Referral fees do not harm consumers, LSB research shows
There is no evidence that referral fees have caused consumer detriment in either the conveyancing or personal injury market, according to an economic analysis commissioned by the Legal Services Board which was published today.
However, there is concern that a focus on profitability causes some criminal advocates to be appointed for cases beyond their competency.
These were the conclusions of research examining the impact of referral fees prepared by consultancy firm Charles River Associates for the Legal Services Board.
In the conveyancing market, the report concluded there was no evidence that referral fees have led to a decline in the quality of work or to increases in price.
Studies show the average conveyancing fee when a referral fee is paid is £543, while the average price paid by consumers when no referral fees is paid is £687.
The report said that while referral fees have risen from around £50 to £100 in 2004, to £259 to £400 today, conveyancing prices have remained broadly constant.
It found customer satisfaction was high among those who use referrals from estate agents, with 90% stating performance was better than others used in the past.
A survey of estate agents conducted by Charles River Associates showed that transactions appeared faster with those who pay referral fees – 57% said they were faster compared with 2% who said they were slower.
Charles River Associates vice-president Kyla Malcolm said firms that paid referral fees charged lower rates than those that did not because they have greater certainty in the volume of work they receive, so they have invested in technology to increase their efficiency, and these efficiency gains are passed on to the consumer.
Malcolm said a ban on referral fees would lead to a return to the complex arrangements that existed prior to the introduction of referral fees in 2004.
She said home information packs could provide a way for firms to ‘get around’ a ban in any event, and the advent of alternative business structures could remove the need for referral fees where different businesses came together.
In the personal injury market, where referral fees are the most prevalent, the research found clear evidence that lawyers who pay referral fees receive more work than those that do not.
It said there was no evidence that an increase in referral fees has increased the prices paid by consumers for legal services or led to a reduction in the quality of services. This was evidenced by success rates remaining constant and rising levels of compensation.
The report concluded that referral fess have helped to facilitate motor claims, as greater marketing has encouraged additional claims that would not otherwise have arisen.
Malcolm said this shows referral fees have led to an increase in access to justice in this area.
In criminal cases, referral fees are banned, although the report said fee sharing is common and can have similar effects.
Interviews carried out for the research revealed that fee structures in place for the payment of criminal advocates had led to more use of in-house advocates, and this was not caused by the fee-sharing arrangements.
There were concerns that a focus on profitability causes advocates to be appointed for cases beyond their competency, which could impact adversely on the defence of the accused.
The report said this could lead to a potential reduction in the number of experienced barristers in the future, or a change in the career path for advocacy with more in-house advocates and fewer independent barristers.
Malcolm said that in light of the findings, it would recommend to the LSB that there is no need to change the current rules in relation to referral fees.
To reach its conclusions, the firm reviewed existing research, interviewed 40 stakeholders, and carried out a survey of estate agents.
The economic analysis is one of five pieces of evidence that will be considered by the LSB to determine its decision on the issue of referral fees.
LSB strategy director Crispin Passmore said the consumer panel’s advice should be with the board by the end of May, and following workshops with stakeholders and any further analysis required, the board should be able to make a decision on its position by the end of the summer at the latest.
Comments
The findings are conclusive...
The findings of the report are conclusive in showing the positive role of (regulated) referral fees in the civil legal services market. The improved consumer outcomes which the report identifies, namely lower prices, better use of technology and high standards of quality, chime with the extensive consumer research that Contact Law gathers from the thousands of client referrals it makes to UK law firms each month. Additionally, the report also shows how law firms themselves benefit from referral fees and have proved to be a genuine win-win for all participants in the UK legal industry.
Rubbish. Are you mad at the
Rubbish. Are you mad at the Law Society? How do you think estate agents cheat clients or homebuyers? Simple. The estate agent persuades the gullible client or buyer to use their highly recommended solicitor. It is naïve to believe that the recommended solicitors only pay fees! Some provide special services to the estate agent and in essence the solicitor acts in the interest of the estate agent and reports to the estate agent and takes guidance from the estate agent. In extreme cases, including one highly reported 2009 case of a UK buyer being cheated on the sale of his main residence; the fraud was made possible by the involvement of a crooked solicitor.
