Modern Law Magazine Issue 17 Conference Supplement

“The problem with lawyers is that they tend to look backwards for solutions rather than looking forward and meeting the challenge head on” Professor Nigel Savage

Managing Change in Changing Times On 11th March 2015, the third annual Doctors Chambers Modern Law Conference took place at 155 Bishopsgate, London. Modern Law brings you an exclusive insight into the proceedings from this year’s event.

Doctors Chambers Modern Law Conference Supplement 2015

Reduce costs; improve customer service & eliminate unrecoverable fees DREAM OR REALITY? Sucheet Amin is the Managing Director of Aequitas Legal, a multi-award winning PI firm based in Manchester. He is also a Past President of Manchester Law Society but his real passion is for technology, in particular mobile apps. He has since conceived, developed and integrated into his firm case management system, Proclaim, a mobile app communication tool. The only one of its kind, the app, called inCase™ is now being used by other PI firms to reduce costs, improve client service and plug leaking time.

Having learnt the coding structure behind Proclaim and managed its development since Aequitas Legal started in 2009, I always enjoyed using technology to enhance our client service and experience.

By late 2011 I started to notice more and more telephone conversations between my fee earners and their clients that just simply weren’t productive. Clients were asking questions like, “what happens next?” or “what happens if we go to court?” These were questions that didn’t help us further their claim but clearly were important to the client.

So I spoke to the team as I wanted to work out how many of these needless calls they were handling. It surprised me that they said they had to deal with at least one call or email a day which was unproductive and would never be recoverable as a cost. On digging a little deeper, it averaged out at one call or email a day, per staff member. At the time, I conveniently had 10 staff, so that equated to 10 calls/emails a day. My team were telling me that it was taking about 2 units of time to deal with the query and log details to the case. Quick bit of maths applying Grade D of £111 per hour across the board - £222 a day in unrecoverable time spent. That was £4,440 a month...and £53,280 a year!!!

With LASPO around the corner, I needed to do something about it and fast. So I conducted some client research to work out what their true needs were from us as law firm. We identified 4 key areas for them inCase App | www.in-case.co.uk/modernlaw

speed of the case; information about what was going on; education about the claims process and; use of technology to deliver our services.

Better reporting was built in with the ability to track client engagement and the benefits and cost savings enhanced by improving automated messages or updates.

Armed with my client research and a need to reduce these calls and emails, I spent a few months thinking how to use this information. I remember one day in early 2012 sitting on a train to visit some family when I literally had a “light-bulb” moment - a mobile app would help manage all of these client needs. I penned some notes about what an app would do and as an avid app-user myself, I thought about what it should look like, how it would work, what it would do, how would it fit in with Aequitas Legal. On that train, inCase™ was born.

inCase™ is truly a revolutionary product that has delivery unprecedented results recognised by the awards it has already received and its shortlisted at the Modern Law Awards 2014 for Best Use of Technology.

inCase™ is a mobile app designed to communicate and inform clients. Using my knowledge around Proclaim, I integrated inCase™ to fully automate update messages, a tracking facility as part of the claims process, with a facility for clients to send messages and photos with ease.

The results were staggering, lowering our inbound calls dramatically and, educating our clients so that when we did need to talk, they already had a good understanding of the process.

The benefits to the client was dramatic as now they could engage with us when they wanted to - we even saw sessions in the middle of the night. Using push notifications, we could deliver instant messages without having to wait for a client to pick up an email or for the post to arrive at their home. It was more efficient all round.

There were some great side effects too...our satisfaction ratings went through the roof as inCase™ allowed clients to constantly rate us. Clients were showing their friends and family which led to new business. inCase™ had direct links to our social media sites which increased client engagement.

There were some interesting lessons too as the first version was quite “dark” and the user journey wasn’t quite how I envisioned it. I had invested tens of thousands of pounds into inCase™ but felt it could do a lot more. And with LASPO, inCase™ had proven itself and was worthy of being made available to all law firms. So inCase™ was redeveloped with more effort into the colour schemes and user experience.

Specialising in the personal injury and conveyancing sectors, inCase™ is available as a plug and go system or a fully branded mobile app. SRA compliant, this software helps maintain profit margins whilst taking advantage of the increasing smartphone market (61% of UK adults own a smartphone - Ofcom, Aug 2014).

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THE EDITOR’S OVERVIEW A

slight alteration in the format for this year’s Doctors Chambers Modern Law Conference resulted in more exclusive post-event copy than ever before, which is why we have decided to dedicate this entire supplement to the day’s proceedings.

As well as the main event this year, which focussed on ‘Leading a Legal Business: Managing Change in Changing Times’, Modern Law also held six exclusive, invite only roundtables (coverage featured from page 16), to put burning issues from the legal sector to leading individuals and uncover the latest news and updates in specific practice areas.

Our headline interview this issue is Professor Nigel Savage, Emeritus President of the University of Law and now Director of Savage Hutchinson Consulting Ltd. I spoke to Nigel post-event, to gauge his overall thoughts, some of

05-08 The interview 06 Interview with...

Professor Nigel Savage

The introduction of new business models has been just one factor amongst many that have impacted the delivery of legal services.

Charlotte Parkinson, Modern Law spoke to the Emeritus President of the University of Law about what the qualification ‘solicitor’ actually means in the modern market, and why legal education should be moving up the professional agenda.

Editorial Assistant Charlotte Lamb Contact 01765 600909

If you have any views, feedback or comment on this supplement or the conference, I’d love to hear from you.

Drop me a line on 01765 600909 or e-mail me via: charlotte. parkinson@charltongrant.co.uk

Charlotte

Charlotte Parkinson, Group Editor, Modern Law.

11 The Modern Law Conference 2015

On 11th March, the third annual Doctors Chambers Modern Law Conference took place at 155 Bishopsgate, London. Charlotte Parkinson, Modern Law went along to summarise the proceedings.

