21 November 2012Print This Post

Whipped into shape

Posted by Neil Rose, Editor, Litigation Futures

Might the high street solicitor become the ringmaster for a series of outsourced services?

There were, I’d wager, a few people on the claimant side of the great personal injury (PI) divide who quietly celebrated the announcement of the proposed new portal fees.

They all recognise the apparent injustice of figures, which look like someone has done little more than subtract what they think is the average referral fee from £1,200; the methodology could not be less clear. The cynic in me wonders if the plan is actually to set the basic portal fee at £600, but allow the claimant lobby to have some kind of victory from the consultation and make them almost pleased to get a level that this time last week would have left them aghast.

But putting aside for one moment the far bigger and more important questions around access to justice, for those PI firms that can still manage to do the work profitably – and I believe there are slick technology-enabled operations able to do just that – then their future has surely just become rosier.

From my conversations with PI lawyers, I get the sense that small, traditional firms will struggle to do the work for £500 (assuming they know their cost of production in the first place, which I’m told a fair number do not), leaving it to the volume boys, who can. Whether £500 or £600, a shake-out of the market appears inevitable.

There will no doubt be even greater consolidation; from what some of the bigger players tell me, there is no shortage of firms touting themselves around, but most do not value themselves realistically. Only the very fittest will survive. So more market share for them (whether there will be more work is not clear right now, especially with the small claims limit for PI still up in the air), and don’t forget that in a post-referral fee ban/alternative business structures world, insurers will be looking for arrangements that still allow them to skim at least a bit from the work they refer on.

But here’s another interesting possibility that I’ve begun to hear of late and also came up at Monday’s Legal Futures conference in London: the solicitor becoming a distribution channel for a range of outsourced services. It was raised actually in the context of conveyancing work, where again margins are cut so tight that, according to Rightmove and In-Deed founder Harry Hill, most conveyancing firms are actually bust, failing as many law firms apparently do to distinguish between keeping busy and making a profit.

He produced illustrative figures for conveyancing in London that show, where a £1,500 fee is paid, the solicitor’s share after handing over a whacking great referral payment is a miserly £125. It is surely hard to make a living at that level, however efficient you are – although of course in conveyancing, and to a lesser extent PI, there are firms that do not pay referral fees.

So how about, instead of doing this low-value work, you instead gather it in from your position on the high street and in your community, and then send it to MyHomeMove to do the conveyancing (it is looking to move into white-label services) and Questus to handle the PI claims. I find Questus a very interesting practice, and one whose timing I suspect could not have been better.

Your primary role as the solicitor would be to hold the client’s hand and make a bit of profit for precious little work, while getting on with the higher value, more complex and professionally more satisfying matters.

Now I’m no law firm consultant – I would drive a much nicer car and live in a much bigger house if I were – but on its face this looks like a viable model for those facing an otherwise unviable future. Might this be the new high street law firm?

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2 Responses to “Whipped into shape”

  1. Tell me that this was not just a shameless plug for one of your major advertisers?

  2. Graham Heywood on November 22nd, 2012 at 9:28 am
  3. It wasn’t. I have written about Questus before and the fact they advertise is immaterial to the point I’m making, which, as I explained, came out of Monday’s Legal Futures conference. You probably won’t believe me, but I had forgotten they do until you mentioned it! I don’t handle the site advertising. And, frankly, I’m not that craven.

    Neil

  4. admin on November 22nd, 2012 at 11:07 pm