Rubbish by the rubbisher and the Joke of Jackson
Fraudsters are criminals and criminals use fraud to steal money. Hence, solicitor, estate agent, bank robber or whatever, illegality is all about and solicitors can conspire along with whoever when they succumb to temptation to cheat and steal. Some would say the same applies to insurers and breaches of fiduciary duties when practicing third party capture, intervention and injury claims capping.
Good to see the nasty motor insurers were unable to bring the same influence over this report as they did to the joke of the Jackson reforms.
The Joke Reforms will lead to consumer's paying fees and hence a cut in their awards to Claims Management Companies who all have regulatory costs to cover which cannot be from reduced payments.
Of course Jackson demonstrated his ignorance of the market by encouraging insurers to make unsolicited approaches in direct contravention of FSA Regs and case law in order for them to cheat the injured and vulnerable so increasing insurer’s profits rather than the consumer being properly compensation. But hey, the Wolf reforms gave insurers what they wanted now Jackson has set the path for the insurers to further under invest in training with their already numb-skull screen led call centre kids to make a further mess of handling claims. Progress...wonderful.
referral fees
I agree that referral fees are important in the PI market but i believe that they should be capped at say maximum of £300 simply to allow for a level playing field. Most of the big firms in the market are still paying upto £800 per case and hire companies and the like are sending their clients to these firms because of the referral fee not necessarily because they will do a good job for the client.
Quite simple the higher the referral fee equates to lower experienced staff dealing with the case!
Now that cant be good for the consumer ! Clients deserve a quility service not a conveyor belt based service.
Notwithstanding the fact that solicitors cost have also been slashed by the new reforms!!
Referral fees for conveyancing
This survey defies belief. Are we supposed to believe that the firms who charge less give a bettter service. Nonsense - new technology and efficency of scale cannot account for this. Any conveyancer dealing with the "factories" knows this is rubbish.
So estate agents say that the firms who pay them are bettter and quicker than those that don't. Well that's a surprise!
I am reminded of a recent survey amongst the public on kitchen appliances which revealed that 60% of consumers regard a juicer as an essential item!
Turkeys vote for Christmas
According to the report no real clients were spoken to , as it states:-
"To reach its conclusions, the firm reviewed existing research, interviewed 40 stakeholders, and carried out a survey of estate agents."
The stakeholders and estate agents both have a vested interest so are bound to say referral fees are positive.Why wasn't the "existing research" updated ?
"In the personal injury market, where referral fees are the most prevalent, the research found clear evidence that lawyers who pay referral fees receive more work than those that do not."
Well I never - if you pay for work you get more work ? These Consultants are good !
I can't wait to read the 4 other pieces of evidence the LSB will consider before making a decision.
Referral fees
And if "real clients" had been spoken to, what do you think they would have said? They'd have said they couldn't care less about referral fees, as they don't affect them. New clients' eyes visibly glaze over as you're telling them all the nonsense the SRA requires.
Bribes - That's the proper term for it
What a silly article, contrary to common-sense, let alone common experience.
Just take a look at these two articles for examples of what such bribes produce:
http://www.lawyersconveyancing.com.au/news/matthew_hurlston_ray_white_re...
AND
http://www.lawyersconveyancing.com.au/news/conveyancing_goodman_group_br...
Referral fees
If the estate agents say these are good for us, then who are we to argue?
However, if I were buying a house, I most certainly would be concerned if my Solicitor was paying fees to the estate agent in return for work being channelled to him. The estate agent's interest is selling the house, mine as buyer is to not buy the house if there is something wrong with it. What am I paying the Solicitor for, if not to be independent and maybe save me from myself as an over-enthusiastic buyer?
lot of talk about
lot of talk about conveyancing do all the PI LAWYERS like paying over the odds for cases!!
especially now our fees have been cut!
