Changes in solicitor business models

Aside from solicitors firms, the review found no published information on the types of business models, prior to the introdution of rules allowing alternative business structures.

In 2010, most firms of solicitors were organised as partnerships. Solicitors are free to incorporate and a small but growing number have done so, possibly because (a) LLPs are treated as partnerships for tax purposes, and (b) LLPs are permitted to limit their liabilities in agreement with their clients.

The charts above show the significant shift in firms moving to LLP status. An article in 2010 highlighted these changes stating “there are many firms who are now taking a second look at converting to a limited company because of the possible tax advantages that can be gained now that the 50% tax rate is becoming reality. Some solicitors have utilised a business model similar to barristers chambers. The solicitors are self employed and part of a partnership where they are responsible for their own income with the limited company providing the administrative and support services. It clearly separates the ownership and operations which can be achieved with the clear structure of a limited company.”1

Partnerships vary in how formal they are:“Partnership is based on collegiality not hierarchy, collective decision making not authoritarianism, and decentralised patterns of professional work. On the normative side there are values that inhere within professionalism such as particular ethical stances, respect for partners‘ equality, and often unlimited personal liability. A firm organised along P2 lines is more like a linked set of individuals rather than a corporate structure”.2

It has been reported that technology has enabled greater flexibility in firm structure with the rise of the virtual law firm: “Examples include a firm with 10 different commercial practice areas and 85 solicitors, a serviced office with internetbased practice management and case management system which allows for virtual working, a city law firm using legal consultants working from their own workspaces and a firm of 18 solicitors covering all aspects of family law  and spread around England and Wales”.3

Another key theme highlighted in research has been the growth in salaried partners: “The salaried partnership is a significant innovation which stretches the meaning of partnership. The ‘traditional’ legal partnership was made up of equity partners only – individuals who owned a share of their firm and, therefore, took a share of the profit it generated. Hence profit per partner measures in the past were effectively the same as PEP measures. Increasingly, though, we are seeing salaried partners, whose remuneration is not linked to profits (besides the effect of bonus schemes), operating as a new tier in organisational hierarchies. Indeed, not only are salaried partner found in most firms now but their numbers are growing significantly”.4

In the run up to 2010, it was reported that there had also been changes in structure brought about by the growth in referrals as a source of work.5

Networks and franchises

There is very limited information available on informal networks and franchises, especially for non-solicitors.

There are preferred supplier networks used by corporate clients such as panels, but these tend to be reported on when the tendering process is being undertaken: “All of the existing panel members have been invited to pitch, as well as around six further firms currently instructed on an ad-hoc basis. It is understood that the tender document contains a request for a breakdown of fee structures as well as an analysis of value-added extras.6 Examples of panels include Treasury Solicitors Department Barristers Panel, “although being on TSol‘s list of QCs does not guarantee any particular amount of work or indeed any work at all. However, being on the list does draw a QC‘s willingness to do Government work to the attention of the Government lawyer looking for a QC.7

Partnerships across organisational boundaries may be more common in the not-for-profit sector with a longer history of joint working and common aims. For example in 2006 it was reported that “CitA has effective partnerships with Shelter on providing advice on homeless issues and with the Macmillan Cancer Relief Fund to provide generalist advice to people affected by cancer”.8

In terms of franchises there has been a growth in recent years of firms operating under a single brand, for example, Quality solictors, Legal Alliance, Lawyer Locator. Another example is Lawnet which repored in 2010 that it covered 68 firms ranging in size from 6 to 39 partners, and as providing a range of benefits9 including lower cost PII scheme, group purchasing power, accreditation to the ISO 9001:2008 Quality Standard, training, online marketing support, publications and marketing support. The benefit for small to medium firms in joining such networks are reported to be lower non staff costs and increased marketing reach through operating under an advertised brand name: “This is more important given that Big Brands who are actively moving into legal services: Halifax through pay as you go online legal forms, backed up with a panel of 6 solicitor firms to provide advice where necessary. Co-operative offering free legal advice to members.10

In 2010, it was unclear how many such networks and franchises exist, how many firms are members, and what volume of clients sourced via these arrangements.

Volume of work undertaken

The review found no information on the volumes of work undertaken by different providers (whether measured by number of clients or cases) for all authorised persons, with the exception of legal aid for solicitors legal practices and estimates of conveyancing for all types of persons authorised to deliver these types of services. The regional distribution of legal aid funded cases in 2009/10 is shown in the tables below.11

Unsurprisingly London dominates most categories, especially housing, employment, immigration, and welfare benefits. However, Leeds has the highest proportion of accident or injury cases.

