law firms become too corporate, this can disenfranchise prospective clients, and MSLFs should step in. As firms grow they can also develop some of the less attractive qualities of corporations; inefficiency; tardiness; poor communication; poor value and so on. Leaner, more efficient and fleet of foot, MSLFs can focus on client bases perhaps alienated by consolidated operations. For MSLFs the question should not be; ‘How much market share do I have?’ but rather, ‘What am I getting out of the share of the market I do have and how can I build on that?’ There are three steps to realising a MSLFs growth potential: 1. Generating confidence and ambition 2. Building new skills and competencies 3. Plugging the financial gap Some MSLFs may not necessarily want to grow, they may be happy with their current position and the risks of growth may completely outweigh the potential returns. After all, investing in growth brings its own risks, especially in a market where there is uncertainty over investment (CBI stats show fewer than 1 in 10 MSLFs tap into the equity markets for investment). However, those MSLFs who don’t seek to exploit their particular advantages in the new world may not achieve the rosy future they seek. MSLFs are as important now as ever and given sound financial planning, a confident business development plan and a quality service offering they should be able to weather the storm and enjoy success long into the future.
I be my response.
think the answer for the “squeezedmiddle” is to “get big, get regional or get niche”. That is of course overly simplistic without intending to be flippant, but if the answer had to be summed up in one phrase, that would
Get Big Mergers & Acquisitions have been happening at pace, and this trend is not only set to continue, but to increase. If your firm is showing signs of being in the “squeezedmiddle” and you haven’t thought about getting “bigger”, now is most certainly the time. Look at Slater & Gordon for example. Russell, Jones & Walker, Pannone and Fentons (as well as a number of firms, probably too small to be considered “mid-sized” but significant in their own right – Goodmans, John Pickering & Partners) all saw their future as being part of a much larger organisation. Andrew Grech, Managing Director of Slater & Gordon predicts three large organisations sharing up to 40% of the consumer and PI market, and I suspect they will emerge as the leader of those three. Get Regional Decide where your battle lines should be drawn. If you have a strong regional presence, is the answer for you to try and compete on a London-centric or international basis? You might be best served by sticking to your regional roots and leaving the bun-fight over blue-chip clients to others more appropriately geared to service them. There are successful Top 100 firms who don’t have a London office, let alone an international one, and have no intention of opening either. There are other equally successful UK firms who have decided their particular “region” should be Asia, and opened a Singapore office for example. Get Niche Decide which areas of law you want to specialise in, and be better than your competitors at these. You might, for example, decide that PI is not an area in which you wish to compete, and it doesn’t sit well with your brand going forward. Look at Taylor Vinters who sold their PI department to Slater & Gordon. With proceeds from department sales, you can re-invest into areas you do wish to be the best at. This might be employment, family law or for mid-sized firms more likely corporate/commercial work. The answers can’t be found in a snap-shot this size, but this will hopefully help provide some food for thought for mid-sized firms. Ben Holmes, Managing Director, Invest In Law
Tom Bingham , Sales Manager, Ontime Group
ML // June 2014
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Tel: 020 7204 8831 Email: pwishart@cobralm.com Web: www.cobralegalip.com
The Views
Helping the ‘middle man’
I
n the anticipation of LASPO and the implementation of the reduced fees in the Portal and the extension of the fixed fee regime in most personal injury claims up to £25,000, the phrase “get big, get niche or get out”, was coined. The logic being that under the new economic and regulatory landscape, economies of scale would assist the big firms and payment on an hourly rate would assist the niche firms. However and probably not unsurprisingly, it has not been quite as simple as the three choice options. Yes, some have got bigger via venture capital backing, insurer backing or Australian stock exchange backing. And, yes the niche players continue to be niche, but what about everyone else? It is not easy to become massive and equally hard to become niche overnight. So have the mid-sized law firms taken the “get out” option? The short answer is no. So what have they done and how will they survive? My view is that 2014 is a buffer year, in which old style work in progress (WIP) is still allowing mid-sized firms to continue as if it they were pre LASPO and pre fee changes. But old style WIP is not going to last forever, so what should firms be doing while they have this buffer year? I suggest that firms should work out what their new WIP revenues look like; revisit how they deal with the new work; revisit who does that work; revisit how they get the work; look to become self-sufficient; invest in IT and right size the firm; and right size is different for each individual firm. The bad news is to get to that happy and “right” place is going to take a lot of brave and painful management and some owners will just not be prepared to go through the pain and stress of reinventing the firm. The good news is that if you can in essence start again, and you are able to create a self-sufficient firm that makes a reasonable return, you have a sustainable business and it really doesn’t matter what size you are. Lastly while you are in reinvention mode, you may well have to come up with a new definition of “reasonable return” and take head of what other similarly qualified professionals earn. David Bott, Senior Partner, Bott & Co
41
Appropriate targets
W
e’ve certainly seen a growth in non-lawyer positions at law firms. A few years ago, roles like CEO, COO and CFO didn’t exist outside the largest firms. Now they’re commonplace in firms of all shapes and sizes.
While once it was enough just to fee-earn, in a market of increased competition and reduced demand, where firms might also have external investors to answer to, the way you earn your fees is more important than ever. In most cases, this has meant someone in the firm stepping out of practice, or hiring an outsider, to take a birds-eye view of profitability and business process. As non-lawyer roles become more commonplace, so too does target-driven practice. The billable hour has been around for years, hiding a host of inefficiencies. With the help of those in non-lawyer roles, small and medium-sized firms are focusing more on improving realisation rates (% of fees recovered from the client) and on reducing ‘lock-up’ (the amount of money tied up in work-in-progress). Tactics might include deploying efficiency tools - we’ve certainly seen increased demand for services like Practical Law, which remove the need to draft from scratch, and Westlaw UK, which significantly speeds up lengthy research tasks that can’t be billed back to the client. Having someone overlooking the finances also tends to improve billing. Imagine a small practice with no senior non-lawyer roles and several partners who are protective over their clients. There is likely to be a lot of recorded time sitting on client accounts as outstanding debt. Now imagine that firm has a CFO who sends a monthly email to the partners with a list of outstanding debts against each of their names. I’m confident those partners would soon be more willing to hold the awkward money conversations. Firms are also starting to set metrics around business development and cross-selling - areas in which they have traditionally struggled. Lawyers just weren’t designed to cross-sell. When you’re project-driven with specific practice area expertise, it’s easy to miss opportunity. If a property partner at our example firm is working on a new lease for his client, does he step back and ask: “What are the underlying business needs? Is my client acquiring a new company? If so, could there be some M&A work for our firm here?” With the help of appropriate targets, he might. Chris Jeffery, Head of Small & Medium Law Firms, Thomson Reuters, Legal UK & Ireland
ML // June 2014
42
The Views
Abortive Conveyancing Transactions... is there a solution?
I
t appears that buying a house is a risky (and nervous) business, not just for the buyers and the sellers, but also for the Solicitors dealing with conveyancing. Although there are no collated statistics for the number of failed transactions, most solicitors put the figure at between 5 and 10%. If you count failures before solicitors receive instructions, then this figure rockets to around 20 to 25%. This would explain why moving house is one of the 3 most stressful events for people. So what can one do to solve the issue of abortive conveyancing transactions? Do clients want to protect themselves against failed transaction fees and disbursements? What can Solicitors do to protect their clients and themselves? At Box Legal, we recently commissioned a detailed survey from Populus, a leading research company. Their survey of 2043 people has revealed a strong concern amongst the public about wasted expenses if their house sale or purchase fails to go ahead. Of the 2,043 people polled, 80% were concerned or very concerned about losing money if their purchase or sale failed to complete. What’s more, 60% of those polled said they would most likely buy an insurance product such as Box Legal’s MoveSafe or MoveSafe ‘Lite’ policy to protect them from these costs. This was particularly the case as they would only have to pay the premium if their transaction completed and there was no payment required up-front. Could this be the answer to not only a client’s worry when moving, but also a Solicitors? Should conveyancing firms be offering these insurance options to their clients? A staggering 77% of those surveyed said that they would want their conveyancing firm to offer them the chance of buying a failed transaction policy as part of their conveyancing process.
The way forward
I
ssues around IT architecture are equally relevant to large and small firms, the only difference is who looks after the technology. Whilst a larger firm will have an in-house IT team, the smaller firm will have to rely on an external partner.
The term “partner” is key– this isn’t just a conventional “IT support firm” who you call when your network goes down. This is a true partner who works with you to understand your business, your underlying requirements, and your limitations– such as resources. They should be pro-active, calling you when they come across something they feel would benefit you. You should feel confident that their recommendations are based on their knowledge of what you need and what you do. Of course that is not to say you take everything they say as gospel, but over time each learns from the other to work towards a synergistic result. Although until recently there was no such thing as an “IT budget”, firms now need to invest continuously to keep up to date, or they risk unexpected high expenditure to keep systems running. For example, the recent end of support for Windows XP has resulted in many firms having to implement costly projects to upgrade servers, workstations and applications which often have intertwined dependencies based on different versions, and which would have been much easier to manage had they been done over a longer period of time. But are bespoke systems the way to go? A bespoke system is theoretically customised perfectly for you, and although it will be more expensive than an off-the-shelf system, there may be longer term cost savings, as it will better fit your way of working. However, costs often escalate because users do not clearly define their needs at the start of the project, requiring major retrofits and updates later.
