A confusing world for aspiring lawyers?

Much is talked these days about the wonderful opportunities and new potential routes that are on offer for aspiring lawyers.  There is no doubt that the landscape looks so different now for someone with an intention to become legally qualified.  However, is all this choice a good thing?

A school leaver, with an inkling that they might want to be a ‘lawyer’ when they grow up, can now take so many different paths.  Of course there is the first decision, not a new one, which is whether or not to do a law degree (figures change slightly year on year but generally about half of those who qualify as solicitors are non-law graduates).  Even for those who choose to do a law degree, the path is not straightforward.  Do they stick to a ‘traditional’ three year law degree?  Do they go for a three year law degree ‘with a twist’, such as the excellent problem-based learning degree at York University (as previously, I must declare an interest here as I do some tutoring on this course)?  Do they go for the new two-year degree being offered by the College of Law? Or do they go for the five-year course at Northumbria, which combines the academic, vocational and training stages all in one?

Degree in the bag, what’s the next stage?  Focusing on those looking to become solicitors, the decision of where to do your LPC is no longer straightforward (assuming you are in a position to have a choice).  Options for LPC are now more varied than ever, albeit that some of these are tied to particular firms.   The most recent additions to the LPC stable are the MA (LPC with Business) being offered to Reed Smith prospective trainees, and the new internationally focused LPC being offered by the College of Law in association with CMS Cameron McKenna. 

Of course all of this must be examined in the context of the ongoing Legal Education and Training Review (LETR).  As has been widely publicised, more common training of would-be lawyers, abolishing the concept of a qualifying law degree, sector-wide CPD, and scrapping the training contract and pupillage are among the more radical options being considered by the LETR.  With a core mission being to simplify routes in and around the profession, ensuring a “structure that increases choice over the processes of qualification, whilst delivering greater certainty to the professions and to consumers as to the quality of outcomes achieved”, it will be fascinating to see where the LETR will end up in terms of recommendations. 

Then you have the ‘Mayson’ approach. Professor Stephen Mayson has argued, in a recent paper authored with John Randall and published in February of this year, that an (improved) LPC should be the gateway to qualification as a solicitor but that there should be post qualification requirements for those practising in reserved areas.  Of course this approach does raise the question (neatly asked by Professor Richard Moorhead in his Lawyer Watch blog) of what exactly is the point of a title that doesn’t entitle you to do anything.

Even limiting the discussion to the system as is, aspiring lawyers have a much wider choice now in terms of what type of organisation to work for once the academic and vocational stages have been completed.  For barristers, there is now so much more on offer than just a traditional chambers. The same goes for solicitors – do you join a traditional partnership, do you join a firm that has a corporate structure (according to a recent blog by Viv Williams, CEO of Legal Futures Associate 360 Legal Group, 25% of the legal profession now trades as limited companies), do you join a firm that is non-lawyer owned and if so, does the identity of such owner inform your decision?

Choice can be a wonderful thing, but I do hope that today’s aspiring lawyers do not find themselves too overwhelmed. 

The Perfect Storm?

Much as October 6^th has passed with a whimper rather than a bang in terms of ABSs (although at least with Premier Property Lawyers we do have one ABS now in existence), this hasn’t stopped the national press highlighting the changes in the legal market and commenting on them.  From Radio 4 debates to the front of the Business pages of many of the Broadsheets, the liberalisation of the market has been a hot topic.

Coinciding well with all of this has been the Espirito Santo Investment Bank report on the impact on the market.  The headlines make eye-catching reading, from ‘Perfect Storm spells the end for thousands of solicitors’ to a ‘seismic’ upheaval of Britain’s consumer legal market.  Whilst it must be remembered that the Bank is hoping gain a lot of clients and traction in the external investment market (they are currently advising Irwin Mitchell among others on their options for seeking external capital) the report is nevertheless a timely reminder to those in the ‘consumer’ legal market that standing still is not going to be an option.  As well as focusing on the retail end of the market, the report also deals with the top end, arguing that even the large City firms will not be immune from the changes.  Chiming with the greater proportion of commentators in the market, the report predicts that medium-sized City firms will be particularly badly affected. 

Much as the rules now allow for external investment, many firms have found over the last couple of years that the expectations of external investors are pretty high and do not sit comfortably with the sort of returns traditionally generated by law firms.  The report states that business angels would expect annual returns of 60-70%, private equity around 30-35%, and even public companies 12-20%.  It’s clear that for those firms who are serious about attracting external investment, the spotlight will very much be on the ‘business’ of the firm. 

On a final note, this week also sees the launch of yet another franchise, Simplify the Law.  This one appeals to me especially as its key message is the importance of client communication.  Co-founder Jonathan Brewer argues that clear and proactive communication will be the difference between success and failure for law firms. It’s always good to see someone singing from the same hymn sheet as yourself (see my last post…..)

Partners v Business Experts - who should run firms?

The issue of the suitability of partners to run a business is one that has been debated for a long time.  It has been brought into sharper focus by the Legal Services Act - indeed one of the 'threats' of the market shake-up often highlighted for traditional law firms is the new competition from businesses run in more efficient and effective ways. 