22 Personal Injury Roundtable

16 Costs Roundtable

New budgeting rules and a test for proportionality have made legal costs one of the most talked-about aspects of the legal industry in the last few years. So, are the new rules clear enough and what’s next for this growing section of the legal market? Catherine Baksi reports for Modern Law.

Conveyancers have without doubt seen some of the biggest changes of all the legal sector in the last 5 years, but how is the sector fairing post-recession, and are things still on the up? Charlotte Lamb, Modern Law, reports.

The need to closely monitor the financial stability of a law firm has become increasingly important as pressures around external capital injections and alternative business models continue to bite. So, what should law firms be doing when it comes to finance? Charlotte Lamb, Modern Law, reports.

Digitally savvy clients and an overall increase in the use of technology are having a dramatic impact on Private Client practitioners, but what’s on the horizon and could a new government spell disaster for the sector? Catherine Baksi reports for Modern Law.

26 Technology Roundtable

20 Financial Roundtable

The Personal Injury (PI) industry has changed dramatically over the last few years. So, how are the firms who remain on the claimant and defendant side fairing, what can we expect from the sector in the years to come, and how will this affect the client? Charlotte Lamb, Modern Law reports.

24 Private Client Roundtable

18 Conveyancing Roundtable

Group Editor Charlotte Parkinson charlotte.parkinson@charltongrant.co.uk Contributing Editor Catherine Baksi

I would like to thank everyone who made the Modern Law Conference 2015 such a success, in particular the headline sponsor, Doctors Chambers Ltd, as well as everyone who has taken part in, and made this supplement possible. I hope you enjoy reading the coverage and look forward to welcoming you to a future Modern Law Conference.

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Modern Law Magazine Project Director Kate McKittrick kate@charltongrant.co.uk

which were highlighted in his closing address (from page 6).

The use of new and innovative technology in the legal sphere has grown rapidly in the last few years, but are firms making use of and embracing technology or do their efforts still leave a lot to be desired? Catherine Baksi reports for Modern Law.

29 Responding to the Challenge of Change in Personal Injury

Significant disruption in the personal injury (PI) sector has led to innovative businesses succeeding. Unfortunately significant fall out is still expected, as Lesley Graves reports.

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The Interview

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Interview with... Professor Nigel Savage

Interview with...

Professor Nigel Savage The introduction of new business models has been just one factor amongst many that have impacted the delivery of legal services. Charlotte Parkinson, Modern Law spoke to the Emeritus President of the University of Law about what the qualification ‘solicitor’ actually means in the modern market, and why legal education should be moving up the professional agenda.

Q A

What, in your eyes, is the greatest change to the UK legal sector since you started working in it?

The greatest change is not one thing, it’s the coincidence of so many issues impacting on the legal services market at the same time.

These include: the impact of the global economic crisis; more competitive markets; clients being more difficult to manage (particularly in the corporate market where the balance of power has changed in favour of the client); the globalisation of legal services, and the disaggregation and commoditisation of the delivery of legal services, combined with the huge advances in the use of technology and social media. Add the impact of changes in public policy and the regulatory environment, and consequent changes in the business model for delivering legal services and the financing issues, it’s no wonder there is so much turbulence in the sector. The problem with lawyers is that they tend to look backwards for solutions rather than looking forward and meeting the challenge head on.

Q A

You helped create the first ‘for profit’ University in the UK, what were the key challenges associated with this transition?

This was like creating an ABS from a law firm in a sense that it was a radical change

to the business model. The transition clearly affected the 700 or so people who worked for the University as well as all the stakeholders. It was a big, big job but it ran very smoothly because of the planning. We put a lot of work into developing an effective communications strategy with staff and students, held meetings with Regulators in advance and identified the types of organisations we would be prepared to sell to. The whole project was tightly managed between the Executive team and the trustees.

In particular we were very careful in identifying the profile of potential buyers to safeguard the brand, our values and of course the staff. For example one of the conditions we established was the introduction of an Employee Ownership Scheme. We were also lucky as we were definitely in the right place at the right time and the Minister we dealt with, David Willetts, was very supportive of what we were doing and was intellectually attuned to what we wanted to achieve.

In many respects all we were doing was changing our business to suit the environment much the same as many law firms are currently doing.

Q A

Why did you decide to establish the Leal Education Foundation?

Establishing the Foundation was very much part of the transition from ‘not for profit’ to ‘for profit’.

‘The problem with lawyers is that they tend to look backwards for solutions rather than looking forward and meeting the challenge head on’

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There are risks associated with being a Charity and running a business. The old structure meant that if the business was at risk, then so was the Charity.

Because of the risk environment at the time, it made sense to put the business into a separate company, sell it and then put the proceeds of sale into a secure Foundation. The Foundation now holds c. £200m in perpetuity, which yields a significant income each year and is 100 per cent secure. On that basis it can now conduct planned strategic support for the wider legal services market and public legal education agenda.

Q A

What is the biggest challenge regarding routes into the legal profession for young people at the moment, are training routes adequate and diverse enough?

They are beginning to change and the issue now is (in the same way that the business models and the needs of legal services are changing), delivering an education that fits the emerging business models. The problem with legal education is that it is 5 years behind the market, we should have been talking about different routes into the profession when the Legal Services Board (LSB) and the Solicitors Regulation Authority (SRA) were first created, as a means of delivering their strategy, but sadly it was not a priority and too much time was wasted in posturing and fighting old battles. Legal education is playing catch up in general and the business needs to adapt to the factors I identified earlier. We are already preparing young lawyers for an environment that is rapidly ceasing to exist so we need to create new routes and develop new competencies to allow young people to function effectively in the new environment. The lawyers that succeed in the future will be those

Interview with... Professor Nigel Savage

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Professor Nigel Savage Nigel Savage was President and CEO of the University of Law (formerly the College of Law) 1996 – 2014. During his tenure the organisation delivered substantial revenue growth alongside cultural and organisational change culminating in a radical change of business model from a charity to a ‘for profit’ entity.

