Acting to stop harm: the FCA and Appointed Representatives
Yesterday the SRA finally published its response to the Competition & Markets Authority's 2016 report urging increased price transparency for the legal services sector.
The SRA’s proposals will make uncomfortable reading for some solicitors’ firms. In many of the main areas of work for consumer-facing law firms (including residential conveyancing, divorce, wills, probate and personal injury work), there will be a requirement to provide extensive costs information on a firm’s website. However the impact does not stop there. Firms acting for small businesses will need to provide fee information on employment tribunal cases, debt recovery services and licensing applications in relation to business premises.
The SRA appreciates it may not always be possible for firms to provide fixed cost information but the idea is that potential clients need enough information to make a choice between law firms. So hourly rates, plus the factors that will impact on costs, such as the likely time involved and anticipated amounts of disbursements are what firms should aim to set out. The SRA recommends firms embed a price calculator on their websites. This information will sit alongside information that the SRA will provide on its website on firms and individuals including their enforcement and complaints history.
Getting to grips with these proposals will represent a major challenge for law firms. Compliance is likely to be required by the end of 2018. First, websites will need to be redeveloped to comply with these new obligations. Then there is the challenge of working out where to draw the line. If a firm provides information on costs to small businesses in relation to, say, employment tribunal work, this will also be available to larger clients who may use it as a guide in determining who they wish to retain. Hence the SRA has identified that these reforms “could lead to greater price transparency in areas of practice where we have not mandated it.” In addition, the SRA has made clear that this is only the first phase and the obligations will widen to other areas over time.
How will the new world of price transparency affect the market for legal services? It will significantly change clients’ expectations in relation to cost information they should have up front and the ease by which it is presented, and it will fundamentally impact the way law firms win business and get new clients. When choosing a law firm, most clients currently rely on recommendations or previous experiences. In future, clients will likely look to online price comparison websites which will doubtless become powerful intermediaries and introducers of work. That in turn will force firms to sharpen their business marketing strategies in deciding whether to attract work by price or to seek a premium position in the market.
These reforms are intended to create the environment for Ryanair or Easyjet-style providers of legal services to emerge. That will be a threat to some but an opportunity for others as the legal services marketplace is forced to adapt to a more price competitive environment.
This article first appeared in The Times law section on 28/9/2017
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