Whatever the view from solicitors, the general public appears to want to be protected. The solicitor also gains from this insurance as they will always be paid their disbursements and even their fees if a sale or purchase fails to complete. It seems to make financial sense all round.
Perhaps the best compromise is a customisable offthe-shelf system, which provides the core functionality, but can be adjusted and enhanced to work with your business. As off-the-shelf applications are often based around best practice, there is a lot to be said for adjusting your working methods to fit the application, rather than vice versa. Another advantage is succession planning: A standard (or partially customised) system is going to be much easier for a new partner to support than a completely bespoke system.
Daniel Morris, Director and co-founder, Box Legal Limited
Benjamin Arnold, IT Manager, Hardwicke
ML // June 2014
The Views
43
Who ATE all the PII?
U
nfortunately in some respects parallels can be made between post LASPO personal injury claims sector and the previous property boom. Professional Indemnity Insurers aredealing with things missed or otherwise during the days of competitively priced fixed fee commoditised conveyancing. So as a PII insurer why is Elite Insurance concerned about personal injury (which until now had a relatively low amount of complaints)? The signs are there and lie in a dangerous cocktail of: 1. The client now physically pays money from their damages 2. Less appetite to take up ATE protection 3. Low fixed fees leading to commoditisation of cases being handled by unqualified fee-earners including a dramatic reduction of the use of barristers 4. Competitive market forces driving up acquisition costs in the short term 5. Failing law firms increasingly unable to manage profit, loss and overheads (including rising professional indemnity premiums) 6. “Cannibalistic” law firms setting up professional negligence departments specifically focused on undersettled claims Elite Insurance can see a perfect storm brewing. In the last 18 months damages caused by RTA have shot up by a quarter or more (according to portal statistics); well above the concessionary 10% increase and there is no sign of that
slowing given that defendant insurers present attitude is to settle the claim inside the portal. Whilst this is some good news for claimants and solicitors, we fully expect defendant insurers to start to challenge quantum in a need to restore some control over the global cost of a claim. Conversely, those law firms settling their clients’ cases low and early are under threat from their industry competitors as the gap in damages between settlement and the industry average grows and clients complain when hearing Bob down the pub got as much as £1500 more for a simple whiplash claim. What will help keep your professional indemnity insurer on-side? 1. Using ATE to insure the risks of failing to beat a part 36 offer and therefore protect against any future defendant insurer change of behaviour or under settlement 2. Lay off quantum risk by appropriately involving barristers As a company providing ATE and PII insurance, Elite Insurance has a vested interest in helping protect law firms and offers such product solutions. Law firms taking simple steps to minimise the risks by using related products will reduce the risk of under-valuing a claim and lower the probability of a future claim on their professional indemnity policy. This will therefore reflect positively on any renewal quote. Jeff Dawson ACI, Director of Sales, Elite Insurance Company
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The Features Business as usual? Paul Wishart explores some proposed changes to Minimum Levels of Professional Indemnity Insurance (PII) cover and outlines how firms can ensure their renewals are successful this year.
T
he 2013 PII renewal season saw significant change, with the final closure of the infamous Assigned Risk Pool and a move to the extended indemnity and cessation periods. The SRA advised that circa 130 firms had to shut down following a failure to obtain renewal terms. The common renewal date was also removed in 2013, although at the current time the vast majority of firms have still retained the 1st October as their renewal date. It will come as no surprise that continuing hot topics of discussion have included whether unrated insurers should still be allowed to participate in the market, and concerns regarding a general lack of capacity and “appetite” from insurers. The SRA has recently declared that unrated insurers will not be banned from participating, although they will continue to monitor the situation closely. Many small firms have breathed a sigh of relief that this capacity will still remain. The SRA has also stated that it is considering a number of proposals for this year, with arguably the most important one being to decrease the minimum limit to £500,000 for any one claim, though the proposed introduction of an annual aggregate cap on claims, and to decrease the run-off requirement to three years, are also both significant. Managing exposure So what impact, if any, will these proposed changes have? Law firms may think that reducing their policy limit to £500,000 should lead to a significant reduction in their
premium. The reality is that the vast majority of claims against solicitors fall below £500,000 in value, so many insurers will consider that their claims exposures may not vary too much, although the aggregate cap could have an impact in certain cases and also provide insurers with some additional comfort. It also enables them to more easily manage their overall exposures, so there should be some improvement on premiums. More capacity may be attracted to the market, but the premiums will not reduce in proportion to the reduction in the limit. Run-off requirements reducing to only three years may also appeal to some insurers concerned about the “long-tail” associated with writing solicitors PII, although the majority of run-off claims are again likely to be brought within three years, so the impact will not be perhaps as great as might be anticipated. Some concern has been raised as to whether the caps will pose a risk to consumers. As most claims fall within £500,000, there will rarely be cases where there is an issue; most multi-million pound litigation against solicitors is conducted by commercial clients, which will probably insist upon firms having higher limits through excess layers. The SRA is also proposing that firms must take responsibility for ensuring that they have the right limits in place, although there are always concerns that “rogue” solicitors will ignore these obligations. Nevertheless, there are many firms which currently practice which could potentially have exposures well in excess of a £2m or £3m limit. Again, these exposures are predominately in respect of commercial work. There are certain
practice areas where, however, there may be concern for example large personal injury and medical negligence cases where damages can run into the millions. Be open The SRA has advised that the implementation of these proposed changes will be confirmed in early August 2014. Firms should obtain early renewal terms as usual, but perhaps postpone making any decisions on renewing until the changes have been formally announced. Whilst insurers are currently considering their strategies for the 2014 renewal season, how the whole market reacts will probably not be obvious until August. What else should firms do to ensure that they are an attractive risk to insurers? Complete a new full proposal form, and ensure that additional information is provided when the form requires it. Full insurer claims summaries for the last six years should be provided, and dated this year. By all means approach several brokers, but liaise with them as to which insurers they access so that there is no duplication. Finally, it is worth considering that the solicitors PII market is a commercial marketplace. Insurers have no obligation to offer quotes, and have suffered significant losses. Insurers are wary, so full disclosure is prudent. If the underwriter suspects that a firm is trying to hide something, then they would rather not quote. Wellpresented submissions, which place an emphasis on good regulatory practice, will be well received. Paul Wishart LLB (Hons) is Managing Director at COBRA Legal & IP
ML // June 2014
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The Features
47
Across the pond Lena Koke explains the changing nature of the legal services market in Canada, including the rise and rise of ‘Supermarket Law’.
H
igh prices and intimidating settings are of great concern for people when it comes to dealing with their legal matters. Innovative lawyers around the world are seeking novel solutions to these issues. In Toronto, we founded Axess Law with a view to delivering reasonably priced legal services to Canadians in non-intimidating, easily accessible settings. A recent survey by Lawyers’ Professional Indemnity Company (LAWPRO), located in Canada, revealed that 56% of Canadian adults do not have a signed will and over 70% do not possess signed power of attorneys. Many respondents cite cost as a factor which prevents them from making a will. With the time delays and costs associated with dying intestate, one of our goals is to provide 200,000 Canadian adults with wills over the next five years. At Axess Law, simple wills are drafted for $99 (approximately £54), documents are notarised at a cost of $25 (approximately £14) and both power of attorneys for property and for personal care are created for $79 (approximately £43). Canadians also note that they find the thought of meeting with a lawyer to be a daunting one. Rather than being in the typically envisioned oak panelled law office located in a downtown skyscraper, we attempt to take the intimidation factor out of the equation. Axess Law’s open-plan offices are found within Walmart stores, venues which clients find to be friendly and convenient, and where they feel less inhibited to pop in for legal services or to make inquiries with on-site lawyers. With office hours from 10am to 8pm seven days a week, customers are able to book appointments at times that are convenient for them. In fact, evenings and weekends are our busiest times. Clients no longer have to take time off of work to sign real estate documents, pick up keys or draft a will. Falling short There is a growing recognition amongst legal professionals, government bodies and the Canadian public, that the current legal system is not meeting the legal needs of society. Benchers of the Law Society of Upper Canada, which regulates legal services in Ontario, unanimously voted to launch a consultation on alternative business structures in February of this year. While some industry professionals and Benchers feel that allowing legal services to be
provided in retail settings such as Walmarts will lead to a decline in the professionalism of the legal industry, Malcolm Mercer, who was chairman of the Alternative Business Structure working group set up by the Law Society of Upper Canada, responded that, “Professionalism isn’t about you. Professionalism is about protection of the public in terms of what we call legal ethics. It isn’t about your dignity or my dignity. It’s ensuring that services are effectively provided in ways that protect confidentiality, privilege, competence and the like.” Mercer went on to claim that the current legal framework does not meet 85% of legal needs in Canada. We, at Axess Law, tend to agree. These sentiments were echoed in a recent Edmonton Journal article, which interviewed the dean of law at the University of Alberta and former Bay Street corporate lawyer, Paul Paton, who stated, “The independent law office, the mainstay of ethical legal practice, faces major challenges in the era of Internet services and has to find “nontraditional ways” to serve clients. We need to make sure people have an ability to access services at all levels.”