In 1980, he was awarded a PhD for his work in corporate governance and over the years has been involved with a range of organisations in the private and public sector. He was a main Board Director of the Higher Education Funding Council and chaired their Audit and Risk Committee at a time of radical changes in the funding and governance of universities.

On retirement in 2014 he formed a consultancy company Savage Hutchinson Consulting Ltd and has been advising clients in the UK, US, Australia and Africa. Current projects include working with a global consultancy to improve the skills and competencies of lawyers by using business development and sales techniques to enhance revenue growth.

Nigel is a non-executive director and chair of the Audit and Risk Committee of Fletchers Ltd, the leading medical negligence firm and Chair of the Board of Skills for Justice Enterprises Ltd.

that leverage their contacts and relationships to deliver client focused solutions. Competition means that if you want to grow market share you will need to get smarter at driving revenue growth through business development and sales.

Q A

Is the sector ‘over-lawyered’?

This depends on what you mean by ‘over-lawyered’.

Richard Susskind and Stephen Mayson have been saying for years that there is a need for more people in the legal services market but not necessarily more top-levelqualified solicitors or barristers. This raises other questions around what the qualifications of a solicitor actually mean.

If we look at the accountancy profession, their qualification is much more clear-cut, 10 years ago, some were called Cashiers, now they are all called Accountants but they will not all become Partners at KPMG. The legal profession needs to find a generic qualification, like the accountancy qualification because currently, a lawyer could be anything from a paralegal fee earner, to a partner at a blue chip firm. If ‘solicitor’

‘There are still too many vested interests trying to maintain the status quo, irrespective of whether client interests are served’ becomes the generic qualification then everyone can find his or her own level within that status.

Q A

What does your work at Savage Hutchinson Consulting Ltd involve, and why did you decide to set it up?

My wife is the ‘Hutchinson’ side and the consultancy is a vehicle to leverage our contacts. We are working on a range of projects in the legal services and education sector and its great fun – we are in the happy position of only taking those assignments that are really challenging and stimulating. Fortunately we are used to working together; Sarah was responsible for global business development at the University of Law. Actually one of our most interesting current projects is working with a global business to develop programmes for lawyers to become more effective in business development and sales. In the last year, we have done worked in America, Australia and Africa on a range of projects. I am also a non-executive director at Fletchers Solicitors Ltd, which I find immensely rewarding.

Q A

What are your hopes for the future of legal services in the UK?

That we come through the turbulence and embrace the change to deliver improved legal services to consumers and the corporate sector. There are still too many vested interests trying to maintain the status quo, irrespective of whether client interests are served.

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The Features

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On 11th March, the third annual Doctors Chambers Modern Law Conference took place at 155 Bishopsgate, London. Charlotte Parkinson, Modern Law went along to summarise the proceedings.

Delegates

T

he cream of the legal crop flocked to the third annual Doctors Chambers Modern Law Conference – ‘Leading a Legal Business: Managing Change in Changing Times’, in London.

With a sophisticated and fittingly modern new venue, and the most diverse range of panellists to date, there was certainly pre-conference buzz like never before. As upwards of 450 delegates made their way into etc. Venues at 155 Bishopsgate, the anticipation for this year’s event continued to build.

Returning Chair, Michael Napier CBE, QC (Hon), the former Irwin Mitchell Chairman and expert on the modernisation of the UK legal system, including the advent and rise of Alternative Business Structures (ABSs), kicked off proceedings by outlining the premise for the day, “The

‘Law firms often go for [a NED] who has a public profile... but often, the contribution they can make is not always equal to the contribution they do make’ Professor Stephen Mayson world that we knew a few years ago has undoubtedly changed. But how different is it, what are ABSs and nonABSs, doing differently?”

Sir Michael Pitt, Chairman of the Legal Services Board (LSB) took to the stage to outline his concerns that in the six months since he became Chairman of the super-regulator, little had changed in the legal market. “I am still surprised by the extremes which exist within the sector... there is significant unmet legal need in society and we have a collective responsibility to navigate through this”,

he said. To achieve real change, Pitt called for regulators, representative bodies and service providers to “adapt, lead and help shape the future sector” and “place Public-interest ahead of selfinterest.” Pitt concluded that retaining flexibility in setting out the plans for the regulator would be a central focus for the LSB moving forward. He finished by explaining how he hoped the profession would respond to such dramatic change, calling for “innovation from practitioners and leadership from regulators.” He concluded with a word of warning to expect further changes on the horizon,

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“Sooner or later, Ministers will turn their attention to the weaknesses in the legal sector and the limitations of the Legal Services Act.”

What firms really need Taking Decisions in a legal business is without doubt an historical issue, but have new and existing business models noticed a marked change in relation to decision making, since the liberalisation of legal services?

The first panel was put together to explore this issue and included Guy Beringer, Director, BCKR; Jonathan Cohen, Director, The Boardroom Partnership; Jane Keir, Senior Partner, Kingsley Napley LLP; Professor Stephen Mayson and Andrew Tucker, Group Chief Executive, Irwin Mitchell.

Napier began by asking how much decision-making authority is vested in the position of Chief Executive, compared to a Board, to which Keir responded: “Kingsley Napley is an LLP, which means we have a members agreement outlining our structure and governance but I am not sure how often Partners adhere to the agreement. Delegation is important but we find we tend to have a balance in terms of decision making.”

Napier then directed the questions towards Tucker, asking “Are you where the buck stops at Irwin Mitchell?”, a point which resonated with Tucker, who responded “Absolutely, certainly regarding any commercial decisions... becoming an ABS facilitated our change in structure and a re-write of our members agreement.” He continued by outlining the benefits of such a structural change, “We no longer need votes on things like mergers and admitting new equity partners. It has sped things up.”

