In Industry Insights, Industry Insights, Jon's Blog, Newsletter

Over the summer the Legal Service Board (LSB) conducted a survey of the 193 Alternative Business Structures (ABS) licence holders (38 CLC and the remainder SRA).

The survey set out to gather further information about ABSs, the services they provide, the clients they serve, and their views on regulation.  The resulting data were sent out to license holders recently, and makes for some interesting reading.

(Note: at the time of writing the source material is not available from the LSB website.)

From the data, we can draw some broad conclusions about the profile of a “typical” ABS.

  • They are mainly existing law firms, with no plans to change the way that they currently deliver their services Whilst nearly a quarter (23%) of respondents are new entrants to the legal services market the majority (77%) were previously regulated by the CLC or the SRA.
  • A large proportion (78%) of ABSs do not intend to change their service offering, and 73% of respondents have not changed the way that they market their services.  91% of respondents have not changed the group of clients they provide services to.
  • Most (83%) say that legal services are their core business Of those that do not consider legal services to be central to their organisation, the respondents demonstrate a wide variety of business models, including:
    •  high Sheriff enforcement
    •  debt recovery
    •  property disputes
    •  panel management of conveyancing services
    •  part exchange acquisitions for developers
    •  risk management
    •  IT security
    •  training and consultancy
    •  mediation
    •  accountancy
    •  claims management
    •  LE I and litigation funding
    •  financial services (including advice and asset management)
  • They applied for ABS for un-surprising reasons The most common factors behind the decision to apply for an ABS licence were:
    • promotion of non lawyer(s) to management of the business (23%
    • regulatory requirement to convert from LDP or MDP (22%)
    • access to external investment for service development (19%)
  • We are perhaps yet to see the hotly-anticipated “innovators” becoming ABSs 95% of respondents say they have the capability to deliver services online or by telephone.  However, the majority of those appear to class a website (providing information, contact details for the firm and so on) as delivering legal services. Only 3% of respondents said that they use an interactive online service used throughout the whole process.
  • However, 59% of ABSs use fixed fee pricing – perhaps more willing to stray outside the comfort of the billable hour.
  • They were likely to be frustrated by the process 55% of respondents report that the regulator took seven or more months to grant their application.
  • The most significant barriers to innovation and growth in the legal services market were listed as:
    • existing regulation
    • uncertainty of future laws/regulation
    • traditional partnership business model
    • access to capital
    • banks won’t lend to law businesses

    Furthermore, 86% of SRA-regulated ABSs said that “complying with legal services regulation adds significant costs to running a business”.

    These figures are consistent with the picture we have seen over the past year or so.  We have helped a number of firms with the application process – if you would like further information or just an informal chat, feel free to contact us.

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