Lawyers are used to regulators with no idea of running a business telling them how to run their business.
But rarely can the advice have been as nonsensical, patronising and dangerous as this week.
The Legal Services Board does not believe the legal sector has enough competition (I must have dreamt there being 10,000 law firms) and wants to stimulate the market to ensure more consumers have access to legal services.
This is a laudable aim, of course, but the oversight regulator appears to have fired in completely the wrong direction.
The LSB’s research apparently uncovered the fact that external capital is not used as much in the legal services sector as might have been expected.
Investors are apparently unhappy with protectionist lawyers not giving access to their firms and stifling the market.
Chief executive Neil Buckley said the challenges were ‘cultural’, with lawyers ‘reluctant to cede control of their businesses, preferring instead to rely on profits and reserves, or bank lending.’
Perhaps Buckley should try a new line in personal finance guidance? Families could report to him they’re struggling to afford a new shed and he could advise them against dipping into their savings and instead direct them to the nearest casino.
It’s hardly as if there is a body of evidence out there dragging lawyers to private equity investors. Quite the opposite in fact.
What’s laughable is this research was based on interviews with a single private equity investor, one investment consultant and a bank.
The LSB stresses it is not for regulators what the right sort of investment finance is for individual firms. Yet in the next breath it would 'concern us if the potential added benefits of external investment are not being realised due to issues relating to the overall functioning of the market’. That sounds like more than a prod to individual firms.
The truth is that lawyers are being blamed for the failings of this type of organisation. The LSB was created in part to stimulate competition: if the market is still uncompetitive (and I contest that anyway) then that’s not lawyers’ fault, it’s the responsibility of regulators.
How solicitors choose to run their businesses ought not to be any of the board’s concern, as long as they are compliant with their regulator. That is the prerogative of any business and if they don’t want to hand over the family silver to speculators then that’s up to them.
Does the LSB believe in a free market or a market engineered by the state in the person of a quango? We are not altogether clear.