The role of the non-executive director (NED) has been much discussed in the sector, specifically in light of new business structures, and Napier directed a question surrounding the role of the NED towards Beringer, who explained that the role of the NED depends entirely on what the business has and does not have. “Somebody from outside the law entirely, who has understanding of a people business, or someone from in the law could be beneficial to a legal business... but what you don’t want is people who replicate what you have got. It depends what you are trying to achieve and what you lack,” explained Beringer. Also commenting on the role

The ‘Taking Decisions’ Panel

‘Your marketing can communicate what you wish your brand to be, but the experience of the client is what the brand actually is’ Beverley Landais of the NED in a legal business, Cohen added, “They must also be able to bring commercial and strategic awareness to the firm, of a non-legal nature.”

Professor Stephen Mayson holds numerous NED appointments and he was quick to point out that NED’s may not be right for every firm. “It is important to make sure firms that are looking, are looking for the right reasons.

Law firms often go for someone who has a public profile... but often, the contribution they can make is not always equal to the contribution they do make”, he explained. “Generally... [a NED] should be someone who really knows what a law firm is about, and a lot of that is cultural”, he continued. Issues around communication are also difficult to get right during times of change, as Mayson explained, “however much you tell people, they will always believe there is something you’ve not told them.” He continued, “It is about treating other people as you would want to be treated in the same circumstances and not just regarding communication as a process or end result.”

Knowing your business...

The ability of senior management to take decisions should without doubt be a top consideration, but whose responsibility is it to effectively grow

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a legal business? The second panel session aimed to probe this issue and included Karl Chapman, CEO, Riverview Law; Neil Kinsella, Chair, Slater & Gordon UK; Beverly Landais, Marketing and Business Development Director, Saunderson House; Joanna Swash, Sales and Marketing Director, Moneypenny and Andrew Twambley, Founder, Injurylawyers4U. Whether or not a bigger business makes for a beautiful business was Napier’s first question to the panel and Kinsella responded first. “It depends on your business, you have to be absolutely clear about where you sit in the market... for example, do you need scale to invest in systems? Or, at the opposite end, do you need to be a niche player and keep costs down and be closer to clients?”, he said. Modern legal businesses need to be aware of the potential dangers that come with growth and, as Kinsella pointed out “growth absorbs cash, capital and can affect profit.” In order to operate efficiently and effectively, firms do need a critical mass but Landais was quick to warn, “Growing the business just for the sake of a large footprint is a sure-fire way to reduce your competitive advantage.”

Taking a step back and consolidating (in terms of implementing existing

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Napier began by asking, “How do firms set a realistic budget and stick to it?”

Bull responded first, saying, “the idea that one set of numbers is sufficient is a problem I consistently find in firms.

It is important to look at both actual and predicted numbers”, he went on “it is easy to set a budget and stick to it but it can be difficult from a political point of view... too much influence is allowed from within the firm.”

Carrington agreed with the difficulties, adding that it is also important to consider “how to inject realism” as an accountant and that “NED Boards and external consultants can often help do this, as they challenge budgets.”

Professor Nigel Savage

strategies), is no bad thing, and collating feedback from partners, staff and clients is invaluable before trying to grow a business, as is considering marketing strategies, argued Landais.

“Marketing is about understanding where the opportunities lie, what the client’s needs are, and how can we satisfy those needs profitably.

The communications and campaigns support that”, she said. Chapman echoed this, as he explained, “the market environment will drive strategy but it also depends on what the drivers of the business owners are, it is legitimate to have a lifestyle business in which massive drivers and scale are not high on the agenda.” Napier then focussed his attentions on Swash, asking how Moneypenny viewed their growth aims, to which Swash responded, “surely the most important thing that any business should strive for is profitability... it doesn’t really matter about the size of the business, it is about what you do, whether you do it well and whether you make money.” Outsourcing business services can be an effective way of reducing overheads, as Twambley pointed out, explaining, “these days, if you’re small,

‘Firms need to train their lawyers to help grow the business organically by nurturing relationships’ Professor Nigel Savage

you have to be niche... marketing is a ‘dark art’ and a lot of solicitors don’t want to do it. They are usually happy to hand it to someone else - if they can do it properly. For us, we can then take advantage of economies of scale and spend the money more wisely.”

The difference between marketing and a brand is an important factor to consider when looking at growing a legal business and Landais pointed out, “a brand is what people say about you when you’re not in the room, which focuses on experience and perceptions of the business they have dealt with and what other people say.” She went on, “your marketing can communicate what you wish your brand to be, but the experience of the client is what the brand actually is.” Chapman agreed and added, “The internal brand is also critical, if there is a gap between what you’re saying and what you’re doing, the business has no sustainability.”

Whilst being realistic on numbers, it is also important to put people and politics into the mix, as they inevitably come into play when assessing a firm’s financials. “Some people are not good at transparency and openness around budgets”, Holland explained.

“Sometimes that’s where law firm management structures can create a problem... you can’t separate people, politics and hardcore figures”, she continued. Although time consuming, the panel were in agreement that setting a budget is simple, but that the difficulty comes with adhering to it and altering it when things don’t go as planned. Berry added to the discussion, “The other consideration with budgets is adding incentives and rewards for meeting them.” LlewellynLloyd offered a different perspective, explaining that in his experience “most law firms do not empower their finance function, in terms of investment and the authority to speak to partners, particularly in a corporate structure” he went on, “lawyers often struggle to financially articulate their case and tend to skew away from numbers.”

An injection of realism...

