ABS revolution in view
Tesco Law was never supposed to be like this. We expected a flood of new entrants to a high street near you, laden with private equity cash and ideas of grandeur, many backed by existing big-name brands. Alternative business structures were going to sweep up the mass market of personal injury claims, whilst the biggest firms looked on from the skyscrapers with a healthy disdain.
So the arrival of cocky upstart Riverview Law is fascinating in many ways (not least because we’re still wondering which river we’re supposed to be looking at). The big draw is a fixed-fee service and annual, all-encompassing contracts. For businesses with up to five employees, legal advice will cost from £2,400 a year. Up to 24 staff members and you pay almost £4,000, up to 50 and it’s almost £6,000.
For companies beyond this size the figures are bespoke and can vary, with the biggest corporations encouraged to use a new outsourcing service that may have some in-house lawyers checking the job market this morning. Fixed fees are not a new concept but they will certainly be alien to the types of firms expected to face competition from Riverview. We know they appeal to consumers/clients/customers, no matter how deep their pockets. Certainty is a priceless commodity in an age of such economic turmoil.
Whether this can be achieved without compromise on quality of delivery is another matter. Riverview may not be involved in a race to the bottom, but there’s no guarantee everyone will be so concerned with high standards. And what happens when one of those small businesses ends up in legal hot water? That £200 a month won’t come close to covering the work required. In effect, fixed fees replicate the insurance model, taking small amounts from lots of entities with the occasional large payout to nibble at the profits.
Most intriguing of all is the relationship between the major financial backer, the global firm DLA Piper, and the fledgling. There is every chance that Riverview will be competing with its mentor for business, creating a strange Miliband-esque internal conflict. Competitors working for the same ultimate owner are not unusual in retail but anomalous to the legal world. What Riverview has done, in recruiting dozens of respected solicitors and barristers and hurtling to the front of the race for business, gives it a great platform for success.
Most City firms will most likely treat this new opponent as a cut-price and sub-standard rival, the legal equivalent of the 99p store. They may come to regret their indifference. We’re seeing innovations almost every week now as a result of the liberalisation of the legal market. Small practices have always been the likely casualties, but as this tornado grows ever stronger, it seems there is no firm too big to avoid the effects.
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Comments
Mentor
John,
It is ironic that you use the word "mentor" in your article.
The type of legal service model (fixed fees for all work based on number of employees/payroll) was invented by Peninsula, a company set up to provid employement law services to UK businesses.
It huge success was quickly aped by RBS of all people who set up a competitor named "Mentor".
As with most ideas there is not as much new in the Riverview concept as there first appears.
M
Mark/John We have come across
Mark/John
We have come across both Peninsula and Mentor. Nat West also had a similar Health and Safety product. Though superficially enticing, given a fixed fee, you actually would need quite a lot of legal advice, in a year, to justify the £4k they would charge us. Over the 16 years we have been an SME our total legal fees come nowhere near that and are only likely to if we became involved in a difficult employment tribunal. Nat West did, at the time, use gentle scare tactics but we decided it was a couple of grand better used elsewhere.
I said something similar to John yesterday and have been trying to think of similar sized firms to whom this might be worthwhile and am struggling. All our other risks are insured against.
£200 a month
There is little or no risk of a "large payout". If the writer of this blog had looked at the "Legal Adviser Service Scope" section of the Riverview website, he would have seen that (so far as "legal hot water" is concerned) the fee only covers the "management" of correspondence up until the commencement of proceedings. So, SP's "difficult employment tribunal" would not be covered anyway. Further, many areas are excluded from the scope of the product: no cover for conducting (which presumably means attending) a mediation, no cover for conveyancing, no cover for professional negligence claims, no cover for EC law, no cover for human rights law, no cover for the sale or purchase of a business or assets...the list goes on. Many businesses may already have legal expenses (or other) insurance which provides cover which would overlap with (or exceed) that available under "Legal Adviser Service Scope".
Clause 4 of "Legal Adviser Service Scope" then contains various exclusion/limitation clauses, including one (clause 4.4) by which the liability of Riverview (including its "affiliates and suppliers", which is not defined but presumably includes Riverview Solicitors and Riverview Chambers, being the entities who are named as the providers of all legal advice under the agreement) to the client "shall not exceed the higher of £250,000 per case [sic - no lower figure is given]". Query how that fits with Outcome 1.8 of the SRA Handbook, by which solicitors cannot cap their liability at anything less than £2 million, being the minimum level of insurance cover required by the SRA Indemnity Insurance Rules. Query also whether Riverview Solicitors would be entitled to rely upon the £250,000 cap (if that is the intention of the agreement), in circumstances where they do not appear to be a party to the agreement, which is made between the client and LawVest Ltd. The Bar Standards Board is less clear on the issue of limiting liability: http://www.barstandardsboard.org.uk/code-guidance/the-extent-to-which-a-....
Which has been offering a fixed-fee service to consumers for some time. Upon close examination, however, the cover provided is again very limited. For example, in the context of civil disputes, Which's scheme only provides advice where the dispute would fall within the small claims limit.
First, if you think after a
First, if you think after a month of licensing there would be a flood of ABS on every High St, I think you may have been buying into your own hype. There was never likely to be such a scenario. However, in 2 or 3 years time there will be a lot of ABS and they will dominate the lower-middle sectors in both commercial and personal legal services. Have the vast majority of small law firms got millions to put together new products and offerings then market, sell and maintain them? No, they haven't, therefore a commercial venture will step in and do it.
Second, if Riverview thinks what they are doing is anything new, they have got a massive shock coming. Their pricing structure is WAY over what an SME with 5 employees will pay per month, especially given the obvious limitations of the retainer. Barring start up corporate advice (most of which comes from an accountant), most small businesses only need employment, H&S and debt recovery advice day-to-day. Law firms, consultancies etc have been providing this service for far, far less than £200 per month for businesses with 5 employees for years. It really does demonstrate a shocking naivity on the part of DLA and the other investors if they think prices starting at £200 a month is the current market rate (and priced will be squeezed and squeezed over the coming years even more than previously).