The decision by the Legal Services Board to recommend regulating will-writing – but not estate administration, power of attorney or trusts – has left private client practitioners bemused. It has also highlighted the divide between the LSB’s narrowly based review of individual activities and the Solicitors Regulation Authority’s belief that all probate-related work – indeed all legal services – should be regulated to avoid confusion for consumers over which parts are regulated and which are not.
The issue of how far regulation should be extended comes as the Law Society finalises its plans for a summer launch of the Wills Quality Scheme (WQS). Practitioners also face increasing competition as new entrants to the market, including the big national brands Saga and the Co-op, step up their legal offerings, and two US online legal document services make their pitch in the UK.
So what does the future hold for practitioners? The lord chancellor has until May to decide whether to accept the LSB’s recommendation, which would then come into force in 2015. The LSB had initially proposed that estate administration should also be regulated but changed its position, arguing that the unregulated community among estate administrators was small – 4-5% compared with about 15% of will-writers – so the risk of fraud was small and regulation would therefore be disproportionate.
While the SRA is still mulling over its own response, and so would not comment, others were not so reticent. The Law Society lobbied hard for the ‘holy trinity’ of wills, estate administration and power of attorney to be regulated. ‘We enormously welcome the proposal that will-writing should be regulated,’ says Richard Roberts, chair of the Law Society’s wills and equity committee. But we are very disappointed that neither of the other two elements is on the current agenda. I don’t think people understand just how vulnerable the recently bereaved can be.’ LSB chief executive Chris Kenny’s comment at a briefing with journalists that, if they were starting afresh, probate would not be reserved, raised further eyebrows, given the number of trust and probate insurance claims and the increase in contentious probate and related actions reaching Chancery.
Commentators have suggested that politics may have played a part in the LSB’s decision. ‘I can buy into that view,’ says Gary Rycroft, vice-chair of the Society’s Private Client Section and a member of the wills and equity committee. ‘The word on the street seems to be that Mr Grayling doesn’t like regulation so maybe the feeling was we can slip this one under the radar. There is also very strong evidence about will-writing with lots of horror stories, so it will be hard for the Ministry of Justice to duck that. But it leaves consumers at huge risk, and the next time an unregulated administrator runs off with some money, send the person to the LSB’s door and see what they have to say.’
It is a ‘bizarre’ decision, says Chris Beames, head of Welsh firm Berry Smith’s private client department. ‘Regulation isn’t the whole answer – solicitors are regulated and you still see them being prosecuted and struck off for stealing from estates. But a will-writing firm will be able to move into estate administration without any regulation or any requirements for insurance or a compensation scheme.’
Members of Solicitors for the Elderly constantly pick up the pieces after clients have been caught out by unscrupulous providers. Director Claire Davis, head of private client at Welsh firm Howells Solicitors, welcomes the proposal to regulate will-writing but says they are very concerned that unregulated and often untrained bodies will be able to continue marketing services such as lasting powers of attorney and trusts as a ‘guarantee’ against care home fees. ‘This is simply wrong,’ she says.
Peter Steer, a partner with Wilsons, deals with contentious probate and is concerned at the LSB’s lack of insight into the extent of fraud. ‘This was a chance to stop people who advertise themselves as estate administrators or act as executors or advisers who can be completely unqualified, or even be struck-off solicitors.’ He says the LSB reasoned that if there was fraud it was criminal and so should be dealt with by the police. ‘But our experience is the police don’t have the resources to tackle something which they regard as a civil matter and, besides, prosecution doesn’t get the beneficiaries redress.’
If the LSB’s recommendation is approved, then the jockeying to be will-writers’ regulator of choice will start in earnest. The LSB has refused to passport any of the existing approved regulators into the new regime, arguing it had found unacceptably high levels of consumer harm arising in both regulated and unregulated providers. This means the SRA – and the other regulators who have thrown their hats into the ring including the Chartered Institute of Legal Executives (CILEx), the Council for Licensed Conveyancers (CLC) and some of the will-writing bodies – will have to prove their arrangements are fit for purpose in relation to this specific activity.