‘There is a growing recognition amongst legal professionals, government bodies and the Canadian public, that the current legal system is not meeting the legal needs of society’ Seeing clearly Our business was set up to address exactly these needs and concerns. We focus on affordability and accessibility with the aim of providing prompt legal services at prices that are reasonable to the average Canadian. With the use of proprietary software designed to produce wills, power of attorneys and other legal documents quickly and efficiently, our lawyers are able to meet with a higher volume of clients at each office location which allows us to offer an affordable pricing structure. When it comes to legal fees, many clients are concerned about the unknown costs that may be incurred when they are being billed by the hour or if they call their lawyer with a question. At Axess Law the price of each service is fixed and stated to the client at the outset of the retainer. Clients only pay the quoted fixed price and there are no surprises when they receive their final bill. Put simply, Canadians want and need affordability, transparency and convenience in terms of their legal services, while the quality of the legal services provided must remain of central importance. Our offices provide a greater number of choices for consumers, while also serving a segment of the population that has been “priced out” of the current legal marketplace, who would have otherwise foregone legal advice and services altogether. Lena Koke is a Barrister and Solicitor at Axess Law Professional Corporation
ML // June 2014
48
The Features
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The Features
49
A new way of thinking Martyn Caplan considers why the traditional Legal Succession Model of assistant solicitor, salaried partner and then equity partner is failing in the new legal market place.
T
he Succession model for sole practitioners, small and medium sized law firms has traditionally ensured business continuity and supported exit strategies for retiring Partners. Historically, it starts with the ambitious trainee solicitor who qualifies and then invests many hours to achieve billing which is often three times their salary. After a number of years of high billing and networking to generate new clients they might then be asked to become a salaried partner with a higher salary and benefits. After many years of being a salaried partner they might finally achieve the previously perceived reward of being offered an equity partnership in which they invest capital and receive a share of the firm’s profits. This invested capital often assists senior equity partners to retire and withdraw their capital. The model is perpetual. Risk averse… Increasingly, junior solicitors are becoming aware that taking equity carries substantial risks from the moment the partnership deed is executed. A growing number of firms are being forced to dissolve. The usual reasons include increasingly high Professional Indemnity premiums, an inability to obtain insurance or the firm’s bankers decide to call in the overdraft and, of course, all partners are joint and severally liable. Prior to dissolution, partners often fail to appreciate the full cost consequences. Ordinarily, a substantial insurance premium (known as runoff insurance is often three times the last annual premium) is payable in a lump sum. The banks have to be repaid, redundancy monies have to be found and there will be outstanding liabilities in relation to a firm’s lease obligations and additional third party creditors. The financial consequences of dissolution are substantial and sometimes lead to equity partners becoming bankrupt. Understandably, salaried partners are now extremely reluctant to take an equity partnership, which in turn
‘Increasingly, junior solicitors are becoming aware that taking equity carries substantial risks from the moment the partnership deed is executed’
means equity partners have a greater difficulty in planning their retirement. Unless they can arrange a successful merger with another law practice, many senior partners are becoming trapped. Junior lawyers are hoping to avoid these minefields by either working in large firms or a growing number of ABS’s such as Tesco’s, work in-house or, until recently, one of the large PI legal firms. In control A newly registered ABS business model has been launched by Lawyers Inc., which responds to this problem whilst reducing risk and generating greater fee income. It enables senior partners to plan an exit strategy, negotiate with the banks and insurance companies from a position of strength and helps to crystalise a pathway for a successful future for all junior lawyers. This new business model envisages firms being able to take control of their own dissolution and all the previous solicitors working there at becoming self-employed consultants contracted to Lawyers Inc. Each solicitor shares between 60% to 80% of their gross billing. This model completely replaces the previous Succession Model for a legal practice and creates a far more attractive relationship between the former junior lawyers and partners. They can work together as a ”Pod”, at their existing offices, provide services to the original clients and new clients,
share the gross fees whilst at the same time they are not in partnership with each other. In addition they have no liability for run-off insurance, secretarial and accounts department fees, or a bank overdraft. Lawyers Inc. become responsible for all the COLP, COFA and money laundering services and the provision of all services necessary for solicitors to carry out their duties including: • Professional indemnity insurance cover • Client and Office Account services • Transcription of dictation • Legal precedents and legal research • Case Management Services • Local and national marketing The key to this new modus-operandi is a private internal agreement between the former senior partners and their former associates, which enables former senior partners to plan a timeframe and terms of their retirement (i.e. maybe a % fee income for a few years after retiring). While the clients remain under the aegis of Lawyers Inc., the former junior lawyers can plan their future by benefitting from the income stream of the old firm’s previous clients. This creates a transparent relationship freeing-up the lawyers to concentrate on helping their clients and generating fee income. Most importantly, the junior solicitors can now create a career in confidence without the risk of personal insolvency being caused by other partners’ actions. This is the model for the future of the legal profession. Martyn Caplan is Director at Lawyers Inc. www.lawyersinc.org
ML // June 2014
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The Features
The Modern Law Conference 2014 The second annual Modern Law Conference took place at the Royal College of Surgeons, London. Charlotte Parkinson, Modern Law, summarises the day’s proceedings.
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odern Law’s second annual conference was once again a sell out event and, despite a tube strike bringing much of London to a complete stand still, upwards of 400 delegates made their way to the Royal College of Surgeons to listen to the thoughts of leaders in the legal industry. Conference Chair, Michael Napier QC aptly opened the day’s proceedings, explaining that it had been designed to “take the pulse of the legal services market one year on from Jackson reforms”. One of the most eagerly anticipated slots of the day was the ‘Keynote Address’ , from the outgoing Chairman of the Legal Services Board, David Edmonds, who retired two days after the event. Edmonds began by calling the past few years a ‘struggle’ and expressing his view that “regulators should have worked in the public interest” and that “there has been a failure to recognise that life has changed, the industry needs to move to a single regulator.” While, arguably, it was easy for Edmonds to express these strong views just prior to his departure from the LSB, Edmonds’ point was reflected later in the day, particularly by some members of the Keynote panel. “The market has progressed in the way it has in spite of the Legal Services Act, Clementi was fundamentally flawed, it is the ‘almost act’ and is not the market solution that is needed. The time is right for a single regulator but we will not get one for some time”, he explained. A lively debate The ‘Keynote Panel’ was one of the heavy-hitters of the day and included representation from cross-industry regulatory bodies; Diane Burleigh OBE, Chief Executive, CILEx; Baroness Deech QC (Hon), Chair, The Bar Standards Board; Desmond Hudson, Chief Executive, The Law Society; George Kidd, Council member and NonExecutive Director, Council for Licensed Conveyancers; Nicholas Lavender QC, Chairman, The Bar Council and Charles
ML // June 2014
The Regulator Panel
‘We are neither witnessing an Evolution or a Revolution but an incremental transition in the market’ Professor Richard Susskind Plant, Chair of the SRA Board, SRA. Due to the address that preceded the panel, much of the comment focussed on the perception of the LSB in the eyes of its regulatory peers. The keynote panel certainly made for a lively debate, thanks in no small part, to the fact that three of the six panel members are outgoing members of their respective bodies. The first of these, outgoing Chief Executive of The Law Society, Hudson, went first, commenting that there had been a revelation amongst regulators because “the Legal Services Board actually listened to what [The Law Society] said. A single regulator would not achieve the aims of the LSA”. Lavender added, “The LSB were supposed to be an oversight regulator, this has not happened” and Deech exclaimed, “We are looking at this with the benefit of hindsight, the question of a single regulator is an old one”. “Clementi got it right...we must fight for ethics and competition in regulation. The Bar are being held back by the LSB”, she concluded. The CLC’s Kidd
quickly voiced their view that “a single regulator would not be right” and added, “it is too early to start burning bridges, we do need an LSB and there has to be a relationship there”. The outgoing Chair of the SRA, Plant concluded the panel by claiming that the sector has not seen the evolution it needs yet, “We have managed to achieve a lot in a clumsy and costly framework...the LSB are competition driven but they have a narrow and unbalanced view.” Burleigh followed on from Plant’s comments; saying that the regulatory system is “a nonsense” and added that there should be either one regulator or Model B style regulation. Innovation and growth Shailesh Vara MP began his address with a predictably upbeat outline of the Governments expectations and hopes for ‘innovation and growth’ within the sector. He outlined that “Regulation should be independent of Government and consumer confidence must be restored in the regulatory framework”.
