In Industry Insights, Industry Insights

I suspect like many of the thousand or so delegates at the SRA’s annual Compliance Conference last week, I was left with a sinking feeling upon leaving the Birmingham Motorcycle Museum.

Was I naive to think that the changes being proposed were for the benefit of the profession (“less prescription, more flexibility” has been the mantra ever since OFR was first launched)?

Has the regulator’s role changed?

What’s really driving the reform programme?

To give it some context, I have until now been quietly encouraged by the steps the SRA has made over the past three years under Paul Phillip.  Don’t get me wrong, they are still far from perfect, often make strange decisions, and sometimes the front line staff don’t sing from the same hymn sheet as the leaders.

But things do appear to be changing for the better.  The top management at least give the impression that they are listening to the profession, and are intent on building upon the best bits of OFR and Principles-based regulation i.e. getting out of the way of the decent practitioners, and targeting the wrongdoers.

I think some evidence of positive reform includes:

  • the relaxation of the anti-competitive separate business rule that effectively prohibited solicitors from having outside interests in ‘quasi-legal’ businesses
  • the imminent CPD revolution, under the moniker of Continuing Competence. (Although I personally hate the name – competence suggests a pretty low bar for a profession – and it will of course cause a lot of upheaval in firms, the hours-based regime was desperately in need of reform – for more information see our recent post on Continuing Competence here, which includes some free templates.)
  • the proposal to create a ‘safe regulatory space’ for firms to trial innovative products and services

The consultation into the reform of the Code of Conduct and Accounts Rules was the main focus of the conference.  I haven’t heard many people moan about the Code of Conduct reform – probably because the current Code has always felt like a rushed, unfinished job, and the proposed changes look to be to be a logical next step.  OFR 2.0 if you like.  Hopefully they will also stand the test of time – we desperately need a little stability.

The new Accounts Rules again, on the whole, appear to me a genuine attempt to make legal cashiering easier, with a focus on the real risks to client money rather than peculiar technical rules.

(Having said that, there was an odd proposal in the consultation that client money be reclassified to exclude money on account of costs and unpaid professional disbursements – effectively making it the firm’s money.  There are lots of reasons why this is a terrible idea, many of which were aired openly at the conference.  One accountant recently told me that the proposal was ‘simply bonkers’.  I sincerely hope that the SRA listens to these concerns.)

So far, so good.

But there’s also this other proposal, being pushed hard by the SRA, that solicitors should be permitted to practise in unregulated businesses.  The SRA says that this will allow solicitors to compete on the same level as unregulated providers, and on the face of it you can kind of see the logic.  But as the Law Society points out, there is the real potential for a two tier profession to emerge, not to mention public confidence in the solicitor brand to suffer.

To my mind, this proposal represents at least as big an upheaval in the legal services market as the introduction of ABSs, possibly bigger.  It is essentially legitimising non-lawyer owned law firms by the back door. The whole point of ABSs was that it would invigorate the legal market by bringing non-lawyers into regulation, for the benefit of both competition and public protection.  What this current proposal does is reverse that position – non-lawyers will be permitted to set up shop and employ solicitors to provide legal services (albeit not the very limited reserved activities of litigation, conveyancing, etc.) in direct competition with fully regulated practices.  That could severely distort the playing field, not level it.

Given what’s at stake here, the effect it could have on the market and the profession, it strikes me that this should not be something that is decided by a front line regulator.

And that, in a nutshell, is why I came away from the conference so deflated.  It’s the constant mission creep and overstepping of boundaries.  No longer does the SRA see itself as simply a regulator in the traditional sense, which most would understand as being a body to protect the public through enforcement of professional standards and punishing the rogues and the incompetent.

No, they now have loftier ambitions to be champions of the free market.  Seemingly, this involves pushing the consumerism and competition agenda at all costs, and without much thinking as to the longer term effects on professionalism, the stability of the market and the viability of certain practice areas.

And it doesn’t stop there.  If messing around with market dynamics were not enough, they also want to force solicitors to be ‘transparent’ (which is a near impossible position to argue against, by the way – who wants to say they do not want to be transparent?). They envisage a world where every ‘consumer’ on the planet has access to every piece of information about every solicitor, including prices, complaints, and insurance claims history.

Then (don’t worry how, just trust the power of ‘increased consumer choice’), this will somehow magically make every legal service affordable to the 83% (or whatever figure is being thrown at you) of people who do not currently get professional assistance with a legal problem.

Set aside for the moment the overuse of questionable statistics, meaningless buzzwords and fuzzy logic.  The real concern for me is this: how on earth is any of this the SRA’s role all of a sudden?

Aha! they say.  Look at the s1 Legal Services Act – it says that the legal regulators are charged with promoting competition and the interests of consumers!  What could be a clearer mandate for us to take it upon ourselves to cosy up to the comparison websites (who, incidentally, have no professional obligations whatsoever).

That is a terribly selective reading of the LSA.  Surely, first and foremost, the front line regulators should be looking at the parts of the Act that a regulator is fundamentally there to fulfil: public protection.  That means being a regulator.  Not a competition Tsar, disruption enabler, innovation champion or whatever else you want to call it.  Reform the rules to get out of the way and allow professionals to compete, certainly.  But let’s not pretend that a regulator’s role should be any more than keeping the profession in check and the public safe.

We should let the regulated firms worry about competing with the unregulated providers and other professionals encroaching on their patch.  Give firms the flexibility to develop innovative products and services, but don’t hand the profession over to unregulated businesses and comparison sites without any thought.

It feels as if the regulator’s agenda is not just enabling change, but forcing it.  Simply doing a good job for a certain client base is no longer, it seems, good enough.

“92% of the people on our site think price is important”, said the chap from the Law Superstore (who the SRA thought was appropriate to parade on the stage in their keynote panel discussion).  Funny, that.  People who visit a comparison site are interested in comparing prices…?

Of course, ask anyone on the ground why their clients keep coming back, and they will give you a different answer.  Clients choose to use a solicitor, not because they have compared prices to the firm next door, but because they trust them to do a decent job for a fair price.  Because clients are often loyal.  Because they received a good service in the past, or were recommended to us by a friend.  Because they know we are professional, qualified, and regulated.  Because if things go wrong they know there is a safety net in the form of insurance and the other client protections.

Value for money cannot be reduced to the lowest possible price, but the intangibles do not fit the comparison site model, and so they are criticised on the transparency argument.

Price and complaints data are not the magic bullet in the access to justice argument, and driving down costs will ultimately harm the ability of firms to keep standards high.  This is not in the interests of the public. It might be in the interests of the Law Superstore, but it is wholly inappropriate for the regulator to be pandering to the comparison sites.

I for one firmly object to the regulators pushing this agenda of consumerism at all costs, getting into bed with comparison sites, and dressing it up as somehow in the profession’s best interests.  It is not, and it is possibly not in the public’s best interests either.

And I do not think it is healthy for a profession to be handing over a huge amount of power to the comparison sites.  We are after all talking about the regulators gifting incredibly valuable marketing information that will ultimately compete with law firms’ own marketing efforts.  If they charge for access to that data, they are effectively profiting from hurting those they regulate.

This is a slippery slope, from which there might be no return.  The profession needs to think long and hard about the implications.

If you would like to make your voice heard, respond to the SRA’s Discussion Paper by 26 January 2017 (http://www.sra.org.uk/sra/consultations/discussion-papers/regulatory-data-consumer-choice-legal-services.page)

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