Legal Services Act - Winners & Losers from the Big Bang
10th June 2008
The Legal Services Act (the "Act") received its royal assent in October 2007. The Act has been described by some commentators as being the catalyst for a "Big Bang" in the legal services market
In a speech in March 2008, The Right Honourable Jack Straw MP, Lord Chancellor and Secretary of State for Justice said:
"The Legal Services Act 2007 is a catalyst for more growth in the profession and for the legal services market to flourish...
A key aspect of the reforms is allowing for Alternative Business Structures, paving the way for a dynamic legal profession that is able to respond more effectively to the needs of the consumer. Alternative Business Structures will be instrumental in widening consumer choice and access to high quality legal services.
But it is not only about consumer choice. There will also be opportunities and incentives for the profession to innovate. By permitting different types of lawyers and non-lawyers to work together to provide a range of legal and non-legal services, lawyers will have greater flexibility in structuring their businesses to take advantage of domestic and global markets...
Alternative Business Structures will go further still. By opening up opportunities to access external investment, the Act also facilitates the expansion of firms and investment in large-scale projects - IT is just one particular example, but the opportunities extend far beyond that.
Firms will be able to reward non-legal staff in the same way as they reward lawyers, making it easier to attract high quality experts to take businesses forward. This will mean the firms of the future could have partners that are finance or marketing directors, driving up the quality, and I hope the standards of service for the consumer.
These proposals are facilitative rather than prescriptive. The drive for reform will need to come from the legal profession itself. But it provides a radical opportunity for the profession to put itself on a more competitive footing."
I make no apology for quoting such a large section of Jack Straw's speech. There is no doubting the government's intention and that is for significant structural and regulatory change to occur in the delivery of all forms of legal service. Without doubt the Act will drive the biggest change in the profession for more than a century and will undoubtedly create opportunities and pose threats for those providing legal services, as well as for those who themselves provide services to the sector. It will be some years before the full impact of this legislative driver for change can be assessed. One thing is for certain, change is coming. That change will emanate from a range of sources:
- The legal profession itself
- Corporates who could benefit from the changes
- Regulators looking at regulating firms and not just at individuals and risk based regulation
- Consumers becoming more aware and more discerning in their purchasing of legal assistance
There are many scenarios that could and may play out as the possibilities are assessed - the real questions facing law firms and those who provide them with services are what does the Legal Services Act mean for my business and who will be the winners and losers?
Much has been written about the Act as "Tesco Law" and several large consumer brands are already launching or planning to launch services as changes are implemented towards 2011 and 2012. The most recent entrant is ‘Which', the consumer champion, an organisation with a huge database of subscribers already being offered legal services.
The biggest threat faced by the legal profession comes from the profession itself - a profession that is, in the main, conservative by nature, risk averse and slow to change. The danger is that these firms will fail to assess the impact the Act may have on them and are then swept away by a wave of change which gathers momentum in 2010 and beyond. There is time to review and plan, to be ready to lead or respond - that time is now.
Ask yourself the following questions:
- Would my firm benefit from assessing the impact of the Legal Services Act?
- What are the implications for the way that we work, the clients that we serve, the people that work with us, the systems we use and the way that we charge for our services?
- What external factors may impact on the markets in which we operate and do we face any external threats?
- Do we have the necessary capital to build for the future?
There is every chance that answering these questions as they apply to the specific circumstances of your business, will take some time. But, whether you lead or manage a law firm or are a supplier of any services to law firms, the effort of stepping back to think about these changes will ensure you are better placed to be a winner.
Contact: Mike Jones on 07887 822308
Email: mike@intrinsic-values.com