Traditional models in a changing market

Although the UK economy is recovering post-recession, if a business (legal or otherwise) is not making a profit, it is not sustainable. Issues around budgeting, cash flow and the bottom line were top of the agenda for the third panel, which consisted of Nigel Berry, Finance Director, Simplify Group; Chris Bull, Founding Director, Kingsmead Square; Gary Carrington, Finance Director and Managing Director - Bike Division, Fletchers Solicitors; Zoe Holland, Managing Director, Zebra Legal Consulting and John Llewellyn-Lloyd, Head of Business Support and Services, Arden Partners.

When a profit has been made, often the most difficult decision is deciding how to share it, amongst shareholders, partners and staff. How best to deal with profit sharing expectations was the theme for the penultimate panel of the day, which included John Cahill, Founding Partner, Stewarts Law; John Schorah, Managing Partner, Weightmans; David Simon, Chairman, Triton Global and Rowan Williams, Head of Professional Services Group – London and South, Baker Tilly. Napier kicked off the debate by questioning Simon about Employee Ownership schemes, to which he responded by

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explaining the “revolutionary” Triton Global business model. Simon said, “It responds to the frustrations of many traditional business models. He went on to say they had, “taken the internal investor culture to the ultimate extreme” by “creating a business that is owned by its employees”, having obtained their Alternative Business Structure (ABS) licence in 2013. “The other advantage with Employee Ownership is that it also creates a succession plan”, Simon added.

Similarly to the Triton model, Baker Tilly also utilise an Employee Ownership scheme, and, said Williams “largely operate as a number of LLP’s but have a corporate vehicle”, which enables them to “have a share scheme and internal ‘stock exchange’”, she added, “it works really well as a motivator.”

Despite the benefits, there are things to watch out for when looking at the ownership of a legal business, as Schorah was quick to point out. “There does need to be liquidity in the shares though... to an extent these schemes work better in a bigger business”, he went on “I would be careful about using it as a model for leveraging more capital.” The partnership model does still have a place in the modern market though and Schorah attested that this is because “it is possible to have non-lawyers as partners nowadays, which is another way of enfranchising your employee base.” Cahill’s view on Employee Ownership was far removed from the rest of the panel, explaining this type of scheme was not how Stewarts operate. Cahill did, however, express an interest in the way in which succession planning can be assisted

‘A number of COLP’s and COFA’s have argued that their position ‘deresponsibilises’ other lawyers within the firm and encourages a ‘pass the parcel’ attitude to compliance’ Professor Richard Moorhead “by virtue of the transfer of shares.”

The fairest way of rewarding staff can often be a somewhat controversial topic, and often, what Schorah called an “eat as you kill” model may be the fairest, if not the most popular method of remuneration. “A lockstep model on its own can create some perception of unfairness, and getting the remuneration process right will make the business more competitive”, he added. However, the method of remuneration depends on what the business is trying to achieve, the more people work to create a “non-controversial” system, Williams said, “the more policing it needs to ensure performance is maintained.”

Williams also argued the benefits of a controversial approach as it “creates constructive tension... for the individuals, it is about motivating them with remuneration so they can have a bigger slice of the cake, and for management, it is about making a bigger cake”, she said. Despite talks about diverse and innovative approaches to financial management, lockstep remains the most popular method of remuneration for law firms around the world, according to the 2015 Global Partner Compensation System survey, conducted by legal

The ‘Making a Profit’ Panel

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consultancy, Edge International. In the UK alone, 72% of firms still use “some form of lockstep” explained Cahill, which certainly provided some food for thought for delegates.

Compliance: a slippery slope?

Minimising and managing risk for practitioners, but above all consumers, is always high on the agenda, particularly following the Legal Services Act (LSA), and the final panel of the day focussed on exploring ethics and some danger areas relating to risk management. Panellists for the last session included Paul Bennett, Partner, Aaron and Partners; Martyn Day, Senior Partner, Leigh Day; Alison Matthews, Alison Matthews Consulting; Christopher Mills, Chief Operating Officer, Schillings and Professor Richard Moorhead, Professor of Law and Professional Ethics, University College London. There has been huge progress in relation to compliance over the last two years, and Matthews’ view was that the “Compliance Officer for Legal Practice (COLP) and Compliance Officer for Finance and Administration (COFA), have been largely responsible for that.” There will always be risk associated with managing a legal business and Bennett echoed Matthews, although he questioned whether the role of the COLP and COFA made a “genuine difference” to the risk management process.

Rather than arguing about whether or not the new compliance system is working, it must viewed “a process and a journey”, explained Moorhead. He continued, “A number of COLP’s and COFA’s have argued that their position ‘deresponsibilises’ other lawyers within the firm and encourages a ‘pass the parcel’ attitude to compliance.” Mills disagreed with Moorhead, explaining that compliance at Schillings has become part of their culture, “everybody takes responsibility for risk management, we now have a special function for risk consulting... and we see this as a competitive edge for us.” The amount of pressure on individuals is intense though, argued Day. “The way the system operates

The Features puts them under the spotlight like never before” he said. Bennett agreed with Day, explaining that in smaller firms “people feel as though the Partners abdicate responsibility regarding compliance, which creates its own risks and tensions.”

In light of external market pressures, taking professional risks is arguably on the rise. Moorhead had undertaken a detailed study into professional risk taking prior to the event and Napier probed him as to whether this was the case. Moorhead responded, “Thinking about a task through a financial frame has a significant impact on decision making and judgement”, he went on to explain that lawyers increasingly (both externally and internally) “measure their value in economic terms” and that naturally, this makes people “more likely to be dishonest and more unethical”.

The key to success...

Concluding the overarching themes for the day was Professor Nigel Savage, President Emeritus of the University of Law and Director of Savage Hutchinson Consulting Ltd. Savage began by explaining that the day’s proceedings had re-emphasised that traditional business

models “are not working.” Savage continued, “The thing about lawyers is that they value their autonomy and this is gradually being eroded.” Lawyers have also built up a resistance to innovation and, Savage explained that this was part of the “culture we were working against at the Law school” and that it “needs to and is changing.” Issues with the partnership model were a recurring theme in the panel sessions and Savage highlighted that there was an “evident shift towards a corporate model”, within the sector. He was also keen to emphasise that the legal profession has always been slow to progress in terms of new business models but showed an optimistic approach explaining that the profession had “survived and is prospering.” He continued, “I am profoundly optimistic at the success of some of the firms here today... ultimately, law is no different from any other service.”

