Wills: beware bank raids
Are high street firms too dependent on executry work continuing? Are there threats in the market place, and how should practices respond? Our author is watching the signs
I am fortunate enough to spend a part of my working week travelling and meeting with the 290 member firms that make up the HM Connect network. It gives me, I believe, some unique insights into the profession and how we are faring at “street” level.
Recently I have noted a worrying trend. When asked “How is business?”, the answer is usually “good” or “bad”. When I dig a little deeper though, for many the answer tends to be a reflection of the level of new executry instructions more than anything else. This may come as no surprise. Indeed, private client work was the mainstay during much of the last recession, as conveyancing dried up and commercial transactions ground to a halt.
This in turn, though, got me to realising that in outlying or economically quiet areas there is limited new wealth being created. There are no new employers or entrepreneurs creating jobs or businesses that will fuel local communities for the generations to come. In essence, fewer and fewer new wills of the wealthy are being added to wills banks. What we appear to have is an ever-greater reliance by legal firms on the “grey” pound, and perhaps, for some, the last generation of wealth holders. In my opinion, this is far too heavy a reliance on one area of law to determine whether the next year’s, or the next generation’s, profits will be good or bad.
Predators in the market
More worrying still is the fact that the long-awaited challengers in this market place are beginning to wake up. The much-heralded Tesco law isn’t here, but Co-op law is, as are will writers both licensed and unlicensed, banks, online providers and, perhaps most concerningly, accountants. All are looking at this highly profitable market place and wondering, “How do we get our share?” They see the rich, low-hanging fruits that are private client work – one of the last remaining legal fields where high fees can be billed for simple, process-driven work. A market place which, on the face of it, is ripe for disruption.
I have heard many stories from member firms of approaches by one or other of the foregoing organisations to their clients – sometimes for the preparation of new wills, but also to influence or in some cases to carry out the administration of the executry itself. One colleague mentioned recently that he had been summoned to a local accountant’s office, to be presented with a file with the preparatory work completed and asked to confirm a fixed fee for obtaining confirmation before returning the file for the accountant to complete the work for the executor, the deceased client’s child.
While this trend in itself has grave consequences for the future of many practices, for clients themselves the potential consequences are equally frightening. There are countless tales of poor-quality work being provided and of fees that would make even a cynical private client solicitor’s eyes water. Outwith the legal profession, many of those who are dipping their toes into these legal waters are unregulated and, in some cases, uninsured. Few, so far, have the skills and expertise that we possess, and none, I believe, care as passionately about the welfare of their clients. But that, I fear, may not be enough.
So, is this just another of these “doom and gloom” pieces heralding the end of the profession as we know it? The simple answer is yes, but that doesn’t really tell the whole story.
There are a few themes that these messages from the high street touch on. Simply put, they are messages of exploitation, exploration and communication. If you bear with me, I’ll set out my thoughts on each and where I believe the solutions might lie. (Can I acknowledge here Knut Haanaes at Ted Talks, who articulates this much better than me: www.ted.com/talks/knut_haanaes)
Disruption round the corner?
In simple terms, most legal firms exploit a process. They learn how to do a few things well and then progress to do more of the same quicker or more efficiently. It’s one of the oldest of economic theories, dating back to the days of Henry Ford. This expertise built up through exploitation is what drives profits. This is a good thing and can be evidenced in many different industries and many great companies. Ultimately, we break the bigger job into pieces and by working as a production line, we gain greater and greater skills in each part. It applies equally to our legal businesses, and even the most traditional of firms has a production line: a secretary or paralegal and maybe an assistant, all working with a partner to assist in getting through a volume of work. Partners have long since realised that their skills would be better spent in managing and delivering rather than typing or researching.
The problem with exploitation, however, is that sometimes the market changes. A great example of this was Swedish industrial giant Facit, which monopolised its market from the 1930s to the 1960s. What did it make? Mechanical calculators. In the 1960s, the first electronic calculators arrived, and no matter how hard Facit might try to “exploit” its existing market, the demand for mechanical calculators was dead. Quite simply, there was a better option available.
