Implementation of the LSA is fast approaching, and the Co-op is planning to be one of the first to enter the market. A panel of experts debates the implications for the company, its potential clients and its solicitor competitors
- Mark Brandon, founder, Motive
- Pearse McCabe, director of strategy and planning, Rufus Leonard
- Giles Murphy, director, Nexia Smith & Williamson
- John Llewellyn-Lloyd, head of M&A, Execution Noble
- Stephen Mayson, director, Legal Services Institute
- Neil Kinsella, chief executive, Russell Jones & Walker
Six months before the Legal Services Act (LSA) is fully implemented, one company is already ratcheting up its preparations.
The Co-operative Group is in the middle of a strategic review aimed at identifying which legal services it will provide and how they will be offered.
Co-operative Legal Services managing director Eddie Ryan says nothing has been decided for certain in terms of the kind of services it will provide, but what is known is that the company will be entering the market in a major way come October.
“We’ve made no secret of the fact that we want to be among the first,” confirms Ryan.
And as the days pass, the pressure is growing. “Our review is ongoing and has been for several months, but the closer we get to October the more intense it will become,” adds Ryan.
“It will build to fever pitch.”
In this, the second of The Lawyer’s series of LSA-themed Q&A pieces, we ask our panel for their thoughts on the Co-op’s plans.
But first Ryan highlights one of the key issues he believes his organisation will be facing post-implementation – choosing the best method of offering face-to-face services.
“We want to offer the whole range of consumer legal services, and while we can provide some remotely others will require face-to-face advice,” he says. “So the challenge for us is how to provide the face-to-face services. Do we build a network of solicitors’ offices or utilise our network of 300 bank branches? Our challenge is to build a business, and the question is, do we provide it via a wholly owned network, through a franchise operation or via a partnership? That’s all being considered by the strategic review.”
The legal market will be watching closely.
How significant is it that the Co-op is planning to enter the legal market?
Very. The Co-op has proved itself capable of taking its brand successfully into many other areas – banking, insurance, funerals, travel – long before its competitors. Added to that, it is one of the very few organisations to have had a strong, ethical dimension to its offering since its inception, which could be very persuasive in the personal legal services market.
The move is significant in that it reflects a different way of thinking about the market and the opportunities for delivering ‘retail’ legal services. I’m intrigued by this difference. At a time when traditional law firms have by and large been bemoaning their lot, accepting flat or declining fee-income and profits, and looking forward to an opportunity to retire, from a standing start the Co-op’s built a legal business turning over more than £24m. Exactly the same market conditions and opportunities, but totally different attitudes. And a belief that there’s scope for more. That’s significant.
The Co-operative is a values-based brand – underpinned by the [Co-op’s slogan] ‘Good for Everyone’ and by the very nature of its business structure. It’s focused on positive human values where nothing takes priority over the general well-being of people. It isn’t driven primarily by profit, so consumers will assume its legal services are not profit-driven either. A brand that can create perceptions of fairness and objectivity because profit isn’t the key priority will be in an enviable position when this market opens up in October.
What are the key opportunities for the Co-op and its clients?
From the Co-op’s perspective, this enables them to extend their well-respected brand into an additional area. A key element in the provision of legal services is obviously trust. If their own branding is to be believed, the Co-op promotes care, ethics and sustainability, and therefore, when dealing with potentially sensitive legal issues it’s arguably a brand that would be trusted. This trust, combined with potentially easy access to the service, is likely to be a desirable offering to the potential customer.
The benefits for the Co-op are consolidation of customer loyalty as well as returns from the provision of legal services. For clients, access to user-friendly, cost-effective legal services, backed by a respected and ethical brand, should be a powerful attraction. Competitors will either lose out, if they’re not up to delivering comparable and cost-efficient services, or benefit from a likely expansion in the marketplace generally, as clients become more accustomed to buying legal services.
There’s one key benefit for the Co-operative: executed well, the plan will add to its current brand equity. Also, as the law is an area where consumers must defer to their lawyers’ expertise, it will reinforce a sense of trust. The knock-on effect will be a stronger brand and therefore greater permission to further diversify into other services.