The idea of legal governance is something that the sector is yet to properly grasp, and Savage argued that this is because the legal managers “have not reached the right level of tension between non-executives, chief executives and chairman and at

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times, the idea of lawyers “reporting to non-lawyers” can add fuel to the fire.

He continued explaining that being “willing to admit where you have gone wrong”, is also the key to effective legal management and governance, particularly whilst trying to manage change. Managing change in changing times centrally involves looking to the future and growing market share is key to achieve this, “marketing is important” explained Savage, “but actually, firms need to train their lawyers to help grow the business organically by nurturing relationships”, he continued.

Finally, empowering staff should be of high importance to any firm wishing to thrive in the modern market, but Savage argued that the true message of the day was about understanding the connection between the different aspects of running a firm. “Good governance delivers good management, which delivers a profitable business”, he concluded, and successfully executing that, is how businesses manage change in changing times.

Modern Law would like to thank all those who attended, sponsored and made this year’s Conference possible.

Sponsors

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The Features

Costs Roundtable New budgeting rules and a test for proportionality have made legal costs one of the most talked-about aspects of the legal industry in the last few years.

So, are the new rules clear enough and what’s next for this growing section of the legal market? Catherine Baksi reports for Modern Law.

Attendees Chair Steven Green (SG) Partner Irwin Mitchell Richard Allen (RA) Costs Lawyer & Senior Manager Complex Claims London, Minster Law Ltd Ian Curtis (IC) Costs Manager Lyons Davidson Francis Kendall (FK) Partner Masters LCS LLP Chris Medhurst (CM) Senior Costs Draftsman Oliver Fisher Solicitors Glenn Newberry (GN) Head of Costs Unit Eversheds LLP Luke Nicholls (LN) Partner Bolt Burdon Kemp Mohsin Patel (MP) Solicitor & Branch Manager Nesbit Law Group LLP Edward Strickland (ES) Director & Costs Lawyer Thomas Legal Costs Jessica Swannell (JS) Costs Lawyer & Practice Manager A&M Bacon Limited

SG: There is very little law that has come out so far about what the test means, so how should the court assess costs with reference to the new test for proportionality?

JS: The new test is very important for the paying party. Before, we didn’t have proportionality in the overriding objectives. Costs which are disproportionate will be reduced/ disallowed even if reasonably or necessarily incurred. If I were the receiving party, that seems a bit unfair. If costs are reasonably and necessarily incurred, what makes them disproportionate? We haven’t got that much case law – we just know that at the end of an assessment the judge will stand back and have a look at the overall costs to see if they are proportionate or not.

SG: We have the five points that are in the CPR, but we don’t know which ones the court will look at most – will value be top of the list or complexity in the middle of the list? Theoretically, there shouldn’t be a pecking order, but we just don’t know.

LN: The one area that’s not being taken into account enough is the conduct element of the new proportionality test. This should cover any additional work created by the conduct of the paying party. But many of the judges take the view there has to be misconduct. I have sympathy for the judges because many of them, especially inside London but outside of the SCCO, haven’t had to deal with costs for a very long time. They’re inexperienced and insufficiently trained, and they’re effectively plucking figures from the air and being told that that’s ok to do and that it’s within their discretion. That’s really dangerous. It’s arbitrary and feels like a penalty.

ES: I don’t mind so much that there does not seem to be any hard and fast rules.

The new test allows judges to get a feel for the case overall and form a view.

LN: Without any case law the judges have got such a wide discretion, but without the experience to use it. Proportionality is in the eye of the beholder.

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GN: The problem is that there aren’t enough specialist judges who deal with these issues day-in-day-out. We need to narrow the field of people doing this kind of assessment. Maybe costs lawyers should be given the task as quasi-court officers.

MP: The rules say what the wider government policy is and essentially it’s an access to justice point. At some point the clients and lawyers will have to come to terms with that. We’ll have to explain to our clients that you might spend X amount, but you are definitely not going to get all of that back whatever happens.

SG: On costs budgeting, should there be any changes to the Form H? Should phases be replaced with periods of time?

GN: The main problem we have with the current budgeting form is you are trying to simplistically funnel work into phases, but you can’t always pigeon-hole the work into a particular phase.

LN: Unless both parties are putting the same work in the same phases and making the same assumptions, you are comparing apples with oranges in terms of budgets on a time basis.

GN: We should be looking at an overarching budget. Maybe time periods are the way forward.

SG: How should the Court deal with incurred costs? Is Redfern v Corby Borough Council (QBA 3/12/14) correctly decided?

FK: Budgeting is not assisting the client, which is what it was supposed to do in the first place.

GN: When judges make these decisions, they take the view that they are penalising us – the lawyers – but actually they are penalising the client.

The client has two options – to instruct us within the restricted budget, which is going to lessen their chances of being successful, or they can instruct us to carry on working in the way in which we previously were, in which case their chances of success increase greatly, but the recoverable costs will be less.

The Features

‘Without any case law the judges have got such a wide discretion, but without the experience to use it. Proportionality is in the eye of the beholder’ Luke Nicholls, Bolt Burden Kemp SG: The problem in all of that is that your opponent knows you are restricted as well and it opens the door to a tactical offer.

RA: I think Redfern is correctly decided based on the rules. What has not helped is that we’re getting a tranche of orders where the court is saying that if we want a full budget, the action will be stayed, otherwise we will adopt a provisional budgeting process. This reflects the courts limited resources and results in a more arbitrary decision.