What I am not saying is that the private client market will disappear any time soon. After all, people still use calculators long after Facit disappeared. What I am saying is that there might be new ways of carrying out the work that will make the old ways redundant. Our traditional model of high fees for what is sometimes perceived as simple work is open to major disruption. Forces are already looking at the market and trying to decide whether there is a better/cheaper/faster way to do it.
The challenge to explore
Exploration, as you will have already surmised, is the development of new markets or processes. It is about finding new ways and new approaches to doing things, ways that are better for the customer. In the case of Facit, the need for calculators didn’t die; if anything, it increased exponentially. Texas Instruments, however, found a new way of doing it. It developed an electronic calculator. Likewise, taxis still exist, but Uber has totally disrupted the market for traditional taxi companies. The examples are endless.
To be clear, exploration is not about private client firms developing new products to sell to clients (although that might be part of the solution). It’s about finding new and better ways to do things. What might these be? Therein lies the prize; suffice to say they will probably be cheaper, more convenient, and online. Yet most legal firms are proving reluctant to invest in or develop these areas and solutions.
The challenge for many law firms is that exploitation is much easier. Exploitation is the status quo, and who would want to change it when we are receiving good fee levels for what is often relatively uncomplicated work? The problem, though, is that there are very few barriers into the private client market. It is not a restricted area; we have no monopoly. We rely instead purely on the relationships that we have built and nurtured with clients for generations. Unfortunately, the weight of evidence shows that once market changes take hold, the effects can be quick and catastrophic, and these relationships might offer little protection.
Communication as investment
So, is there any good news? Well, we haven’t yet touched on communication. There are some positive messages to be recounted. There are firms that have really engaged with their clients, have created stronger relationships, new services and opportunities and, in at least one case, a whole new brand. They regard communication as the key – not just a mailshot once a year, but an ongoing dialogue through a variety of media to assist, inform and educate the client, with nothing immediate in it for themselves.
I should also add that in the modern world, private client work can be a dynamic area of practice with multiple issues to be dealt with. Modern family structures, relationship issues and finances, along with a whole host of other issues, bring a need for real experts while providing fabulous topics for discussion, education and communication with clients.
Let’s consider communication. Which of your friends do you like? The ones who only contact you when they want something, or the ones that are there for you all the time and pop you the odd little message just to say hello? Who do you trust, the neighbour who wants a deposit before he will lend you his lawnmower, or the one who gives you the key to his shed and says “Help yourself”? Modern social media are about giving the simple things away for little or no cost, making information freely available and allowing people to share their views on your services with the world, helping you improve them. The firms that do this and build the trust that goes with it are the ones that customers return to and recommend in their droves.
To use what we do here at HM Connect as an example, we provide free legal news updates to our member firms, we provide free CPD, and a team visits our member firms to see what else we could do to assist. On the face of it, a lot of effort with no guaranteed return, but ultimately the network remains a profitable source of business.
We as solicitors are in a privileged position. Clients know and trust us, but that in itself is no longer sufficient to guarantee their future business, particularly in the face of a changing market. I don’t remember my old insurance broker; I just started one day buying my insurances online. For all I know my broker might still be sitting there with a file for me and some of my old policy documents, assuming that one day I’ll come back. We all know that won’t happen. Technology changes take effect more slowly than some expect, but when they bite, the change can be breathtaking and can catch us all off guard.
My suggestion, for what it is worth, is that those not investing in an ongoing “conversation” with clients act now before it is too late. Don’t be the friend that only calls when you want something; instead, invest the effort in building and maintaining a vibrant social media policy and engagement with clients. That at least will stop the slow erosion of a client bank and will allow time to continue to exploit the market for a time to come. But in addition, there is a need to explore; we need to find new and better ways to help our clients, for their benefit as well as our own. No one else is better placed to serve our clients. If we don’t, though, someone else definitely will!
Stephen Vallance built up and sold his own legal practice and now works closely with many high street and rural law firms across Scotland as part of Harper Macleod’s HM Connect support and referral network
e: Stephen.email@example.com or firstname.lastname@example.org