Traditionally, a trainee qualified, was hopefully taken on by his or her firm, slowly worked their way through their years' PQE, until they had enough years under their belt to be considered for partnership.  Although this is a significant generalisation, if an assistant/associate was good at the job of 'lawyering', they would get accepted into the partnership.  Business acumen, and indeed the basic ability to run a business, were not necessarily factors. 

Things have changed now, in that business development, networking, people-skills and so on are much more relevant in firms both large and small when considering who to take into the partnership.  However, there is no doubt that there are still many law firm partners out there who, though very good at their 'day job' are not naturally suited to running a business (and indeed often would prefer not to). 

This is something that the SRA has recognised and decided to deal with.  The introduction of principle number eight in the new Code of Conduct, which states that that firms and solicitors must: "run [their] business or carry out [their] role in the business effectively and in accordance with proper governance and sound financial and risk management principles", is a significant departure.   This is backed up to an extent by the Chapter 7 outcomes and indicative behaviours on management of the business.  However, there is no doubt that for many law firms there is still a long way to go in terms of running the firm as well as possible.

So, what's the answer?  The last ten years or so (probably extended to 20 years for the larger firms) have seen the rise of the 'Business Director' (or similarly named role) - an external, non-lawyer brought in to run the business.  However, for many firms this hasn't been as successful as hoped, and I think that much of this is down to lawyers' natural assumption that they are more than capable of running the business on their own, and perhaps a little bit of professional snobbery (who are you to tell us how to run our business.....).  For the outsiders'/consultants' view on this, there is an interesting linked-in discussion thread http://www.linkedin.com/groupItem?view=&gid=3572215&type=member&item=54725293&qid=18a5fad3-5aca-4cb2-b665-4b3933127566&trk=group_most_popular-0-b-ttl&goback=%2Egmp_3572215

Jeremy Hand, who set up private equity firm Lyceum Capital in 2008 specifically to look into investment into the legal sector, stated at a conference around that time that law firms have unbelievable profit margins but cannot run themselves.  At the time one got the sense that he was rubbing his hands with glee at the prospect of the money that could be made out of the legal sector. Of course, Lyceum has since directed its focus towards legal process outsourcing, and other private equity houses have been targeting the legal publishing market.  How much of this is down to the difficulties encountered when actively considering investing into a law firm run by lawyers? 

Of course there are many firms that are run fantastically well by their managing partners/governing board/whatever partnership management structure is in place.  This applies across the country and across all size of firm.  However, there is no doubt that the opening up of the market puts this issue into sharper focus and it will be interesting to see how the debate develops and what happens in practice. 

Why wait until October?

What is interesting about recent moves such as the creation of In-Deed and the launch of Panone's stand alone white label division, Affinity Solutions, is that these have all happened before 6th October 2011 - in other words before the 'Big Bang' date for legal services.   

A year ago all the talk was about who would be the first-movers in the ABS market.  What the last year has shown is that it has been possible to come up with innovative ideas and structures within the existing regulatory environment, without having to wait for the new, more flexible regime.  Of course some of the recent developments have taken place in anticipation of the changes, in that they wll be looking to take advantage of the opportunities under the Legal Services Act once ABSs are authorised.  This includes In-Deed, the new online conveyancing service launched by the founder of property website Rightmove, which has stated that some of the money it raises from its intended AIM float could be used to help panel firms that need to invest in training, technology and customer service.  Other recent developments have taken place in response to the changes provided for the in the Legal Services Act - I would include in this Quality Solicitors, with its emphasis on the quality and professionalism that clients (or should that be consumers) will be getting. 

In fact there has been so much activity in the market that one almost wonders why the profession needed the Legal Services Act to galvanise it into action.  An even more interesting question is the extent to which these moves are motivated by the upcoming regulatory changes, as opposed to the other market pressures which are so widely commented on, for example: the pressure on fees stemming from the strained economic environment; the rise of legal process outsourcers and legal publishers; the increased demands for improved client service and online capabilities from the younger generations; and so on.  Whatever the case, when you distil down what has been happening, it's quite an eye-opener.  Look at this brief list of what new themes have been emerging:

• national networks, both non-branded (such as GetSolicitors) and branded (such as Quality Solicitors);
• online legal advice portals (such as Expert Answers);
• referral services (such as Bid4Fees);
• find a lawyer websites; and
• the comparison websites (such as Wigster, LegalCompare.com).

Whatever your views might be on these developments, there is no doubting that the last year or so has seen significant moves in the industry.  

First ABS regulator announced

So the Council for Licensed Conveyancers (CLC) have become the first licensing authority for alternative business structures (ABSs). This is despite concerns over both the limited nature of CLC's experience and the lack of clarity on the CLC's separate business rules. 

With the Bar Standards Board having recently taken the decision that it will regulate advocacy focused ABSs (albeit with restrictions in place meaning that they will be very different entitities from other ABSs), and the SRA having obtained the 'yes' vote needed to clear the way for their application to become an ABS licensing authority, things are definitely moving on. 

However, there is doubt about the start date of 6th October.  There is a lot of work still be done, and parliamentary steps to be taken.  Justice Minister Jonathan Djanogly refused to confirm that ABSs will start on this date when questioned at a recent Legal Week forum, and Legal Services Board Chairman David Edmonds apparently sent out the same message at a recent Legal Futures Conference.  The SRA are still working on their ABS application documentation and one suspects that in order to be anywhere near ready to accept ABS applications by 6th August will take a herculean effort.