ES: We’ve had courts push back (where they’ve had concerns over incurred costs), and ask for a more detailed breakdown of incurred costs.

I think that’s sensible as it gives you a chance to provide a better explanation and breakdown.

SG: The question here comes down to – is the court actually looking at what you have done task-wise or is it just looking at a figure?

JS: In our local courts where it appeared to us that the incurred costs were disproportionate, the judge basically said they can look but they can’t touch. They put a note on the file that the costs were disproportionate, but they won’t limit future costs.

However they will reserve the assessment hearing to themselves.

FK: The key to this is collaboration between the parties. I’ve had great calls with opponents talking through budgets and there is very little for the judge to decide.

SG: Provisional Assessment - Should the existing £75,000 limit be retained, decreased or increased?

JS: If it’s increased you’re going to have more complex cases that simply cannot be dealt with on the papers. From a training perspective, it would be nice if it were to be decreased. Trainee costs lawyers don’t necessarily have anything small to cut their teeth on anymore.

LN: It should be decreased. More cases are being assessed - people think it’s worth a punt and its clogging up the courts and hampering settlement.

GN: It should go back to £25,000 – that’s what the pilot scheme was based on.

CM: If the provisional assessment limit were to be retained, I think the detailed assessment cost limit would need to be changed. We perhaps need an incremental system that allows for an increase in the detailed assessment costs cap once a bill of costs exceeds £25,000 and again at £50,000. It is unrealistic to expect accurate and efficient work if we are constrained to a £1,500 cap on a bill of costs nearing £75,000.

ES: We’re finding massive inconsistency with the results of provisional assessments, which makes it difficult to advise clients on appropriate offers.

SG: Will your firm introduce J-codes?

IC: We are considering whether to introduce them because we think they will help with budgeting but we need more information about how it’s all going to work. One difficulty both paying

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and receiving parties have is the lack of consistency between the budget and the bill of costs. A lot of time can be spent by both parties trying to work out when a particular phase has been exceeded.

FK: It’s a fantastic theory that you should be able to press a button and produce a bill, but fee earners can’t and shouldn’t spend their time coding everything they do. It’s just not going to work. Fee earners could end up spending two hours of their day sorting out what their work was rather than doing work.

RA: We will introduce them when these are bought in through the next update to our case management system. J-codes or else some other sophisticated time recording system, is a necessity to track and monitor approved or agreed budgets.

SG: Jackson/LAPSO - Is the new system working? What are the major problems/ snags which are causing difficulty?

GN: DBAs are an issue. We’ve got clients who’ve heard of these magical damages based agreements, and we are hand-tied by the failure to allow (within the rules), hybrid DBAs. Clients would happily pay £150 an hour as the matter progresses and then give you 50% of the damages on top. Claimants don’t have any financial interest in the litigation, therefore costs proliferate. Hybrid DBAs are an opportunity for claimants to have a skin in the game, but also for lawyers to have some skin in the game as well.

CM: A major problem has been the abolishment of a lot of Legal Aid, denying access to Justice to those who need it but are not privileged enough to be able to afford it privately.

SG: How will the role of the Costs Lawyer/Practitioner change in the medium term?

JS: Lawyers are now using costs lawyers at the start of the case rather than just at the end.

CM: Up until Jackson costs lawyers focused their skills at the end. Now we are in contact with lawyers throughout the process and working more collaboratively.

GN: The profile of costs lawyers has increased. I thought it would happen after Woolf, but Jackson has introduced sanctions, which has made the biggest difference.

SG: So in summary, the changes have created more work for Costs Lawyers at the moment.

Modern Law would like to thank all for attending.

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The Features

Conveyancing Roundtable Conveyancers have without doubt seen some of the biggest changes of all the legal sector in the last 5 years, but how is the sector fairing post-recession, and are things still on the up? Charlotte Lamb, Modern Law, reports.

Attendees Chair Eddie Goldsmith (EG) Partner Goldsmith Williams, Chairman of the Conveyancing Association Richard Bretherton (RB) Solicitor - Chief Executive Ochresoft Technologies Limited Simon David (SD) Managing Partner Thomas Legal Group Lloyd Davies (LD) Managing Director Convey Law Adam Day (AD) Managing Director Hatched Lindsey Frith (LF) Associate Ramsdens Solicitors LLP Rob Hailstone (RH) Founder Bold Legal Group Ben Harris (BH) Sales & Marketing Director TM Group Chris Harris (CH) Director Lawyer Checker Mark Montgomery (MM) Customer Strategy & Marketing Director myhomemove Ed Percival (EP) Quality Manager myhomemove & Director Premier Property Lawyers Paul Saunders (PS) Partner Shakespeares

‘Industrialisation and technology may actually allow the cottage industry to continue’ Chris Harris, Lawyer Checker

EG: Has the conveyancing market evolved from the cottage industry it was, to a more industrial industry?

MM: It’s hard to argue that it’s not still a cottage industry when you’ve got 75 per cent of firms doing less than what it would take one person to do full time.

There are still firms who deal in incredibly traditional ways, which is frustrating.

CH: I was talking to an Australian conveyancer a couple of months ago, who was saying that technology in Australia has allowed the small conveyancers to thrive. Industrialisation and technology may actually allow the cottage industry to continue.

LF: We should aspire to be an industrialised industry but try to maintain some of the key qualities of a cottage industry.

MM: There is a bottom tier of firms that have a choice to make in the next few years as to whether they embrace technology or get out because the pressure is going to be on.

CH: There is no indication that prices are going to fall, corporate agents want to maintain a high price and maintain their margin. Whilst prices remain high, there are lots of inefficient conveyancers who continue to operate as they are.

PS: We can be as industrialised as we want but if the consumer and the market place don’t accept that industrialisation, we will not be able to sell the product that we have on offer.