If the SRA wants to go wider than regulating solicitor will-writers to include those who are currently unregulated, it will be down to the Law Society Council to decide if that is acceptable or if it risks diluting the brand of ‘solicitor’. ‘This poses a massive dilemma for the SRA,’ says Rycroft, a partner in Lancaster-based Joseph A Jones & Co. ‘Many solicitors would quite rightly be very concerned because, clearly, for many will-writers that would be the "holy grail" in claiming they are the same as solicitors with the same regulator. This will be the next arena for battle.’
At the same time, there is concern that competition among regulators could lead to ‘two-tier’ regulation. Law Society president Lucy Scott-Moncrieff says the public are protected by solicitors’ mandatory insurance and the Law Society compensation fund when things go wrong. ‘Consumers have every right to expect such guarantees,’ she says. ‘Two-tier regulation, which falls short of offering similar protection to all those seeking help in making a will, would be confusing to consumers.’
ILEX Professional Standards is finalising its application for entity regulation and individual regulation for probate practice rights. Chief executive Ian Watson says its model requires those applying to have knowledge and experience of will-writing and estate administration. But now the LSB has ‘decoupled’ the two it may have to reconfigure it – ‘as will the SRA and CLC’ – to fit just will-writing. Regulation is going to be a competitive market, he says, but it is about variety and not a ‘race to the bottom’.
According to research by the Legal Services Consumer Panel, a growing number of people make the probate application without legal help – 36% in 2010 – although solicitors deal with 86% of estates where professional help is purchased. Consumers who were dissatisfied with providers blamed delay, mistakes, lack of communication and poor value for money. In a move to raise the profile of private client practitioners, the Law Society has drawn on the experience of the Conveyancing Quality Scheme (CQS) to devise the WQC. But is that tantamount to saying that simply being a solicitor is no longer enough to win work in a specialist area? Rycroft is chair of the WQS working party. ‘What CQS has done is remove the "elephant in the room" that all firms are of an equal standard,’ he says. ‘We have to accept that. Those of us doing this work realise there are a lot of solicitors dabbling in this field who frankly shouldn’t be. For me, personally, one of the attractions of WQS is to differentiate ourselves not just from will-writers but also from other solicitors.’
The proposed scheme will cover will-writing and estate administration with scope to extend it to powers of attorney and elderly client matters. Based around a robust protocol, it will set prescribed time periods for communicating with clients, picking up on one of the main complaints made to the Legal Ombudsman. ‘This is a very positive way to differentiate the dedicated specialists in a crowded market,’ says Roberts, director of niche London firm Gedye & Sons.
Standing out from the crowd is becoming increasingly important as new entrants such as Co-operative Legal Services (CLS) and Saga Legal Solutions make their presence felt. CLS is one of the biggest players in the market with a standalone probate and administration department that is 130 strong, including 46 solicitors. There is also a separate wills department. Clients have the option of a face-to-face meeting with a paralegal ‘probate consultant’ and their file is then handled on a one-to-one basis. This area of law is still a ‘cottage industry’ with most solicitors doing it on a small scale, says CLS commercial director Robert Labadie, which makes it an attractive market to big players.
The Co-op’s membership database is a huge resource but it is one they respect and do not bombard with material, he says. ‘However, it is a great link. People have already bought our other services, have trusted us to bury their loved ones and so we hope they will trust us to do their legal work.’ In terms of fees, CLS benchmarks itself against other providers and is ‘somewhere in the middle’, he says. It aims to match fixed-fee quotations for comparable services provided by a regulated solicitor practice or trust corporation. CLS will do an estate administration from the simplest to the most complex, but would not set up and run a complex trust or take on contentious work. Later in the year it will be offering more ‘unbundled’ services.
Over-50s specialist Saga (pictured) first entered the legal market two years ago with an online document assembly service provided by Epoq, with Parabis – which became an ABS last August – sitting behind it for any advice that was required. Last September it started offering will-writing, probate and powers of attorney, all done on fixed fees via the telephone and internet, with set timescales for responding to clients and proactive file handlers. Clients holding policies with Saga benefit from a 20% discount on their legal fees.
It is not holding back from ‘taking on’ the high street. A recent press release claimed that, despite many people simplifying their estates, many solicitors take a percentage cut from the estate based on its value. Saga, it said, determines the cost on the complexity of the work ‘to ensure that families and beneficiaries get their fair share of an estate, rather than lining lawyer’s pockets’. It set out a series of scenarios with comparative charges – on a £1.25m estate with property worth £170,000, one bank account, three savings accounts, 30 share portfolios, four pensions and five specific legacies, it said its fee would be £3,920 compared with the 1.5% ‘typically charged’ by high street solicitors of £18,750.