Referral fees
What is dangerous about referral fees is that PROFESSIONALS are being controlled by business people as to whether they get work and how much they may charge. Legal Professionals must be independent and advise their clients without regard to how this will impact on whether they get further work from an estate agent. Directors of Estate Agents might be people of good character but they will be under pressure to make sure the legal revenue stream creates as much profit as possible for the estate agent owners. The survey referred to above provides more data about consumer views but it would be rather simplistic analysis to base serious decision-making on such surveys. At best it appears that the decison-makers for legal services reform have high IQs but low intellect - ideal candidates to run a moronic call centre.
The people behind the agenda clearly want business people to be in charge of legal services and the pay and status of professionals to be reduced to call centre workers - why?
Why is there such a rush to make a decision on referral fees when the new government has just been elected and has barely had time to scrap the farce known as Home Information Packs let alone referral fees?
The Law Society prevented
The Law Society prevented solicitors from advertising more aggressively, and the Woolf reforms set up an environment for the CMC's to plunder this gap. We lawyers adapted, streamlined, and got on with it, only it now appears we have done so with such skill and adaptation, that the insurers want it changed again and up steps Jackson to push it all through. Cosy.
None of this is to help consumers. None of it. What other profession is prepared to undertake work without charging the client and on the basis that even if their job is excellent and entirely faultless, they waive all their fees if the claim fails? The consmer already gets the work for free, and we shoulder all the risks. If we can live with that, why does it need to be changed?
The consumer's needs? Yeah right.
It is the super sized referral fees and company backslapping the Government, Law Society and Press should be most concerned about, that is set to tie up and desecrate the provision of legal services for ever. Jackson and Tesco's Law. Butchers, Greengrocers, Milkmen, Solicitors Practices. All the same soon. Practices on the High Street will soon be thinner than the law Society Gazette.
If we are lucky we shall not need to retain our names, we shall simply be known as 'seat filler 152798 in Quadrant Blue' in the divisional HQ.
Referral fees
I'm now a mere observer of this scene (I'm retired and I moved from private practice to in-house 35 years ago) but I continue to take a keen interest in the way the profession conducts itself and its ability to serve the interests of rank and file clients. My assessment is that the profession has done a poor job in promoting and safeguarding its cause and, thereby, the interests of the clients it's there to serve. There are strong echoes of the early post big-bang days in the financial services sector, when the cost to consumers of product purchases was inflated by commissions etc. and, to boot, masked from ready view. As so often, lessons are not learned.
conflict of interest
Referral fees do cause a conflict of interest. As a conveyancing solicitor of 7 years pqe working mainly in the volume conveyancing sector, I can speak from the 'coal face'.
I have had estate agents complaining that too many enquiries have been raised and when the reason for the enquiries has been explained (for example, on a leasehold property a s20 notice had just been issued and the sellers solicitors were unable to produce a copy) - they complain that the solicitor is being too finicky and you then get a call to the senior partner of the estate agency threatening to take the firm off the panel!! Another instance was when I was seconded to a smaller branch of my firm ( a small country branch), where the branch had a close relationship with the local estate agents. I was asked to act on behalf of the purchaser and my colleague in the residential department of my firm, was acting for the seller. After studying the title etc, I raised the usual enquiries with my colleague acting for the seller and was promptly reprimanded by the estate agents - they didn't expect me to raise enquiries, after all we all [the seller's solicitor and my self ] worked for the same firm; incidentally I was also reprimanded by my firm for raising enquiries - as 'that was not the way it was usually done and I had upset the estate agent, who didn't like fuss over such trivia as planning and building regulation issues' (in this case it was uPVC windows on a listed building!).
My experience is far from unique -discussions with colleagues from other firms reveal the same.
My solution? I am getting out and becoming a sole practitioner - mainly doing outsourcing for small to medium sized law firms (see my website for more details: www. jurisc.co.uk)- so that I can concentrate on doing a thorough job for the client without having to put up with the market politics that are lowering the standards of our profession.