Blog | Is there any point in allowing solicitors to work in unregulated entities?

fullsizeoutput_13a7It will take more than bundling legal services to tap into the elusive unmet needs market, says Jean-Yves Gilg

20 January 2017

A couple of years ago, a flight carrying Paul Philip back to the UK was delayed, stranding the SRA’s chief executive in South Africa for a day. He doesn’t usually sue airlines for minor delays, he says, but this one was sufficiently inconvenient that, on this occasion, he did.

Philip instructed an online provider to pursue his claim. They sent him some forms to fill in and secured a few hundred pounds’ compensation. Only at that point did he discover they were taking half of the amount as their fee.

There is an unmissable irony in a leading supporter of a deregulated legal services sector experiencing first-hand how it benefits consumers. But this is not the point. Philip laughs about it. For him, the case is the perfect illustration of how solicitors could work in unregulated entities and deliver a quality, affordable service to consumers and small businesses. Instead of an unregulated adviser with no professional qualification indiscriminately pushing forms through a claims pipeline, a solicitor working in a travel agency business could provide the service for the organisation’s clients at little or no cost, he says.

As far as bundled services go, it’s not a bad example. General legal advice is not a reserved activity. Anybody can set themselves up as a legal adviser business. Plenty of people do. So the idea of allowing qualified solicitors to be employed as such in unregulated entities sounds attractive. It opens up new job opportunities for lawyers – whose numbers are still rising – and it could give individuals and businesses access to services they might not otherwise afford.

But there are serious ethical issues. These are not necessarily unsurmountable but they are legitimate. They range from lack of supervision and the potential for conflicts of interest, to the likelihood that there would be no requirement to have professional indemnity insurance and that the advice provided will not be covered by legal privilege. In-house lawyers will relate to some of these issues, especially those who worked in accountancy firms before alternative business structures became an option.

Philip accepts these points and says the regulator will look at the checks and balances that should be put in place. But the impression one gets is that there is acceptance within the SRA that these risks are a small price to pay to ensure greater numbers can have access to legal advice. The regulator’s chief says the question is whether clients are able to understand the risk and assess for themselves whether their need calls for the full protection offered by a regulated solicitors’ firm. Perhaps he’s right. In practice, however, two questions remain unanswered.

This approach underplays the realities of business. It’s one thing to require a solicitor in an unregulated entity to make it clear they are not insured and that their advice is not privileged. How they do this in real life is a different matter. Philip talks about carefully drafted client letters and ensuring clients give informed consent. From the provider’s perspective, this is the only workable solution. But by Philip’s own admission, most clients don’t ask about indemnity or privilege. So what are the chances they will properly read – let alone understand – a six-page care letter?

A more fundamental question, though, is whether there is sustainable demand for bundled legal services. Research suggests there is a vast untapped market for unmet legal needs. But this market has proved elusive. The Co-op, one of the prime examples of an organisation with the potential to bring law to the masses, has drastically reduced its legal ambitions. The AA and Saga have all but shut down their legal offering. It doesn’t mean this potential doesn’t exist, but the delivery model may not be as obvious as just throwing in a bit of legal advice alongside a travel company’s core services.

@jeanyvesgilg

This story was first published on Solicitors Journal on 20 January 2017 and is reproduced by kind permission

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