abs – big bang or big whimper? – and how will it affect you? peter scott consulting

ABS – Big Bang or Big Whimper? – and how will it affect you?

Peter Scott Consultingwww.peterscottconsult.co.uk

Some topics for discussion today

• Appetite for ABSs?• Opportunities and threats?• How are you going to compete?

Appetite?

‘At this stage I am very pleased with the level of interest’

David EdmondsChair, Legal Services BoardApril 2011

Appetite?

‘ABSs will not be introduced until ministers are convinced that all the appropriate regulatory arrangements have been made, the necessary safeguards are in place and the impact of the new regime on the legal services market is fully assessed’

Dominic GrieveAttorney GeneralApril 2011

Types of ABS

• LDPs which will become ABSs• MDPs?• Quoted ABS?• ABSs with non-lawyer ownership?

Legal Disciplinary Practices - LDPs

• LDP with non-lawyer managers will be ‘passported’ to ABS status

• Market Appetite? • Benefits for the legal profession?

What is an MDP ABS?

The Clementi report described MDP ABSs as

‘practices which bring together lawyers and other professionals to provide legal and other services to third parties’

• Market Appetite?• Regulatory hurdles?

The Clementi report

“in the areas of consumer debt, inheritance planning or personal taxation, a combination of both legal and accounting skills could be a valuable asset for the client. Research carried out by MORI suggests that there is some consumer interest in the convenience and accessibility of one stop shopping”

Sir David ClementiFinal Report, December 2004

What will clients want?

• Will they want to buy professional services from a one stop shop?• Will they care?• How will the MDP ABS gain competitive advantage over rivals (both law

firms and accountants)?

What will be the USP of the MDP ABS?

Regulation?

The Clementi report considered that the most fundamental issue with MDPs was that of regulatory reach.

“how could a legal services regulator exercise power over people who were not lawyers, were offering clients a different professional service and might have different codes of practice in areas such as client handling?”

A quoted ABS?

• The Slater & Gordon experience?• Other professionals which have floated?• Aims and Benefits?

The non – lawyer owned ABS

• ‘Tesco law’ (more likely ‘Co op law’)• Market appetite?

Investment appetite by non – lawyers?

• Types of investors?• Their Aims?• Their Requirements?

Some issues to deal with?

• Ambitions of younger lawyers?• Will external investors understand some law firm

cultures?• Will they be put off by the new regulatory code?

Appetite by owners of law firms?

• Which types of firms?• Aims?• How much working capital do law firms really need?

Who will be your markets competitors in the brave new world after 6 October 2011?

The need to be competitive

“Competition is a process by which …

services that people are not prepared to pay for

high cost methods of production and inefficient organisations

are weeded out and

opportunity is given for new…services methods and organisations to be tried” *

This is the space ABSs and others will fill

*Everyman’s Dictionary of Economics – A. Seldon and F. G. Pennance 1964

You have developed a realistic plan, but…

This will require RESOURCE - resource which many firms cannot realistically and at an economic and acceptable cost provide themselves

But your competitors may have the resources

Is lack of resource making you uncompetitive?

Often a lack of resource of expertise(client perception surveys will show if this is the case)

Often a lack of financial resource(inability to invest in your people and in the business)

Resource to enable you to…

attract and retain the best talent

Resource to enable you to…

provide clients with the depth and breadth of expertise they

will require when they need it where they need it

Resource to enable you to…

build the quality management which will be

required to successfully compete in the future

Resource to enable you to…

provide the necessary support infrastructure to underpin the effective provision of high quality professional services

Resource to enable you to…

provide the necessary technology to make you

more efficient and profitable

Building resource to compete

Will you be able to build sufficient resource on your own to achieve your goals?

The profession is too fragmented Nearly 11,000 law firms Over 85% have 4 or fewer partners Most will not be able to compete and survive if they remain as they are

Size does matter

Competitive growth models?

• Organic growth alone?• Some form of consolidation?

How can consolidation enable tomorrow’s law firms to compete?

Not about size for the sake of size

• A means to develop resource at an acceptable economic cost to each constituent firm which individual firms cannot on their own provide

A better platform on which to build a more competitive law firm capable of succeeding in tomorrow’s legal market

Your Vision?

Any questions?