The Features Vara also compounded the view of many in the legal sector as he said, “In the next 2-3 years the effect of these reforms on the market will be known and we will be able to establish whether the introduction of ABSs has improved the accessibility of legal services.” The ‘Why invest in legal services?’ panel was made up of George Bull, Chair of Professional Practices Group, Baker Tilly; Ben Holmes, Managing Director, Invest in Law; Paul Lester CBE, Chairman, Parabis Group; Jordan Mayo, Managing Director, Smedvig Capital and Martin Wright, Senior Partner, JZ International. Mayo kicked off the debate, explaining “any investor is looking for the same dynamic, a combination of better service and a better price. There is huge potential now to bring in external capital to the legal market”. Lester responded with the Parabis view, explaining that the Group wanted a challenge, as the legal market was ‘inefficient’, “investment is not a ‘quick fix’, it is about growing and developing the businesses”. “Investors will want something in return”, added Bull. “Firms will need to accept that there will be a culture change following external investment”. Holmes raised the importance of all Partners in a firm being on board with the idea of an external capital injection, prior to investment. “If key Partners leave, then what are you investing in?” he said. This idea was also echoed by Wright, as he explained the need to invest in the management of a firm. “We have specific requirements for people, processes and service and look for entrepreneurs who have the vision to sustain a bigger business”. Evolution or revolution? ‘Does being an ABS make any difference?’ comprised a diverse range of legal practices; Doug Crawford, Chief Executive Officer, myhomemove; Philip Dicken, Managing Director, NewLaw Solicitors; Colin Ettinger, Partner, Irwin Mitchell; David Simon, Chairman, Triton Global and Jeff Winn, Managing Director, Winn Solicitors. Dicken went first, explaining the reasoning behind NewLaw’s conversion to an ABS. “Becoming an ABS was the only way our business could work in a compliant way and it gave the NewLaw brand credibility.” Winn followed a similar tangent, explaining that for Winn Solicitors the transition to becoming an ABS was an ‘evolution’. “The right opportunity arose to take external investment and we can now take full advantage of the consolidation in the
market”, he said. The panel were in almost unanimous agreement that the transition to ABS had been a natural progression as Ettinger commented, “becoming an ABS in 2012 was an inevitable consequence of the natural development of our business”. Simon also added, “The LSA facilitated employee ownership, which was an opportunity we were keen to explore. We have evolved from a traditional LLP structure and it is an exciting time for people within the business”. ‘The New Models’ panel, comprising of Matthew Briggs, Chief Executive Officer, Brilliant Law; Shirley Brookes, Senior Partner, PwC Legal; Karl Chapman, Chief Executive, Riverview Law and Lucy Scott-Moncrieff, Director, Scott-Moncrieff and Associates Ltd,
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was designed to take a thorough look into what new and arguably ‘innovative’ models are doing in the legal market. Chapman responded to questioning over the innovative Riverview Model, as he explained that a lot of the things happening in the legal market are ‘only innovative in the legal market’. The panel were all clear that the client should remain at the heart of any new legal business, as Briggs explained “our ownership sets us apart, we were founded by serial entrepreneurs and we have been able to build and develop the business based on client expectations”. The Director of virtual law firm, ScottMoncrieff and Associates went next, saying “We understand that lawyers want to be lawyers; the reason behind our ABS was because it enabled our The Delegates
Headline Sponsor
Sponsors
E C L I P S E
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The Features
lawyers to profit share. They do not have to play an active part in the day to day running of the business”. A variance of the perspective of most speakers throughout the day was offered by Brookes, as she explained that for PwC Legal, external investment was not a necessity, “We were much happier to have the PwC Group invest in the Legal arm; enabling profit share. That investment was like rocket fuel for us”. Culture, culture, culture The final panel of the day, ‘Will there be a second wave of ABS applications?’ involved Dan Cutts, Senior Partner, Weightmans LLP; Andrew Grech, Managing Director, Slater and Gordon; John Lewellyn-Lloyd, Head of Professional Service, Espirito Santo Investment Bank; Professor Stephen Mayson, Independent Non-Executive Director and Andy Raynor, Commercial
Director, Shakespeares. Mayson started the debate, “the first wave of ABSs hasn’t finished yet. I would anticipate more change in the coming years than we have seen in the last 2 years”. In response to Napier asking whether the influx of Personal Injury ABSs would subside, Grech explained that some of the emerging models ‘do not have great clarity of vision’ and that “focused purpose organisations tend to succeed. Values and strategies must work around the initial business purpose”. The question of whether law firms really provide the best opportunity for investors was raised by Lewellyn-Lloyd as he explained, “law firms are not perfectly formed to create investment opportunities. Investors want to know how they will get a return on investment”. Grech agreed with this, remarking “Investors invest in the management and they rightly expect us to have the right
‘There has been a failure to recognise that life has changed, the industry needs to move to a single regulator’ David Edmonds
levels of governance, professionalism and risk management”. Culture change and the client was the final point raised by Cutts as he explained, “ABSs certainly aren’t for everybody, they do involve a culture change”, to which Raynor agreed “Absolutely, ABSs are driving market change but it would not be possible if people didn’t adopt the right culture”. Professor Richard Susskind OBE closed the day’s proceedings by explaining that in the next 3-5 years clients will demand more and that “the likelihood that technology is not going to be one of the major drivers of change is highly improbable”. He went on “the Top 50 will look completely different in 2025 and some of these players will not have emerged into the legal market yet. We are neither witnessing an Evolution or a Revolution but an incremental transition in the market. This series of changes will continue and although alone, they may not appear spectacular, when they are combined over years to come, they will alter the face of the legal profession beyond recognition”. Modern Law would like to thank all the Speakers, Sponsors and Delegates, who attended this year’s Modern Law Conference.
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Going green Rob Attryde explains why having a greater understanding of the relationship between energy and functionality, could help your business in more ways than you first thought.
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ost legal organisations have more devices than they need. Indeed, many have more devices than they think they have. Staff have come to expect a printer on every desk, and the more convenient it is to print, the more pages will be printed. KYOCERA’s research shows that individuals with a dedicated printer print three times more pages than those who share a device with ten or more colleagues. The obvious response is to remove all personal printers and install shared multifunctional devices (MFDs), but this alone doesn’t solve the problem. Transitioning to MFD’s is best undertaken on the basis of an audit to examine printing activity and workflows. The key is to optimise the fleet so that the devices offer the right functionality in the right place to support necessary printing and copying activities, and then to educate staff so that they understand the objectives behind the change and how they are expected to change their habits in order to ensure the project delivers against its targets.
‘The relationship between functionality and energy consumption can be complex, but broadly speaking a single multifunctional consumes less energy than a separate printer, copier and fax’ Tradition wins out? It’s not uncommon for a print audit to begin with the admission that the organisation has no idea how many pages it prints. This isn’t so surprising when you consider how consumables and paper are purchased. Unlike hardware, which is often the subject of a high profile procurement exercise requiring partner-level sign-off, stationery and consumables are often purchased ad-hoc and by multiple people. Even in the best-run legal organisations these are seen as incidental costs and any attention paid to them is centred on negotiating the keenest price, rather than considering the amount purchased. Managed Print Services has become a buzzword for contracts that combine the supply of hardware, service and consumables, but rests on the unstable premise that the outcome is “print”. In fact many documents can – and should – remain in digital form. So a true managed service also encompasses software that enables documents to be input, output and exchanged securely without having to be printed. There may be areas of the organisation where a hard copy is definitely required, but many documents are printed just because that is the
way it has always been done. It’s interesting to note that 60% of those in the legal profession who were surveyed by KYOCERA recently said their organisation hasn’t deployed Managed Print Services to deliver savings. Energy efficient Fleet management software can provide a detailed picture of who is printing what to which machine, first as part of the audit process and later with a view to ongoing optimisation. Management software can flag up changes in workflow that indicate adjustment is required to maintain optimum device loading. Allocation of print costs by individual, team or department can also help to focus attention on user behaviour and drive people towards achievement of print reduction goals that in turn reduce both energy use and cost. Even if a device recovers quickly from sleep mode, energy use will peak as the fuser is heated. The most energy-efficient way to use any printing device is to print in a single batch. This won’t suit all users, but the ideal scenario minimises both the amount of time a device spends actively printing and the number of times it has to go through the warm-up cycle. Smart thinking The relationship between functionality and energy consumption can be complex, but broadly speaking a single multifunctional consumes less energy than a separate printer, copier and fax. Faxes, however, need to remain switched on permanently so fax functionality is not recommended on every multifunctional device. In general, the fewer devices connected to the mains supply, the lower the energy use – and the longer those devices spend in sleep mode, the greater the saving. For devices with no fax facility, turning them off outside working hours – either manually or by a “wake on LAN” solution – is ideal from both a cost and energy perspective. Whether for reasons of cost, sustainability or both, reducing energy and paper consumption is desirable. Increasingly, legal organisations are being more open about the drivers behind their sustainability goals, and no matter which issue is top of the agenda, getting better control of your organisation’s documents makes good sense. Rob Attryde, Head of Marketing, KYOCERA Document Solutions UK Ltd
‘There may be areas of the organisation where a hard copy is definitely required, but many documents are printed just because that is the way it has always been done’ ML // June 2014
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Are you going to be one of the 50 winners? George Bull outlines the pitfalls that law firms need to avoid, if they wish to survive in the short to medium term.
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he recent Modern Law conference provided fascinating insights into the divergent routes taken by different law firms. There were also interesting perspectives from the funders backing these nontraditional firms. For example, in consumer law, successful personal injury firms have developed a comprehensive range of services that are no longer restricted to claims handling and management. The more innovative firms and those which have greater appeal to external funders, including private equity providers, now have offerings which include loss assessment and adjusting, physiotherapy and medical care. These are the businesses that will continue to grow and attract further external funding and ultimately be sold to a larger business or perhaps even IPO in their own right. Prepare for the long term However, it was revelatory to hear views expressed that, of the 200 or so mid-tier law firms, only some 50 may survive in the short-medium term. The work of our own recovery specialists has helped us understand the warning signs of firms which – if they do not mend their ways – may well be one of the 150 or so predicted failures in the top 200.
