Two for one wills?

After simmering its way through parliament over the last three years, the Legal Services Act is about to explode into public consciousness. This is no exaggeration. Dubbed ‘Tesco’s Law’ by friend and foe alike, it will significantly change the way consumers buy legal services and send huge shockwaves through the established legal profession.

At the heart of the LSA, is a radical overhaul of the industry’s regulatory framework and a liberalisation of ownership and investment rules. Quite simply, the game has changed. With the likes of the supermarkets, insurers and accountants now able to sell legal services, traditional legal firms will get their first real taste of competition. The consumer will now be king.

The challenge for existing firms is both economic and strategic. They will have to identify their own distinctive skills, talents and core capabilities that can’t be replaced by technology, systems or less costly staff. They will need to take those core competencies and shape them into a coherent, client-focused offer. Then through fierce industry wide competition, the market itself will drive out inefficient and outdated practices.

The arrival of big, household names in the legal arena, will also mean a fresh emphasis on communication. In the past, the legal and marketing professions haven’t been the happiest or indeed, most regular of bedfellows. With sophisticated, highly leveraged brands now stalking their patch, traditional firms will have to wise-up fast. Fortunately the relaxed ownership and investment rules of the LSA allows them much more latitude. By injecting fresh capital and board level expertise from outside the industry, established firms should be able to compete on equal terms.

Despite initial speculation by industry commentators, it’s unlikely that the major investment banks will try to buy their way into law firms – they’re difficult businesses to grow quickly and the Intellectual Property rests entirely with the the individual partners. Rather, back office outsourcing and legal processing opportunities will be the order of the day. At the same time, major corporates will pursue vertical integration options - for example, Insurance Companies acquiring personal injury law firms. What’s more, the post-election shake-up of legal aid will no doubt drive big outsourcing companies to consolidate this sector because of the guaranteed income streams.

Whatever the challenges thrown up by the LSA, it undoubtedly offers some huge opportunities. And although some lawyers argue that it will mainly affect the high street and leave the mid and top tier firms untouched, this is probably complacent and wishful thinking. From where we sit, the LSA promises to shake the decades of dust from a trusted but rather staid profession. And it couldn’t be more welcome.

For further information please contact Paula Morris. T: 029 2047 4401 E: p.morris@capitallaw.co.uk

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