RegionFamilyAccident or InjuryHousing, Landlord and Tenant disputesEmploymentCriminalImmigrationWelfare Benefit issuesDebt problemsOther
RegionFamilyAccident or InjuryHousing, Landlord and Tenant disputesEmploymentCriminalImmigrationWelfare Benefit issuesDebt problemsOther

Activities undertaken by different law firm staff

The RIR found very limited published information looking specifically at the different roles undertaken by different staff within law firms. However aspects of this are touched upon in some pieces of research which show:

  • One piece of research reports that solicitors tend to be seen as senior to legal executives, but that legal executives share largely the same knowledge base as solicitors.12
  • Some criminal law firms “used agents at times when fee-earners did not want to do out of hours work, were engaged at court, or where the police station was some distance away. All of the firms who used agents or non-solicitor fee earners reported that they were accredited police station representatives. Several firms employed agencies staffed by ex-police officers, or employed ex-police officers directly as legal executives13.
  • 83% of solicitor legal aid firms responding to a survey employed a cashier; 55% had a practice manager; 21% of the firms employed an in house accountant14.
  • For barristers differences in work undertaken in 2009 were:
    • “38.4% of self-employed barristers reported that they practised in crime; 99.7% reported doing legal aid work. Despite the fact that considerably more men than women were self-employed (70.7% vs 29.3%) the gender ratio in criminal practice was significant with 36% of women and 39% of male self-employed barristers reporting working in crime. Among crime barristers more than 63% derived more than 91% of their income from crime work.”
    • “78% of female and 77% of male self-employed barristers practised in civil work. Of those who practised in civil, a significantly higher proportion of women (74.5%) did legal aid work than men (57.2%). A significantly higher proportion of women than men did family work in general, 48% of female and 21% of male barristers.15

Activities undertaken by advisers in solicitors legal practices

Work undertaken by the Legal Services Reseacrh Centre in 2006 found a range of activities being undertaken across categories of law for legal practices that delivered legal aid.16

Primary Subject Area of Advice ProvisionCaseworkRepresentationSecond Tier Support
Welfare Benefits100%25%25%
Debt/Money Advice50%13%0%
Community Care0%100%100%
Personal Injury69%50%19%
Clinical Negligence86%71%29%
Mental Health60%80%20%
Human Rights67%50%33%
Domestic Violence65%62%26%
Sexual Violence70%78%22%
Actions against the Police50%38%0%
Public Law63%55%0%

This research shows that, 53.8% of organisations who offer housing do casework, 38.5% provide representation and 15.4% offer second-tier support in the same subject. This can be compared to 100% of welfare benefits advice givers in private practice that do casework.

Overall the survey found increased specialisation, with the proportion offering representation or second-tier support generally well below the proportion also providing casework. However for a limited number of subject areas there is variation from this pattern, for example, mental health and sexual violence.

This points to specialism - as the depth of service required increases, the number of suppliers offering these services decreases.

Mediums of service delivery

The RIR found no published data on the use of different mediums of service delivery for any categories of work.

A possible proxy measure of changes in technology could be changes in the ratio of offices to firms with a decrease from 1.38 to 1.28 office to firm ratio between 2004-2009 but this could be a function of changes in firm sizes.17

A range of commentators promote the use of the internet as a way of augmenting legal business:

  • “Elawyering firms (those offering services via the web) need to consider the use of client extranets, and web enabled document automotation. Combining digital applications with traditional human service is a way to increase small law firm profit margins, without increasing the amount of time that the attorney spends on each transaction.18
  • This includes Citizens Advice where a zero based review reported on the need for CABs to “take advantage of new technology for divert clients from the most labour-intensive and expensive-to-provide service of face-to-face counselling so that this service can be reserved for those who really need it, especially socially deprived people. The diverted clients would be expected to help themselves to a significant extent, rather than have full advice provided tailor-made to their circumstances19.”
  • 2010 research summarised solicitors views: “Face to face contact with a legal adviser is most valuable for cases involving highly distressed consumers (typically in family law), consumers with communication problems (e.g. where a client has poor English), consumers with some degree of mental impairment (e.g. certain elderly clients), consumers who lack IT literacy (frequently preference was made to elderly clients), the consumer attending court.” Face to face contact with a legal adviser was described as not necessary for personal injury, will writing, conveyancing, and simple legal issues.20

In terms of capability for delivering online advice, a 2005 survey for the Law Society found that :

  • “Ninety percent of fee-earners in firms with less than ten partners now have a PC on their desk (up from 49% in 2002); 86% of sole practitioners have their own PC and only 3% have no access to a PC at all. Around 80% of solicitors in private practice work in a firm with its own Website and, overall, only 10% of respondents were in firms that did not plan to have a Website”.
  • This survey also reported that:
    • Many small firms have introduced work-generating websites that offer services like online matter tracking or fee quotations.
    • 18% of firms had received requests for electronic services from other bodies. Of these, 30% had come from banks and 19% from estate agents.
    • 20% of solicitors have received requests from other solicitors for online services.
    • Up-to-date IT is already a condition of securing instructions from in-house lawyers in large businesses or government offices who take for granted the ability to exchange documents and messages by email.
    • e-mail was reported to be an effective way of communicating with the Bar.
    • Over 30% of clients were willing to receive e-mail advice and this rose to 46% for conveyancing clients (80% of whom were also willing to receive advice by telephone).
  • This survey shows widespread use of IT over 6 years ago, driven in part by firms responding to client demands. The expectation would be that the use of technology has substantially increased since then, in line with societal trends.21

Recent research on sole practitioners reported that 47% of respondents said they had developed an online element to their practice delivery, enabling clients to log on and track the progress of their matter.22

The RIR found no information on the use of technology by other authorised persons.