‘Prompt decisions help ensure that working capital is available to meet the often substantial costs of staff reduction programmes’ ML // June 2014
To put it another way, if you wish to be in the successful 50, you need to avoid these pitfalls: 1. Allowing too much working capital lock-up – work in progress not billed and debtors not collected in a timely fashion leads to increased working capital requirements. These requirements can be significantly reduced by active invoice management and regular credit control procedures; 2. Loss of key work-winners without suitable replacements – in a very competitive market, client attrition leads to loss of turnover. For firms with a traditional high fixed cost base of property, people and insurance, reductions in turnover inevitably result inprofit erosion; 3. Ability to adapt and change cost base– if revenue continues to be under downward pressure, difficult decisions,such as reducing staffing levels must be taken early. Prompt decisions help ensure that working capital is available to meet the often substantial costs of staff reduction programmes; 4. Ability to adapt and change service offerings – a thorough review of the profitability and cash requirements of each service line should be undertaken. Management should understand the commercial rationale for persevering with loss-making departments. This rationale should be reviewed and challenged on a regular basis; 5. Ability to adapt and change – delivery model - ability to innovate in the way services are delivered, moving from traditional models to more efficient process or projectdriven, IT-enabled models; 6. Ability to adapt and respond to opportunities – the ability to identify growth markets and
George Bull
George Bull heads Baker Tilly’s Professional Practices Group and is primarily involved in providing leading-edge business and taxation advice to the legal profession. In his work with clients, George invests time and effort in explaining complex tax issues simply, producing workable solutions to difficult problems. He firmly believes that tax systems should ‘look as though they were designed to be that way’, being fair, clear, certain and proportionate in their impact. As most tax systems fall short of this ideal, George works closely with clients to develop strategies, maximise profitability and solve problems in a tax-efficient manner both in the UK and internationally. George is closely involved with the reform of the legal profession in England and Wales and is one of the driving forces behind Baker Tilly’s widely recognised reports‘Climate Change – Forecasting the Impact of the Legal Services Act’, ‘Legal innovation 2013’ and ‘The importance of being financially stable’. George regularly broadcasts, lectures and writes on all aspects of professional practices and taxation.
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‘Limited levels of communication from the management team to all partners about strategy and financial results will lead to disinterested and demotivated partners not all pulling in the same direction’
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utilise existing skills and people to service these opportunities as they develop, or ability to attract key new partners to develop new markets, is vital to long-term sustainable growth; Ineffective management team – a lack of defined leadership hampers the firm’s ability to create a defined strategic plan,to implement strategic plans and to develop growth and profitability; Lack of management information –a lack of regular, usable financial information, often evidenced by inappropriate WIP and debtor provisioning, can lead to poor financial decisions being taken; Difference between profits and cash–the lack of regular, usable financial information and the consequent failure to understand and highlight the difference between profit and cash can be very dangerous. Management teams driven by profit may not acknowledge future cash requirements and so may fail through unforeseen cash needs; Weak financial management – If the chief financial officer does not have the status or presence to command respect among equity partners, their sound financial advice and planning may be ignored in favour of alternative strategies which cannot be funded; Property transactions – responding to the short-term attractiveness of rent-free periods and rentalised fit-out costs of new property transactions without the detailed analysis of the profit and cash effects on the firm in subsequent years can lead to significant cash difficulties; Excessive drawings – allowing partners to continue to take drawings in excess of the profits earned or the cash available in the partnership will quickly lead to financial difficulties;
13. Communication – limited levels of communication from the management team to all partners about strategy and financial results will lead to disinterested and demotivated partners not all pulling in the same direction. This may lead to counter-intuitive actions being undertaken by partners or partners becoming disillusioned and leaving unnecessarily; 14. All profits drawn as remuneration– leaving little or no reserves within the partnership means the firm has no ability to ride out the consequences of unexpected rainy days; 15. Merge in haste, repent at leisure – a poor choice of merger partners can turn a successful small firm into a large firm struggling for working capital and unable to pay the necessary restructuring costs leading to a downward spiral of performance; 16. Merger not adequately controlled– without strong leadership and control of the merger process, a perfect strategic merger can lead to painful periods of firefighting to keep the larger firm afloat and lead to the loss of key work winners; 17. Poor post-merger integration– firms often over-estimate the synergies achievable, and underestimate the time it will take, the complexity and ultimately the cost of integration; 18. Poor communication with and management of outside stakeholders– failure to manage key stakeholders, such as the firm’s bankers and the SRA can lead to key decisions being enforced by parties outside of the firm. This obviously may not be in the best interests of the firm. Maintaining strong relationships with outside stakeholders and presenting unified workable plans gives firms a greater chance to control their own destiny;
19. High levels of debt- when interest rates eventually rise, firms with high levels of debt will see increased interest and finance charges. This erodes profits and limitscash available to be drawn as remuneration. These risks can all be mitigated by strong leadership and communication from those charged with running the firm. Their leadership should be driven by considered strategic plans which are derived from accurate and timely management information and from a well-informed and insightful view of the current and future legal market. As with all plans, they should be regularly revised and updated as dynamic conditions change. What happens next? If you can identify your firm in more than one of two of these risk factors, then we would be delighted to work with you to help remedy the situation and assist in the development of the necessary plans before it’s too late. It is not just about ensuring that you are fit to survive but that you have a competitive edge. The mid-tier suffers from over-supply and pricing pressures with most firms having no clear differentiators. If you are determined to be one of the winners, then with the financial strength of survival comes the opportunity to build your own business through acquisitions of those firms who will not survive. A firm that is financially fit with a clear strategy and real differentiators will not just survive but be one of the winners. Our specialists - including a transactions support team, recovery and restructuring experts and management consultants team are here to help. You only have to ask... George Bull is National Chair of Professional Practices Group at Baker Tilly
ML // June 2014
Modern LAW Awards 2014
E C L I P S E
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For Events Enquiries: Ellie Campbell | T 01765 600 909 | E ellie.campbell@charltongrant.co.uk For Sponsorship Enquiries: Kate McKittrick | T 01765 600 909 | E kate@charltongrant.co.uk
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By negligence or by design? Jill Scott asks whether monies overpaid to telecom providers can be recovered on a ‘No Win, No Fee’ basis.
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y careful consideration of contractual terms, telecommunications law and regulations in the areas explained below it is possible to obtain substantial credits of up to £250,000.00 from your telecom provider. You do your day to day work inside or outside the office, and you are not aware of what may be taking place behind your handset to defraud your company. When you receive your bill, you are unable to know if the services listed on the bill are for your legitimate usage, and are for contractually agreed services. Wrong Charges Many Customers have relied on the knowledge of the sales representative who is selling the requested products and services to choose what is best way forward for the customers communication needs. In some cases the customer has been advised on products, and services that have proven to be a wealthy profit for the telecom company Supplier and not necessarily what the customer has needed. In some cases customers are paying for services that were not contractually agreed. If services have been added to the billing and not agreed by contact, these services can be disputed. Wrong Package Mobile/Cellular communications is a very complex priced industry as price plans change constantly along with mobile phone equipment. An education on how the mobile industry works, and how deals are stacked up would be very advantageous for any customer who is tendering for their mobile contract. In respect of every SIM card issued on the signing of a contract, a commission is paid to the dealer by the mobile company. Every bundle of minutes for calls and texts on the contract has an additional commission. The cost for equipment (mobile phones supplied in the deal) is taken off the overall commission. The remainder can be utilised as cash back to the customer, as equipment funding which is held with the dealers for new future equipment, or as credit against the customer’s future billing. Alternatively the dealer might retain it himself which is what the customer wants to avoid. It is important to select the correct bundle; this is a bundle of minutes/texts which companies pay for monthly. When customers exceed the bundle the customer pays for calls/text that is not captured within the price plan. It is important to capture as many calls as possible as this keeps to a fixed cost on the contract which you have budgeted for. There are many types of fraud and errors that
‘There are many types of fraud and errors that costs individual companies more than they need to pay’ costs individual companies more than they need to pay. On occasions fraud is conducted by Telecom Company’s suppliers and the telecom company is unaware of the fraud they are involved with. So both the Telecom Company and the customers are both victims of the fraud. The fraud can originate before the customers telephone bill is produced by theTelecom Supplier. Fraud can be conducted by telephone companies against one another. Interconnect fraud involves the manipulation of records by telephone originators in order to deliberately miscalculate the money owed by one single telephone network to another. This affects calls that originate on one network but are carried by another. Somewhere in between source, and destination the data is corrupted which means that neither the Telecom Provider, or the customers, are aware of the fact that the bills are incorrect. These are some common areas of errors and fraud: Duplicate billing This is normally because there is an error in the configuration of Telecom Providers equipment, by negligence or design, which causes customers billing to start as soon as the telephone call begins and the ringing tone is heard, even if a call is busy, or if there is no answer. The cost is added to the customer’s bill and this can be recurring repeatedly in small amounts for calls which were never completed. Slamming This is any corrupted unauthorised change to the default long-distance/local provider, or internet service selection for a customer’s line. This is most often made by fraudulent providers in aid to steal business from competing service providers. The list of fraud and errors that affect the customer’s bill is endless. The investigation process requires a wealth of experience, and knowledge of how bills can be inaccurate and misleading. Telecom experts are so confident about their ability to obtain a substantial refund that they are prepared to analyse all your telecom contracts, and previous bills on a ‘No Win, No Fee’ basis. You have nothing to lose, and everything to gain. The call that you make to find out what credits you can obtain will be the most commercial call that you have ever made. Jill Scott is Director at Broadband Telephony Voip Auditing Ltd. jill@b-voip.org
ML // June 2014
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Being responsible With mergers and acquisitions high on the agenda for many law firms, WIP has become a major factor in valuations, so, what IT tools can firms harness to ensure they manage their work-in-progress more effectively? Barry Talbot explains.
