Alliotts Chartered Accountants and Business Advisors - Legal Leader
May 2010   
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* * * SWOTing up for the Legal Services Act
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With the new regime expected to provoke market changes over the next 12 months, how up to date is your firm's SWOT analysis?

Law firms aren't simply emerging from the recession into a changed economic landscape. The profession is also facing a fairly radical change in regulation. To date, the effects of the Legal Services Act have been relatively low key, with some firms simply taking advantage of the opportunity to appoint crucial non-lawyer fee-earners and managers as partners. But many commentators predict that competition within the industry will become more ferocious as the UK economy picks up. Both traditional legal firms and new legal entities are expected to take advantage of the wider opportunities the Legal Services Act affords to increase income and eradicate competition.

Whether you believe the Legal Services Act will have an impact on your business or not, now is an opportune time to revisit your SWOT analysis to make sure. We are even aware of firms that have been compelled to undertake a SWOT analysis for the first time, having realised that traditional 'bread and butter' markets could soon have their stability eroded. That threat alone is prompting firms to at least be aware of the potential ways in which their business could be affected over the coming years.

That said, there are an equal number of firms that have expressed a desire to understand what opportunities might become available. Those that fared well through the recession have a balance sheet that can be put to good use whilst prospecting is still relatively cheap. Those that didn't fare so well are now looking for other ways to return the firm to former billing levels.

Just as a brief brush up, a SWOT analysis is a strategic planning tool that significantly aids decision-making in commercial ventures and projects. It allows a firm to identify areas of stability and prosperity to navigate towards, whilst highlighting areas of substantial risk. Linking heavily with our article in this issue on leadership, the SWOT analysis - standing for Strengths, Weaknesses, Opportunities and Threats - will be part of your intelligence gathering operations that allow you to plan an optimal strategy for the next 12 to 18 months. And the new regulatory and commercial provisions of the Legal Services Act should certainly be a key consideration.

Many firms will discover potential threats to areas of their business that will benefit from monitoring or preventative action. However, there are likely to be just as many opportunities for those with vision. Either way, awareness is essential.

Colin Farmer is an auditing and strategy specialist working with a range of professional partnerships.

Email Colin Farmer at colin.farmer@alliotts.com

Thoughts from the Sector

We asked a few clients and contacts within the legal sector to provide their views.

"I would question how it expects to operate in practice. For example, the collaboration of estate agents and banks/building societies was unsuccessful. Which area of law will it work for? Conveyancing and personal injury are the obvious choices. Where the work is more complex, it won't be applicable as clients are more likely to use trusted advisers. It is equally less of a threat in the more specialised areas of legal work. The Legal Services Act could be to the detriment of the client in that it could be restrictive, prevent exchange of work, or affect objectivity. It is more likely to appeal to either ends of the spectrum - big firms or very small practices - but mid-tier firms may find that such collaboration could impact negatively on client retention."

"For a medium-sized City-based commercial firm like ours that majors in corporate and commercial property work, the Legal Services Act has far less impact on our business than general economic conditions. We don't consider there to be increased risks from greater competition in our particular business sectors in the same way as for a high street firm that is affected by 'Tesco law', or the much bigger firms that can now have external equity participation that alters their management and control mechanisms. Our main threat from the Legal Services Act comes from increased regulation, and in particular the SRA rulebook. This is a 'make-work' exercise - the new body modelling itself on the FSA to a large extent. In our view, this has negatively affected the professionalism and quality of a solicitor's work, and has not been in the public interest. The move by the regulator, under criticism, to a 'principles-based' approach is recognition of its early heavy handedness."

"When you take a system that has worked successfully for generations and, purely for political gain and political publicity, tamper with it to make it more politically correct, you create something that is doomed to failure. This has already been evidenced clearly in relation to MDP's, and the real loser here will be the client. When the uniformed and inexperienced interfere in something about which they have little or no personal experience, it is a recipe for disaster - it is an attempt to turn experienced specialists into generalists and the loser will be the client."
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Legal Leader contributors
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* Colin Farmer * Nigel Armstrong * Richard Hopes * David Snell * Rosemary Mashford * Download pdf *
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Alliotts Chartered Accountants and Business Advisors,
Imperial House, 15 Kingsway, London, WC2B 6UN
Registered to carry on audit work by the Institute of Chartered Accountants in England and Wales and authorised and regulated by the Financial Services Authority for investment business.