Niche firms will materialise to occupy emergent ‘advice deserts’.
The days when a firm’s name alone could attract new clients are long gone and the emphasis has moved to the expertise of the individuals employed to provide the legal services.
This is underlined by the Bellwether Report 2014: Brave New World published by LexisNexis, which identifies a ‘new breed’ of lawyers who are ‘networked, innovative, often niche specialists who’ve set up their business to compete directly with major industry players’.
‘The specialist practitioner’, however, is not a new phenomenon. More than 28% of legal practices are run by sole practitioners or sole directors – many of whom provide a niche legal service.
So what options are available to you if you are a specialist? Some of you will progress to partnership at your firms but others, like me, will set up their own firms in their respective area of specialism.
As law firms continue to merge or close, the demands for niche legal practices will rise to occupy the ‘advice deserts’ that have started to appear. The black hole that will be left by cuts to legal aid will also need to be filled by those who can provide a legal service on a cost-effective basis.
Niche firms have lower overheads and can provide a local and national service as they trade on their specialism, not their locality. This not only fills the gaps that are being left by the collapse of firms in big cities such as Birmingham and Manchester, but also addresses the unmet need that has been present outside London for a number of years.
Niche firms will work on a national level at lower cost, undercutting the prices of national firms and still be able to survive and thrive. It is no longer ‘the bigger you are, the better you are’. It is more like ‘the bigger you are, the harder you fall’.
The legal market is calling out for new entrants to fill the void and the Solicitors Regulation Authority is supportive of specialist practitioners setting up their own firms. There seems to be a movement by the regulator to encourage entrepreneurial lawyers to take the plunge and be the future leaders of the legal profession.
With the news that the SRA plans to reduce the minimum level of professional indemnity insurance cover from £2m to £500,000, there is no better time to enter the legal market and contribute to maintaining a profession run by legal practitioners. Even outcomes-focused regulation is friendly to niche firms.
It is easier for niche firms to manage risk to clients, the law firm and the legal profession if the firm is run by specialist practitioners. This could be because, with a risk-based approach, it is less risky to provide legal services through traditional law firm structures than business models that rely on private equity funding or branding of a large conglomerate.
These business models will need to generate a profit above and beyond that required of a niche practice.
The travails of the Co-operative Legal Services serve as a good example of the dangers associated with business models dependent on consumer branding and a reminder that legal services are not a consumer product to be bought and sold.
The long-term sustainability of the legal profession will be down to the entrepreneurial lawyers who have studied law, worked in law and are able to manage the law. They will be the ‘stars of the legal services revolution’ and their credentials outstrip those entrants which buy into law to generate a profit.
That does not mean that specialist legal expertise cannot be priced. Niche firms will be able to spearhead the value of a specialist service at a competitive rate, creating a benchmark to allow clients to compare rates between firms. This will ultimately bring down costs for specialist services and create a better service for clients across the legal profession.
The legal profession will start to adapt to these changes, but it will be the specialist practitioners who lead the way.
Sophie Khan is solicitor director at Sophie Khan & Co