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his question not only applies to how to value work-in-progress for the purpose of merger and acquisition processes, but also with the standard dayto-day management of WIP for any law firm. With our business of supplying IT to law firms, we often find that it’s not unusual for a firm to have a total lock-up that stands at 180 days or more, which is often shared equally between WIP and debt. In an ideal situation, WIP should be no more than 30 days as lock-up is the single biggest cash investment that a firm has on its balance sheet. However, to achieve these firms must have a process in place to ensure that their billing is done early. This is what all firms should be doing with the exception of PI firms as they manage their WIP differently as it remains in place until the case is won and a settlement is made by the client.
‘Whilst it is fairly simple to see what the outstanding WIP balances are at the end of any given period, if someone within the firm wants to drill into the detail, it is not always readily available’ Under pressure The best practice management around WIP is still the same as firms need to be confident that what is in their WIP, will be realised. Someone within the firm must take responsibility for the WIP in such a way that the value shown is accurate and billable. In our line of business, we find that most firms do not have the IT tools in place to manage their WIP on this basis and responsibility for WIP lies with the finance department or directly with the fee-earners. The main issue with the management of WIP today is that whilst it is fairly simple to see what the outstanding WIP balances are at the end of any given period, if someone within the firm wants to drill into the detail, it is not always
‘Most firms do not have the IT tools in place to manage their WIP on this basis and responsibility for WIP lies with the finance department or directly with the fee-earners’ readily available. This is a major issue for firms that have high transaction volumes, meaning they are forced to take a long route around their systems in order to get to the detail. In addition, finance directors who are under pressure to produce reports that bring the exceptions to the fore, tend to create provisions in an attempt to reduce the value of WIP which are based on historical reasons and methods because the transaction level detail is too difficult to get to and it is far easier to create a provision to reflect the value of WIP. Solid ground However, I believe the solution to this is simple - reports or dashboards must provide both aggregated and transactionlevel data to those who are responsible for managing the WIP. In addition, if your firm is the target of an acquisition or merger, you need to be able to prove that your WIP number is solid and not over-inflated, which means value negotiations will be over much quicker. Conversely, if your firm is targeting a law firm, having the right IT tools in place when you are performing the due-diligence, will save your firm many thousands, if not millions of pounds as with the right IT in place you won’t need to rely on what a firm says its value is; within a day you will be able to see the data that proves what the true value is. A number of law firms within the UK have already seen a dramatic improvement in the management of their WIP with QlikView, as it enables them to review their WIP at either matter or client level on a daily basis, without someone within the firm having to spend a long time extracting the data. So if your firm is currently sitting on a provision of 20% of the value of the WIP in your balance sheet, wouldn’t you like to know what the real value is? Barry Talbot is the Managing Director for Informance. www.informance.co.uk
ML // June 2014
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The Features
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Policing the front line Martin Cheek considers some of the biggest challenges faced by Money Laundering Regulations for the Legal Profession.
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he Proceeds of Crime Act 2002 and Money Laundering Regulations 2007 have created a great many challenges for the Legal Profession. Issues such as Legal Professional Privilege, Beneficial Owners, International Clients and the training of staff have all created additional burdens on law firms. The Regulations set out a “Risk Based Approach” to compliance, but in reality how we feel and react to risk varies enormously. This has led to firms with very similar client bases and types of work adopting very different policies, procedures and approaches to compliance; with some firms taking a “belt and braces” approach and others just paying “lip service”. So what are the risks to the firm and the Money Laundering Reporting Officer (MLRO)? Firstly there is the risk of jail, a pretty big risk for any professional. Then there are the other risks such as financial, reputational, and operational. In every case, firms need to adopt robust Know Your Customer and Customer Due Diligence policies and procedures. S.5 of the Money Laundering Regulations 2007 set out the following requirement: “(a) Identifying the customer and verifying the customer’s identity on the basis of documents, data or information obtained from a reliable and independent source.” Know your firm Many legal firms still believe that you are required to see photographic evidence of the client, such as passports, driving licences and then some form of proof of address such as a recent utility bill etc. This is not the case, the test is relatively straight forward; for individuals, there is an objective test of “does this person exist?”, then a subjective test “is this the person that they purport to be?” It’s interesting to note that the vast majority of frauds committed are where individuals have used fake passports, ID documents etc, or they are complicit or a conspirator. To complicate the matter even further when it comes to corporate clients, the concept of a “Beneficial Owner” comes into play, which is any individual who is entitled to more than 25% of the profits or proceeds from the company, or owns more than 25% of the share capital. The Regulations state that you must identify these individuals to the extent that the relevant person is satisfied that they know who the beneficial owner is. So again we see law firms adopting very different approaches to Beneficial Owners, with some firms simply
identifying who these individuals are, through to firms that take the additional step of verifying their identities. This can become even more perplexing when dealing with Trusts or complicated International Businesses, especially when they are registered in places like the British Virgin Islands. Proper procedure Law firms also need procedures in place to identify Politically Exposed Persons (PEPs); these are any individual, who has been entrusted with prominent public functions such as Government Ministers, Members of Parliament, and Senior Officials in the Armed Forces. The current requirement is to only check PEPs outside the UK, however under the 4th Money Laundering Directive (currently passing through the European Parliament), it will be a requirement to check UK PEPs and also PEPs who hold Beneficial Ownership with a corporate client. Many small and medium firms take the view that they don’t deal with any PEPs, therefore make no checks at all, and apart from asking every client if they are a PEP or subscribing to a PEP database service supplier, there is no easy method of ascertaining if your client is actually a PEP. The front line As we can see having reviewed a small aspect of the compliance issues, the Regulations are designed to combat money laundering and place onerous obligations on the Legal Profession; basically they have forced lawyers to be policemen at the front line. Legal firms will have to use multiple methods and a variety of different software to comply with the Regulations; this can be time consuming, costly and cumbersome. What if firms could bring all these diverse requirements into a single platform that linked all of the necessary elements together, UK and International Business and Individual clients with full Sanction & PEP screening and monitoring? The new SmartSearch Systems addresses all these questions neatly by bringing together all of these different verification elements together in a single platform. With its trusted Data Partners Experian, Dow Jones and Companies House, SmartSearch reduces the time taken for individual checks from circa 15 minutes down to just 3 or 4 seconds. The savings for business checks are even greater reducing processing time from 45 to 60 minutes down to 4 minutes and eradicating the long waiting times for client documents. Martin Cheek is Managing Director at SmartSearch
The Features
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Unlock the potential Charlotte Parkinson spoke to Tracy Blencowe, Eclipse Legal Systems, to find out how law firms can use big data to change their practice.
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s the face of the legal industry continues to develop, many law firms are beginning to explore new drivers of efficiency. Big data is data that exceeds the processing capacity of conventional database systems. Either the data is too big, moves too fast, or doesn’t fit within the confines of a basic system. While the possibilities that surround effectively managing big data may be on the radar for some law firms, the question is how these law firms and others in the sector can best go about not only extracting information from data but how they can use it effectively for business development and marketing purposes. So, how can and should successfully using this data help streamline legal practices and ultimately, drive efficiency? Harnessing and exploiting the data law firms already possesses could unlock a myriad of previously undiscovered opportunities. Utilising historic data, in particular, could help firms predict current case outcomes and map specific patterns for future case work. In order to set about doing this, it is vital that a fully integrated case management system is implemented. Software solutions which automate and streamline day to day processes are invaluable, as the time of highly-trained and costly lawyers can be freed. This type of software could also reduce the amount of time wasted by the whole firm, as they do not have to trawl through raw data. Whilst the legal industry may be slow in realising how embracing data capture and consolidation methods could benefit their firms, the sector is beginning to awaken to possible benefits. Not only could effectively managing and consolidating data help save the precious time of lawyers, it can also provide new opportunities for IT-literate lawyers and technical professionals to take up new positions within practices. Big data is also creating new business channels for law firms and new practice areas, which focus on how the firms can best apply and make use of this data within the firm, making day to day operations easier for all aspects of the firm. Marketing could also be made easier and, with the correct practice management system, marketing can
Charlotte Parkinson
Tracy Blencowe
be targeted towards specific demographics, based on solid and factual evidence. Ultimately, the potential savings (in terms of time and money) from full and proper understanding of big data are huge and those firms who don’t recognise this will eventually fall behind. The data is there, now is the time to unlock the opportunity. Tracy Blencowe, Business Solutions Director at Eclipse Legal Systems comments: “In capturing client and matter data in their case and practice management systems, many law firms are sitting on a huge and untapped business development tool. I’ve lost count of the number of law firms I see that are investing in disparate CRM software and effectively going about duplicating the volumes of data already held in their CMS and PMS systems. Smarter firms are stepping back, taking a look at the incredibly valuable information already held, and implementing ways to leverage this for business development and marketing needs. The investment in the software has already been made, and the data is already there… now just focus on how to use it!”
