Adapting for the ABS

Adapting for the ABS

A recent article in the Law Society’s Gazette, optimistically entitled Small firms will be “resilient” in the face of ABSs summed up a report by consultants Oxera, commissioned by the Law Society, which came to the conclusion that ABSs are not only unlikely to undermine geographic access to justice for consumers but would also not have a detrimental effect upon the businesses of small practitioners.

The research, which was only conducted on twenty law firms and only by telephone found, inter alia, that:

  • existing “commodity” legal providers, such as bulk conveyancing firms, might have problems competing with an ABS firm that is built on a trusted brand and might therefore choose to merge with a branded provider seeking to enter the market, but that
  • smaller firms would be able to “differentiate themselves” by finding themselves a specialised area of the market not suitable for “high-volume, remote legal access”.

The report went on to state that some of those interviewed believed that small firms would need to “specialise in clients who value face-to-face contact, such as the elderly, disabled or high-net-worth individuals, or areas of the law that involve more bespoke advice, such as child custody or divorce” but that many interviewed believed that they would be safe from competition because they focused on market sectors such as elderly clients or because they had their own strong local branding would “insulate them from larger firms offering a more remote service”.

Rather than giving firms any degree of comfort, the article should, in fact, be sending out a clear and strong message that unless all lawyers – not just solicitors – take off their rose coloured spectacles and start to compete in a market place which is inevitably going to become more competitive, then they will not survive.

In this article looking at Alternative Business Structures we consider briefly why those in the current legal market place will need to change in order to survive.

Will ABSs make a difference?

There is a rumour going around, spread by those who want there to be as little continuing opposition as possible (and no doubt spurred on in part by the decisions in Scotland as to the ownership of legal practices) that the introduction of the ABS will have little if any impact upon those currently in the legal market, and especially will have little impact upon high street practices and those engaged in niche activities.

Indeed, the Oxera report takes the view that if high street firms concentrate on those clients who prefer a one-to-one experience, such as the elderly or high net worth clients, make themselves the legal service that is “just around the corner” rather than a remote centrally placed giant provider or transform themselves into niche practices, then they will have nothing to fear.

There are a few problems with that particular strategy, not least that:

  • there are not many high net worth clients knocking around,
  • the elderly are surely going to be one of the sectors that organisations such as the Co-operative will be best able to target,
  • what is remote about having the Co-op or Tesco Express just around the corner?
  • there is a finite limit to the number of people who can provide niche services – the clue is in the word “niche”.

The vast majority of smaller firms are finding it hard enough to eke out a living as it is without having to share it with the Co-op around the corner.

ABSs are coming and there is not much we can do about it except compete. That last word “compete” is an important one. It means that we must run in the race and not just stand around in the hope that the spectators will realise we are the fastest – we just chose not to try.

The sad fact for many existing firms is that in many cases ABSs may not reduce the public’s access to legal services but increase it, and so another argument against them bites the dust. Indeed, if they are regulated correctly and if they put in place procedures that ensure that quality of service is maintained, they may even benefit the public by reducing costs and improving standards.

So, instead of pretending that it is not going to make a difference lets do something about competing.

Do we have a brand?

A number of those interviewed in the Oxera report stated that they were satisfied they would survive due to their “strong local branding”.

Before you breath a sigh of relief, slap yourself on the forehead and go “Of course. How silly of me. I’ve got my reputation” ask yourself, do I really have a strong local brand or is it as illusory as client loyalty has turned out to be? Indeed, I would challenge any firm to go into the street in their local town and ask a few people to name some local solicitors. They may be in for a shock. Not only are they unlikely to be named, but there is every chance that none of the competitors will be either.

The public are a fickle bunch. They will invariably buy that which is cheapest, or is most effectively marketed, or has the most well-known brand name or appears to be best value for money. So, if an ABS comes along that can offer one or more of these “values” the chances are that they will take work away from the firms with their self-delusional strong brands.

Tackling things head on

If an ABS enters the market it will do so to produce a profit. It will produce that profit by attracting to it as much work as it can undertake profitably. Since there is a limit to the amount of work available, so that work will have to come from somewhere. That somewhere is going to be those solicitors who are already providing those services.

This is going to be war. It is going to be about how many clients you can attract versus how many the local ABS can attract. And just like a war you are going to need strategies and tactics (and remember, they are not the same thing).

Instead of deluding ourselves into thinking that it won’t make a difference we need to assume that it will and we need to begin by improving what we offer and how we offer it. We need to:

  • become better at offering the services we want people to buy,
  • improve our internal procedures so that we become more cost-effective,
  • make our premises look less forbidding and Dickensian,
  • market ourselves to those whom we would like to have as clients,
  • find genuine unique selling points that really do differentiate us from the competition,
  • address risk and client care,
  • adopt a “right-first-time” approach to the work we do,
  • have work carried out by appropriate grades of fee-earners so as to keep the firm?s costs as low as possible and the firm profitable,
  • use the Internet as a tool to assist our work rather than a vehicle through which to offer hideously designed brochure sites which do nothing other than make the firm look out-of-date.

And these are just some of the things you will need to think about and which we hope to cover over the coming months.

So, in a nutshell, let’s stop pretending all in the garden is rosy, take a good look at ourselves and then do something about it.

Do ABSs have to be the opposition?

So, do we have to regard ABSs as the opposition?

Well no, not really. They are only the opposition if we want to compete with them.

We could, for example, become them; find an organisation to merge with, take over or be taken over by and become an ABS ourselves. Just make sure that you don’t do so until you are permitted to, otherwise you may have the SRA knocking on your door and not looking very pleased.

We could look at refinancing ourselves with external capital and even ownership and use the resulting funds to become a bigger, better, meaner player.

We could even let go of the over-powering need for independence and perhaps embrace the ABS as a potential future employer rather than as a competitor. A word of caution, however, it may be worth bearing in mind that many of the available jobs may be for paralegals rather than qualified, over-paid professionals.

Is there anything we can learn from?

What we may be witnessing is the beginning of a similar process in the legal sector to that which happened many years ago in the food retail sector when supermarkets took over from high street shops.

Just as lawyers are doing now, local shop-keepers started by thinking that the lack of a personal service and the fact that the local shop had been on the high street for 100 years would protect them from the competition. They were wrong; the supermarkets won.

The simple fact was that the supermarket, with all its faults, was far more convenient and user-friendly and, in addition:

  • they had parking spaces outside,
  • they stocked more products,
  • they were often cheaper,
  • they opened branches in railway stations and motorway services where the people were rather than expecting the people always to come to them,
  • they extended their opening hours to suit the customer,
  • they opened on Sundays,
  • they offered ancillary products and services,
  • they offered internet shopping and home deliveries.

Look at any town centre today and count the number of small food retailers. There may be a specialist butcher of fish-monger – although it is highly likely that there will not be – and if there is a baker then it is likely to be one of a chain.

So, let us look to what has happened elsewhere and learn.

Ask yourself “what does my client really want?” as opposed to the more usual question “what is it convenient for me to give my client?”

Ask “how does my client want a service delivered to them?”, rather than “how can I deliver the service at the least possible cost and difficulty?”

Ask “how does my client want to be charged” rather than “how can I persuade my client that this is how I will charge them?”

What do you want from a supermarket versus a high street grocer? Your answer may lie in the answer to that question.

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