There has been a lot in the legal press lately about the introduction of ABS which is due to be implemented in early 2012. But what is an ABS and how will it really affect the legal market?
An ABS is an Alternative Business Structure and will consist of an organisation which provides legal services and has some form of non-lawyer involvement. It was introduced as a result of the Legal Services Act 2007, or “Tesco’s Law” as it has been nicknamed in the profession. Interestingly, despite this tag, Tescos have actually confirmed that they are not currently interested in registering as an ABS when the structure is launched next year! The SRA is already dealing with hundreds of enquiries and recently the Co-op have confirmed that they will be applying for ABS status in 2012.
These organisations can now be run by non-lawyer managers, i.e. the directors/partners/owners of the organisation do not have to have any legal experience. However, any non-lawyer individuals with more than a 10% share, or a significant influence, in the business will have to pass a vetting stage by the licensing authority to demonstrate their suitability. Solicitor owners will generally be deemed to be fit to manage a firm.
All ABS firms will be regulated by a licensing authority. It is likely that the Law Society, SRA and Council for Licensed Conveyancers will all be appointed as licensing authorities. The Legal Services Act 2007 requires that an ABS appoint a head of legal practice and a head of financial affairs and administration. The SRA have re-termed these roles as a compliance officer for legal practice (COLP) and a compliance officer for financial and administration (COFA). Eventually all law firms will be required to have a COLP and COFA. The firm’s COLP will be responsible for ensuring that the ABS complies with the SRA’s regulatory requirements and the COFA will ensure the firm complies with the SRA’s accounting rules.
How will it affect the legal market?
It is difficult to say at the moment because it is still a few months away from full implementation. There is a lot of negative press about the introduction of ABS firms, which suggest that it will take work away from high street solicitor firms and provide a lower quality service to consumers because they will use less qualified staff to charge cut-throat prices. I am not convinced that it will have that much of a negative impact on the existing market for the following reasons: -
- Competition is healthy. It provides opportunities for creative thinking and new marketing ideas, stops complacency, motivates to provide higher levels of customer service and helps to grow the market.
- If ABS firms really are able to offer cheaper services, then it increases the access to legal services for those who can’t afford the rates of the high street solicitor, but don’t qualify for legal aid. Improved access to justice is something that all solicitors should be happy about, if for no other reason than to decrease the number of litigants in person that we face in court!
- If there are more ABS firms providing legal services, there will be more jobs available for solicitors looking for work.
- Whilst the large corporations seeking ABS status, such as banks and supermarkets, will be able to offer cheap prices on more straightforward matters like simple Wills or tenancy agreements, they will not be able to offer the personal service that clients will get at their local high street firm. For example, many clients would choose to visit their local firm to discuss complex inheritance issues rather than speak to a “legal adviser” in a call centre miles away. There will always be a market for the personal service of a local solicitor and whilst some clients may choose to opt for a cheap deal, there will be others who would prefer to pay a little more to have a face-to-face conversation with their solicitor.
It will be interesting to see how the introduction of ABS firms will unfold in 2012 – I certainly don’t think that it will be as bad as many solicitors believe, but I do think that it may be time for some traditional firms to step up their game and ensure that they are offering the highest quality service to their clients.
What do you think?