‘Smarter firms are stepping back, taking a look at the incredibly valuable information already held, and implementing ways to leverage this for business development and marketing needs’ Tracy Blencowe
ML // June 2014
Specialist mediators proportionate results www.ExpediteResolution.com 0844 879 3166 www.TrustMediation.org.uk 0207 353 3237
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IT Crowd Work-in-progress – or is that something to write off? Our resident IT guru Charles Christian writes…
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ith mergers and acquisitions high on the agenda for many law firms, WIP has become a major factor in commercial valuations but what IT tools can firms harness to ensure they manage their workin-progress more effectively? OK, let’s just take on step back and ask why this is necessary, why is there a need for firms to have a better handle on their WIP? From my conversations with people who have been involved in merger/acquisition talks, one of the most frequent caused of failure is the discovery that the finances of the target firm are far less healthy than originally envisaged. It is not that the target firm has been cooking the books, far from it. In fact the realisation of the true parlous state of their finances usually comes as just as much as a shock to the target firm’s partners as it does to the would-be acquirers! Ancient issues Why? Because of work-in-progress - all that unbilled work sitting on the firm’s books. Unfortunately, all too often it is not unbilled work waiting to be billed; it is work that will never, ever be billed. It is work that needs to be written off because the matter is moribund, the client has gone away or because it is so ancient that it would be very difficult to seek payment. Or, as an IT director confessed at a recent conference: “We discovered a client we hadn’t billed for six years, we’d just forgotten about him!” It is a long established commercial principle (not just for law firms but any business) that the longer you delay sending out an invoice, the less likely you are to be paid promptly and in full. With WIP, the added complication is you haven’t even reached the billing stage and, as any lawyer knows, some matters never conclude, they just drag on (running up WIP) before petering out. Manage the flow But what do you do about it and how can technology help? As with all technology, you first need to fix the people issues, the firm’s cultural issues and the internal business processes. For example, is there an issue with lawyers sitting on matters that could be billed rather than getting them out to the clients? Does the firm practice interim billing – and if not, why ever not? Not only does it provide an excellent way on ensuring WIP is regularly
‘Among the many mistakes wannabe innovators make is to focus way too much emphasis on the technology and not enough on the business processes this technology is meant to support’ converted into bills but most clients (certainly the commercial ones) prefer to split payment over time rather than have one very large bill to arrive at the end. They too have cash-flow concerns to manage. So, the technology... All modern legal accounts and practice management systems contain some form of WIP analysis reporting function. This means there is no excuse for a firm not knowing the total WIP and WIP breakdowns by department, matter type and even by individual fee earner and matter. However, technology can take you a lot further than straightforward reporting thanks to software known as Business Intelligence (or BI) systems. Definitions vary but essentially whereas WIP reporting is a historical reactive function (in the sense it usually only gets done when someone in the finance departments requests a report, typically before a partners’ meeting) BI systems are proactive as they can be set to alert specific individuals when a key performance indicator (or KPI) target is either hit or approaching. (Many systems use a traffic light system of green, amber and red warning.) For example, it can be programmed to generate a KPI alert when WIP is approaching an unacceptable level, by department, matter or fee earner. Similarly, it can also be used to generate alerts when matter budget levels are being approached, so the firm knows in advance that it may need to renegotiate fee levels with the client. In fact there are dozens of different types of reports that can be generated by BI systems but they all share one feature in common, namely: they can be set up to provide an advanced warning to management of all those things that keep them awake at night. (The alternative, as those unfortunate partners hoping to sell their practices learn to their cost, is being taken by surprise when the full picture emerges.) The technology is there, it just needs law firm managements to recognise its value and be prepared to invest in it. But, there again, that applies to almost all legal IT. Charles Christian is Editor-in-Chief of the Legal IT Insider
ML // June 2014
IT Crowd
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‘DIY’ Legal Services Problem solved... What role can case managementtype software have in improving the efficiency and productivity of nonvolume matter handling?
What role can case managementtype software have in improving the efficiency and productivity of non-volume matter handling?
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he traditional view that case management is best suited to high volume, low value work such as that carried out in conveyancing factories by unskilled workers is at best, outdated and at worst, putting the future of the (non volume) law firm at risk. The increase in online legal advice and ‘DIY’ legal services has only added to the pressures placed on law firms by consumers who evaluate the cost versus perceived benefit of engaging a specialist. Firms are increasingly expected to deliver more for less and the only way they can reasonably expect to do this without compromising on quality is by making every matter as efficient as possible. The majority of modern lawyers practicing in low volume, high value areas still spend a tremendous amount of time on administrative tasks, and if it is true that ‘time is money’, then surely lawyers should be embracing every opportunity to reduce the time spent on unproductive, unbillable activities? Technology is undoubtedly the answer. Case Management systems deliver valuable time savings in many areas other than just automated workflows, for example, managing client information and automated production of time consuming documents such as Estate Accounts or Financial Statements. Relationships with clients can be improved and collaboration with other lawyers made easier. Many, such as Redbrick Practice Management, integrate with an accounts package which adds additional benefit in automatically posting payments, cutting out duplication and managing billing in a timely fashion. It may be that a full case management system is not suitable for all areas of the business, in which case a matter management system (which is often seen as more basic in its functionality than a full case management system) can still deliver high level efficiencies such as running conflict checks, anti money laundering checks, managing client and matter data and time recording. The level at which a case management/matter management system is deployed within specific areas of a firm will vary but firms can choose the bits that best fit their requirements and utilise them to make improvements in service, reduce costs and improve cash flow. Many low volume firms question whether they can afford to deploy a case management system, when in fact, they should be asking how can they afford not to? Jo Hodges, Head of Sales and Marketing, Redbrick Solutions
addressed.
h! A question we at Eclipse get asked an awful lot - and one which contains an outdated assumption that needs to be
We’ve spoken to lots and lots of practices who come to us seeking a technological solution to operational woes. And a few of those firms have a very fixed view of that they think ‘case management’ is. • “Ah but our commercial fee earners won’t use case management software.” • “We run very high value matters - we’re not a sausage factory.” • “Our lawyers are very highly qualified, won’t case management software try to deskill them?” The assumption here is that ‘case management software’ is a very fixed and defined thing, only suitable for high volume operations trying to dehumanise processes. But this couldn’t be further from the truth - a good case management system should have the ability to be indistinguishable from ‘matter management’ or ‘business management’ or ‘file management’. If you have the ability to easily strip away the things you don’t need, and quickly create/configure things that you do need, then that ‘case management’ system becomes your own unique client, matter, and business management tool. We’ve experienced a huge number of requirements which are very simply delivered once this ‘semantics barrier’ is broken. Don’t think of ‘case management’ - just think about a software solution that will deliver what you need. So coming back to our objections: • “Ah but our commercial fee earners won’t use case management software.” Well give your commercial lawyers an Outlook environment with which they (invisibly!) can feed things in to the case management system. Problem solved. • “We run very high value matters - we’re not a sausage factory.” So strip away the automation tools and the ‘robots’ that case management software can bring - and just use the client management, document management, and financial tools that are provided. • “Our lawyers are very highly qualified, won’t case management software try to deskill them?” Not at all remove the process automation and broaden the scope of what the lawyer can achieve and access within the system. Result = highly skilled, and now more effective, lawyers. Darren Gower, Marketing Director, Eclipse Legal Systems
ML // June 2014
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IT Crowd
Defined risk The Law Society has recently issued some fresh - and arguably confusing - guidance on Cloud security. What are some of the key issues should law firms & legal services providers consider when looking at cloud options as an alternative to in-house IT solutions?
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irstly the cloud is certainly not new, a superb tool if your firm wants a service based approach to computing. In a nutshell It should offer stability, flexibility and scalability of all your business requirements. The answer arguably, is you have to trust your data with the Cloud provider. The question, therefore, is do you? Confusing? It’s quite simply, we need to understand what risks the cloud provider carries to your business, how do you assess this? Ask some very simple questions: a) Are they certified to an international recognised standard, such as IS027001? b) Do they actually understand information security, risk and risk management? Of course plenty more questions can be raised, but let’s consider why this a good place to start for firms: it enables firms to understand the objectives of key principles such as: • Preserving confidentiality of information • Integrity of information and security • Availability of information and services • Regulatory and legislative requirements. ISO27001 means security is a core component to the business structure that security risks are identified. However firms must check what the overall ISO27001 scope covers; i.e. does it protect the assets used for provisioning cloud services or is it restricted to unrelated assets? Ask the Cloud provider for the ISO27001 certificate which will outline the scope. ISO27001 means the cloud provider should have reviewed all their assets, which would highlight any business risk. Some risks will be controlled by internal processes but some may be within the accepted risk level; either way all risks will be documented and defined as to what level is accepted. Security risks can happen to any asset, no matter what preventive measures are in place. Therefore, it’s about a proactive approach to identifying risks in a timely manner. They will need to monitor and measure each risk continually. Documentation must be updated, reviewed and plans for new policies and objectives must be created to ensure continual improvement. Firms can request to see the company’s information security policy, which will outline the management commitment to information security. When firms hand over their data there needs to be trust and a relationship is key. Priti Mehta, Group CEO, Acuutech Ltd
ML // June 2014
The whole rainbow What role can case managementtype software have in improving the efficiency and productivity of non-volume matter handling?