What are the key risks?
It could be an expensive failure. Recruitment will be key – getting and managing the right lawyers for the job. It remains to be seen whether lawyers will be happy swapping private practice for a commodity provider run by a corporate.
Client acceptance, especially for non-standardised legal advice. At present there are no fully established brands in consumer legal services. New entrants may therefore struggle for recognition.
Will the LSA expand the market for personal legal services?
The usual pattern is for competition to expand a market and I think that is likely to happen here. The unknown is how that expansion is distributed between established solicitors and new entrants. I therefore think that more consumers will seek legal advice – but not inevitably from lawyers.
The market will expand. A situation like this will inevitably grow the size of the market, creating a lot of new opportunities as a result. With increased competition comes greater awareness of these services as well as more competitive pricing, which will result in more consumers considering these services where they may not have done so in the past.
How will the provision of legal services fit with the Co-op’s ‘ethical provider’ line?
Without wishing to be too lofty, legal services – and those who provide them – are part of the foundation of the rule of law and of Western social democracy and economy. There’s a danger in legal services being available in the same way as a tin of beans. I’m all in favour of business-like legal services, greater and easier access for consumers and more certainty and transparency in the lawyer-client relationship. But
that’s not a call for unrestrained commercialism or consumerism.
Those loftier purposes can only be fulfilled through ethical behaviour. My feeling is that the Co-op’s philosophy and origins put it in a stronger position than many other organisations – including some law firms – on the ethical provider spectrum.
What structure for providing face-to-face legal services do you think the Co-op will use as it builds its business?
While delivery of the legal service may be done through a more efficient technology platform (ie a website), I’d expect the stores to be used as a key method of marketing the offering, possibly through some form of physical presence, such as ‘free consultations’. The actual delivery of the legal service can be done either through their own team of lawyers or outsourced to a third-party law firm. Perhaps most likely, at least initially, is a combination of the two.
Although it might seem like the most attractive option, partnering is fraught with difficulties. It’s important the Co-op starts as it means to go on, with its own culture, strongly defined and consistently applied. Trying to assimilate a bunch of small, diverse law firms, sometimes with different quality standards even within the same practice, seems to be asking for trouble.
What do you anticipate will be the timing of the Co-op’s build-out of legal services?
While there are undoubted risks, there are significant ‘first-mover’ advantages. This will assist any new business entering this market, but as important is the ability to establish themselves. This requires building market share quickly and efficiently. I expect the next 12 months could see some aggressive moves by those seeing the market as attractive.
Resourcing will have to be quick and on a relatively large scale to provide a rapid-response, high-quality service across the country. I’d seriously look at targeting more senior, maybe redundant lawyers, work-returners and competent
in-house lawyers who are bored with the lack of legal content in their jobs. I’m sure they’ll make full use of well-qualified, and usually cheaper, legal executives.
My guess is that the Co-op will achieve critical mass relatively quickly through organic expansion and marketing its current customer base. I expect that acquisitions will be considered but will be more dependent on opportunity and pricing.
Which area of the market is the LSA likely to impact the most?
Any service line that can be ‘commoditised’ can be arguably sold more widely through better distribution channels and delivered more cheaply through greater use of technology. It’s these service lines that will be impacted the most.
What other factors are likely to be significant in the Co-op’s launch of legal services?
The most important are the strategies of other major potential competitors, which for the most part are unpublished. October 2011 will bring much greater competition and capital to legal services. All launches will have to be robust and adaptable against a changing landscape.
Is this the end of the high street law firm?
Not necessarily. ‘Good for Everyone’ may be an effective strapline for certain types of non-contentious work such as wills, moderately complex probates or tax planning, but it’s difficult to see the Co-op prevailing in highly charged litigation for individuals or small businesses.
The problem for high street firms is they face a war on many fronts, not just with legal supermarkets. They’re being squeezed by regional firms, which in turn are being squeezed by national and international firms. Funding through legal expense insurance is increasingly limited to larger panel firms.
One great advantage high street firms still have are their local reputations and intimacy in the solicitor-client relationship. If they’re to have any chance, they’ll need to choose the ground on which they fight carefully.