For the first time, businesses outside the legal sector will have the ability to offer their own full range of legal services under their own brand, as part of the act’s Alternative Business Structures (ABS).
The Co-op, Saga, the AA and the RAC are some of the firms preparing to launch their own legal arms. Editor Victoria Hartley (VH) asks Eddie Goldsmith (EG), senior partner at Goldsmith Williams why financial services firms aren’t doing the same.
VH: What opportunity does this offer financial services firms?
EG: The important thing is that this opportunity has never existed before. What this means is that big, well-known firms will see this as an opportunity to offer other ancillary services under their own banner.
Q: Critics of the idea from the mortgage advice industry have dismissed it as not core to current business activities. How would you respond?
A: I can understand why this might not be a core business activity, but if a firm offers a service that’s relevant, this should be seen as an opportunity to expand under their own brand and under their own control. Firms happily refer clients on to third-parties at arms length, but this way, you can keep these services under your own roof.
Q: What types of firms do you see this working for?
A: If those new ABS entities were part of a network, for example, that’s likely to mean that as a part of that company it would encourage Appointed Representatives (ARs) to use their conveyancers. It also puts the AR in a much stronger position if they use their own brand because all those questions on due diligence have been answered, particularly fraud. It ticks a lot of boxes. I imagine plenty of organisations we haven’t even thought of will be looking at this option – apart from lenders who like to keep legal firms at arms length so they can sue them! Medium to larger scale companies though will be interested. You have to have scale for it whether you’re an introducer, a packager or a network.
Q: When can firms apply and what’s the application process going to look like?
A: Firms can apply from 6 October. Legal regulator the Solicitor’s Regulation Authority (SRA) is likely to be very careful with its approvals because it will be performing a public duty. In each case it has to ensure each non-legal firm is honest so will be reviewing business plans, the suitability of each manager and so on – the last thing the regulator wants is scandal. Firms will be very, very heavily scrutinised. The process could take up to nine months from a standing start but firms in a related field will be passported, which could qualify 200 firms overnight.
Q: The margin in conveyancing isn’t spectacular, so what’s the business case for launching an ABS?
A: What people forget is that under an ABS the firm can become a full-serviced legal firm offering wills, probate, personal injury and so on. It’s true – there isn’t a lot of margin in conveyancing but there’s plenty in estate planning. At the moment the market is dominated by unregulated will companies so it’s an opportunity for legally regulated companies to take market share. What is clear is that the industry has yet to wake up to the existence of this act. It may not be for the fainthearted, but at least people should be aware of the possibilities. This is the biggest revolution in legal services ever – and legal services have effectively been a monopoly held by a small group of individuals for too long.
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To read a Mortgage Solutions news analysis on the Legal Services Act, click here