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n recent years, providers of traditional high volume, workflow orientated, case management have increasingly turned their attention to more sophisticated matter management systems targeting the ad hoc worker. The prevailing view used to be that the more complex types of work could not be broken down and serviced by defined workflow and standardised procedures. To some degree this is still true for certain types and aspects of work. However, the new hybrid approach has proven that there is no reason why at least “parts” of these complex processes can’t be identified and automated. Prime examples of this would be file inception and closure procedures. Accommodating even these simple processes saves time and money. Not to mention the related benefits of harmonised presentation and consistent service levels. It has also emerged, driven by the pressures of risk management and compliance, that adherence to some basic routines and standards is essential to all areas within the firm, irrespective of the nature of work being performed. The inherent auditing and security within the new generation of software means that all work within the firm is managed in accordance with the prevailing rules and regulations, minimising the burden on the fee earner. Also, there is every possibility that the ad hoc worker will still communicate with many of the same contacts as other members of the firm. They should therefore be able to take advantage of a central register of experts, barristers, other solicitors and agents. This data should not be held multiple times and should be available to the whole organisation including the CRM department. Another major leap is the introduction of facilities that allow the user to define their own ad hoc case plans. Fee-earners performing work where “every case” is different can still take advantage from a strong system of reminders and quick access to data. They just need the flexibility to allow them to control the system rather than the other way round. For example, being able to automatically store and publish a complete electronic file is becoming a fundamental and expected requirement from the IT system. This basic facility can also provide significant cost savings as well as the obvious improvements in terms of productivity. The new generation of matter management software can certainly help the non-volume user achieve some immediate benefits that are easy to implement. More advanced systems can also provide for high volume as well as complex work types and ideally the whole rainbow of variations in between. Phil Snee, Development Director, Linetime
IT Crowd
Out in the open T
he Law Society has recently issued some fresh - and arguably confusing - guidance on Cloud security. The cloud is being rapidly adopted across a range of industries and at an accelerated pace across a range of verticals. While it has gained adoption faster in some regions and industries faster than others, it is nevertheless seen as compelling choice over comparable in-house solutions. Specific regulatory guidance on the use of cloud-based practice management systems from European Bars and Law Societies is thin on the ground. The Law Society of Scotland has already produced a useful advice note on the use of cloud computing by legal practices (see www. lawscot.org) which is broadly supportive of the concept and others look set to follow suit. First, it is essential that practice management systems are—and remain— compliant with data protection and privacy rules about the security of client data and this concept extends to the providers entrusted to store this data. Providers should be transparent about where and how data is stored and encrypted, ideally with some form of external validation for law firms and their regulators to have proof that their data is safe in the cloud. The location of your data is also extremely important, given the varying data protection and privacy rules between different jurisdictions and the rights of regulators and other authorities to gain access to it. For EU based firms, a service provider with a data centre in an EEA member state is must. The main business risk of cloud computing is that a firm’s data is lost or becomes inaccessible in the event of a technical fault or the financial failure of the provider. To ensure that any problems in this area are avoided, it is important that a firm’s data be stored in an open format that can be easily transferred to another provider and that it is regularly backed up to another third party server in case something goes wrong. Some providers also offer an additional service known as data escrow, which allows you to automate a backup of your data and documents with a third party provider of cloud storage. Nagib Tharani, Director of International Expansion, Clio
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An attractive alternative O
rganisations adopting the “Cloud” have grown rapidly over recent years with various different hosted options available. Recent SRA guidelines have outlined the major types of cloud offering and services available. Cloud services are an attractive alternative – ease of deployment, predictable cost and reduced management, but as detailed in the recently published SRA guidelines service providers should be carefully assessed to ensure compliance, information security and ownership of data. While public cloud services such as Office365 and Google’s have a plethora of options, they provide highly cost effective and easy-to-use business facilities. However, their terms of service permit their access to information stored in “their” cloud and are therefore unlikely to allow for bespoke clauses such as the SRA’s explicit access requirements. Many of these commodity cloud services utilise data centres outside the UK, often in the US, where government agencies can demand access to information without your knowledge or prior consent, giving rise to additional challenging regulatory compliance issues. Ultimately, as the privacy of client information is paramount, the access rights from the service provide in the main discount the use of these services. Not all public cloud contracts include such terms but close scrutiny of T&Cs is required before adoption of any such service. On-premise systems are evaluated against internal policies and numerous published standards such as the SRA Guidelines, DPA obligations and ISO27001/2. Any cloud service should be subject to the same strict examination. As the majority of public cloud services would not just automatically comply Private (Data Centre or IaaS), Hybrid or Bespoke cloud services from specialist providers remain the preferred or safe option. When sourced from a reputable provider who has understanding and experience in provisioning compliant, secure systems, Cloud services can meet and exceed regulations. When reviewing the viability of cloud services, in addition to usual due diligence, firms should consider: • Data Centre location - within UK borders is preferable • Do T&Cs grant the service provider any level of access to information? • Do T&Cs accommodate SRA clauses? • Can the data be audited to the same degree as an onpremise system? • Is the service provider ever classified as Data Controller under the DPA? • Can you audit the service provider’s underlying infrastructure to verify security & business continuity? • Is your information removed from the system at the end of the contract? A properly provisioned cloud service should easily align with existing IT policies with little or no adjustment. Mike Batters, Technical Director and Co-Founder, NETprotocol
ML // June 2014
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5 minutes with...
5 minutes with... Jordan Mayo Q A
Did you expect the legal services sector to change so drastically when you started working in it – from an investment perspective? I think the legal services sector is still at the very beginning of a long period of change, and in a sense I’m surprised some of that change isn’t happening more quickly. The Legal Services Act has created an opportunity to finance a large number of innovative and disruptive business models in what is a huge UK market. At the moment only a few forward thinking firms are really embracing technology, for example, and most legal services firms are still missing key non-legal skill sets at a senior level. What has been the key positive or negative impact of the liberalisation of legal services?
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Q
The key impact is more choice and better quality for consumers of legal services. There is an illusion of choice in many legal services sectors; choice in the sense there are lots of small providers, but little choice in the sense of true differentiation of service delivery. The best customer experience is delivered by specialisation and heavy investment in technology and people. myhomemove and Kings Court Trust, both ABSs funded by Smedvig Capital, offer consumers a truly specialised and differentiated service, which would not be possible without external investment and the complementary expertise of non-lawyers. Who inspires you and why?
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As a venture capital investor I spend a lot of time with entrepreneurs; the best ones combine the vision to see a genuine market need with the tenacity, drive and persistence to actually make it
happen. That often inspires me. It’s a tough job being an entrepreneur. Have you had a mentor? If so, what was the most valuable piece of advice they gave you? I’m fortunate to work with a number of world-class entrepreneurs, managers and NEDs. By far the most common piece of advice is make sure you get the team right – hire the best people you possibly can and think hard about the organisational structure, team dynamics and make sure you have a broad set of complementary skills and experience. If you were not in your current position, what would you be doing? I would like to say playing cricket for England but that is unrealistic, to say the least. I’d probably be starting up a new business, quite possibly in legal services.
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Jordan Mayo is Managing Director at Smedvig Capital
Gorvins implements Proclaim in 6-figure deal
Eclipse’s Proclaim Practice Management Software solution rolled out for 100 staff
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ull-service law firm, Gorvins, has implemented the Proclaim Practice Management Software solution from Eclipse Legal Systems. The South Manchesterbased practice employs 100 staff and provides a full range of legal services for its clients which include blue chip organisations, SMEs, entrepreneurs, public sector and regulatory bodies, and private individuals. As part of the firm’s growth plans, and its strategy to focus on providing the very best in client and customer service, Gorvins embarked on a rigorous selection process to replace its incumbent, dated Practice Management System. Gorvins has rolled out the full Proclaim Practice Management solution across the entire firm. Now all staff, including
ML // June 2014
solicitors, secretaries and support, have instant desktop access to Proclaim Matter and Case Management tools, providing a consistent environment for all file progression from process-driven work to complex multi-path matters. As part of the integrated solution, Gorvins now uses Proclaim’s matter inception and CRM features to enhance management of all new enquiries and matters. Gorvins plans to roll out the FileView Interactive and SecureDocs online self-service solutions next, to enhance client communications and electronic document viewing/signing. A full client and financial migration from the previous Gorvins system has been carried out by Eclipse, having converted all relevant data to Proclaim. Lorraine Lockie, Managing Partner at Gorvins, comments: “We selected Proclaim based upon both the system’s standout features, and Eclipse’s qualities as a supplier.
Proclaim provides a one-stop solution for us, seamlessly integrating our key requirements, which include financial management, workflow, CRM, compliance and document management. The system stood ahead of its peers in providing this holistic approach, and in also boasting the flexibility to ensure it develops with our practice. As a firm we are looking to grow, not only in terms of scale but also the breadth and depth of our service offerings. The ethos at Eclipse is very similar to ours at Gorvins approachability, professionalism and a strong focus on making sure the client is happy. We look forward with confidence to the future with Proclaim as our platform for growth.” For further information, please contact Darren Gower, Marketing Director at Eclipse Legal Systems via darren. gower@eclipselegal.co.uk or call 01274 704100. Alternatively visit www. eclipselegal.co.uk
Driving efficiency and compliance ALB from Advanced Legal, the right partners for your ABS ALB is a single, fully integrated case management solution with best practice functionality built-in. Making it the perfect fit for demanding ABSs.
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Why switch to client-centric Case Management Software?
For less boring paperwork Proclaim is the UK’s leading Case Management Software solution, in use by 20,000 legal services professionals. Proclaim streamlines processes to enable you to focus on what’s important - your clients and customers. Deliver a superb experience for them and maximise profitability for you.
More profitable people work • Hugely configurable - have it your way • Manage your full range of matter types • Instant, slick online services for clients and customers • Automate procedures and document production • Access live KPIs and performance data • Integrate with business partners
Get the competitive edge
Call 01274 704 100 visit eclipselegal.co.uk or email info@eclipselegal.co.uk