‘We come at this from the consumer point of view,’ says business development director Karen Brenchley. ‘We are putting what we have learnt in our other industries into our legal services. For instance our grant of probate where we do the legal work and the client does the leg work is proving a popular option.’ She says the legal market is overpriced, which is giving Saga an opening. ‘The market hasn’t responded yet but markets don’t change overnight,’ she says. ‘However, with competitors coming in and changing the way pricing works, and with the Law Society promoting best practice, pressure will be on small law firms to become more specialist. Saga isn’t going to change anything on its own but we will be part of a bigger picture which will be very different in 10 years’ time.’
The examples of fees given by Saga are ‘rather disingenuous’, says Rycroft. ‘We have always been subject to market forces and common sense. It is blindingly obvious that if an estate is relatively easy to administer you charge a fee accordingly. We have also unbundled services for many years. But solicitors don’t talk enough about what they offer and our competitors are good at exploiting that reticence.’
The image that comes to mind, he says, is of ‘the choice between a ready meal and meat from the butcher’s shop. We mustn’t underestimate the big brands with their loyal client base, and some high street firms won’t survive as a proportion of business goes to them. But others will thrive because of the personal service they offer’. Steer sees Saga and CLS being successful among the ‘reasonably affluent middle class and below. I don’t think people with large estates or complex tax issues will jump to go to these organisations unless they can demonstrate they can deliver highly technical expertise. Many clients want to sit down at a difficult time in their life and talk things through with someone, not with someone in a call centre.’
There is certainly still room for specialist solicitors, says Beames. ‘We have been very busy for the last nine months and we are doing a lot more power of attorney and Court of Protection work, which is feeding off the will side of things and proving quite lucrative.’ The contentious side is also increasing. ‘Thirty years ago we probably had one disputed estate every three years,’ says Roberts. ‘I must now handle 8-10 new sets of instructions a month. It’s partly down to an expectation-led society, partly down to the economic climate, partly down to fragmentation of families and partly down to poor quality of will-making.’
Practitioners are also keeping a close eye on how they can tap in to the growing trend towards online fixed-fee DIY solutions. Legal marketing franchise QualitySolicitors has partnered with US firm LegalZoom, while a panel of firms are working with another US firm, Rocket Lawyer. Other offerings include online price comparison website Compare Legal Costs, which has partnered with East Midlands practice Nelsons to offer fixed-fee online legal documents to businesses and consumers, the firm’s solicitors reviewing documents if required, also for a fixed fee.
When it comes to regulation, the LSB has said it is not going to try to regulate document-only online services unless they involve a checking service. ‘We have to recognise that legal information is out there and people will have a bash at things,’ says Rycroft. ‘What we have to do is show that we can add value to the basics. I personally would have been happy to dip my toe in the water with Rocket Lawyer but, as a firm, we made a commercial decision not to go down that route – as a small firm we were concerned we wouldn’t be able to cope with the volume of work that might come in. We also had an issue with their requirement to discount fees. But I am not hostile towards them at all and we have to recognise that this is the way some legal services will go.’
Berry Smith, on the other hand, did decide to join Rocket Lawyer’s ‘on call’ lawyers. Beames has not yet had any take up but his colleagues in other departments have. ‘We see a new generation which is internet-savvy and wants to buy things out of office hours and we want to be in on the ground floor,’ he says. ‘The hope is those clients will then think of us if they need further legal advice – though whether internet-based clients have that sort of loyalty remains to be seen.’
What is important, says Roberts, is not to be put off by fear of competition. ‘The battle is to encourage consumers to realise they need to die tidily,’ he says. ‘There is a big market out there – I can’t think of anything else that is a compulsory asset to buy where 60% of potential purchasers haven’t bought it – and dedicated specialist lawyers will succeed whatever the competition.’
Grania Langdon-Down is a freelance journalist
- The Law Society’s Private Client Section provides best practice information and support to solicitors and other legal professionals working on wills, probate, tax and financial planning, trusts, contentious probate, mental capacity, elderly client and estate administration. See the website for more details.