Articles From the Team

ABS – The breaks are off

It has been four years since the Solicitors Regulation Authority (SRA) was provided with licencing powers, by the Legal Services Act 2007. These powers were aimed at “liberalising the regulation and provision of legal services in England & Wales”. This “liberalisation” resulted in the birth of the Alternative Business Structure (ABS). An (ABS) is simply defined as; “A regulated business providing reserved legal activities which has either, or both, non-lawyer owners and managers.” This is a clear shift from the traditional model, whereby a law firm is owned & managed by lawyers. But to what end? The overarching aim here is to provide consumers with a greater choice and access to legal related services.

Simply put, anyone, with an ounce of business acumen can own and manage a law practice in England & Wales providing the SRA has provided the requisite licence. That isn’t to suggest they are just handing them out to everyone and anyone. Typically, this was taken up by full service firms which do not already have a presence in the Legal Sector, such as the “Big Four” accountancy firms, but isn’t limited to that as many high street practices and even the Co-Op have acquired an ABS licence.

There were mixed views on whether or not this posed a legitimate threat to traditional legal firms then, and those mixed views remain, but as time passes and as more licences are issued, it suggests the initial threat to the traditional Law Firm, has yet to play out in its entirety, particularly when considering that the chairman of the Solicitors Independent Financial Advice recently stated that the application rate was three times higher than initially predicted, 113 from last October alone.

Success in this open market now rests on who can manage the business effectively, existing and new. The same source suggests that the traditional law firms approach has focused on “consolidation, mergers & acquisitions” which arguably plays into their rivals hands. How so? Having a Safety in numbers, more of the same approach, Law Firms are potentially missing the opportunities which their newer ABS rivals afford themselves by offering a more diversified and holistic client service.

Perhaps the approach should be to maintain existing client relationships rather than spending money getting new clients. We see this in other sectors such as banking and telecoms where the new customer is provided a better transfer or joining incentive. Obviously, a traditional law firm cannot take on all the services that the “big four” provide but what’s the harm in working with companies which provide complementary services such as accounting or surveying. I guess it’s something to think about, and something, if the threat of ABS’s remains on the horizon, that could leave traditional law firms scratching their heads.

If this shift continues at the rate it has, the shape of the legal recruitment sector will have to shift with it. I see this on a daily basis whereby the candidates I represent want to move for a better work-life balance, and where do we place them? Usually an ABS that offers a different culture & approach to client servicing, as well as their staff, than the traditional law firm.

For more information please contact BCL Legal.