BH: There has been some change within the top 100 firms in terms of volume in the last 10 years but a very long tail still exists. One thing we have seen is a dramatic change in how we can provide

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consumers with updates.

RB: For a lot of high street firms, their traditional lines of business such as personal injury and crime are gone, and probate is becoming commoditised. This will lead to more consolidation.

EG: Adam, as an estate agent, you presumably deal with the cottage industry high street and the volume providers, what is your experience of the two?

AD: It’s a generational thing, 10 years ago we would recommend the local high street firm and now (as estate agency shifts more online) it takes business away from the high street. There’s only a very small percentage of our sales that deal with a local conveyancer.

EG: Is that because you’re online?

AD: No, the buyers don’t care that we’re online, our buyers are used to online and looking for quotes and looking for the best value for money.

MM: The next generation of house buyers are digital natives. Their first port of call is going to be online.

RH: Isn’t that partly why Veyo has been created to serve those firms who haven’t got a case management system. But will they buy into it?

EG: What technological initiatives are currently evolving in the market which will make a real difference to customers and indirectly practitioners? What’s going to make the whole thing better?

AD: Instant exchange without any conveyancing.

EG: So says the Estate Agent!

EP: Technology will be led by what the consumer wants. When you consider now how easy it is to buy or do anything

The Features

‘There is a reluctance in the industry to nail the colours to the mast and set a clear expectation of what’s going to happen, when’ Mark Montgomery, myhomemove online, why shouldn’t you be able to do everything involved with your house purchase online as well?

MM: The technologies that can make online delivery more personal and secure, such as secure email and cobrowsing will make a real difference.

Things that are becoming mainstream in other service sectors and will shape client expectations.

CH: YouGov produced some data in 2010/11 that asked where people primarily found their lawyers from, with 4% stating online. In 2014, it said this is now 8%. That’s 100% growth and indicates a considerable change in consumer appetite.

EG: I’m surprised it’s so low. I expect everyone has case management systems and portal type services for their clients but that’s not common across the whole conveyancing industry, is it?

LD: If case management systems are run effectively, we will be able to manage capacity, which will allow us to be hugely more effective as conveyancers. Case management systems linked to account systems that have management information will be a key driver going forward.

EG: What will the impact of a HLMR controlled Land Charges Register have on costs and process?

BH: It’s still a bit of an unknown but one of the things they put in their proposal document when it was signed off, was that they will have to reduce the cost by 20 per cent in order for it to be a viable project. There is also the issue with the Local Land Charges (LLC), and not the CON29, at this stage the CON29 has still got to come from the Local Authority.

MM: How will that work in terms of the personal search industry and physical visits to local authorities to get the data?

If that’s on a costs recovery basis then it becomes less efficient and much more costly. Isn’t that going to offset the savings of the LLC? BH: It’s hard to argue against centralisation of data as being a good idea and it could bring some positive changes for the personal search market.

The percentage of the market that uses personal searches is still the minority though, so it might bring prices down but it’s not a price driven market, as personal searches are already more cost effective

than official in the majority of cases.

PS: The industry should be investing money in actually getting accurate data and updating it.

RH: The Registers of Scotland are going to provide a one-stop-shop for all property related data, whether it’s utilities, searches or The Home Report.

They’ve been looking at other countries like New Zealand and Norway where the conveyancing process is much quicker.

EG: So you’re saying that the Land Registry in Scotland has a strategic plan to take over conveyancing and replace it with its own system?

RH: Not to take over conveyancing, but to put most of the information that the conveyancer or the lender might want in one place so you don’t have to go to 10 different places to obtain the relevant information.

EG: How can law firms best protect themselves and their reputations from fraud?

LD: Systems need to be robust; we still insist upon the client going out and seeing a regulated individual and getting their documentation signed in front of them. If you step away from processes like that, you are incredibly vulnerable in today’s marketplace.

MM: We can learn from other sectors, for example Barclays Wealth Management use voice biometrics to identify the client based on a voiceprint.

SD: The problem is this is a cottage industry and most firms can’t afford that sort of IT, it is hugely expensive and it’s just not practical.

EG: So would you all say that as an industry we’re very poor at client identification, verification and security generally?

LD: Our regulators have sat on the fence for a very long time, there should be a definitive solution.

EG: How can we satisfy conveyancing customers who seem to expect more and more for less and less?

RH: Do they actually want more?

BH: They do want more contact. 5,000 people took part in the Moving Trends survey and the results showed roughly 70 per cent wanting to be contacted more than once a week.

LF: It is difficult to keep clients informed because of the reasons that we’ve discussed (mortgages, searches, replies

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to enquiries). There is inevitably going to be around two weeks throughout the whole transaction where you might not have something to communicate to the client. We need to learn how to inform our clients that there is nothing to report, in a time efficient manner, in order to meet our clients’ expectation of regular contact.

MM: There is a reluctance in the industry to nail the colours to the mast and set a clear expectation of what’s going to happen, when. With more transparency, clients will demand more.

EG: Where are fees likely to go – up or down?

RH: Fees have gone up over the last couple of years because volume has gone up, but it depends what level the fees were at before then, were they too low to really sustain the practice?

LD: Price is a factor, certainly online, but again you have to sell on service and we’ve always found that as long as you provide a great service people don’t mind paying for what you are providing.

EG: Are fees likely to go up?

LD: I think so.

MM: But we have to draw a distinction between what conveyancing firms earn and what the prevailing rate is in the market.

AD: We haven’t seen any downturn since putting our fees up, in fact the opposite as it’s driven our sales team.

EG: What will the conveyancing landscape look like in 10 years time?

CH: For years and years, people have been talking about the consolidation of the conveyancing sector, it hasn’t happened for all sorts of reasons.

Can I see the conveyancing sector consolidating considerably in the next 5 years? Probably not, after 10 years I think it’s more difficult to tell.

MM: The impact of ABSs longer term really challenges the partnership model.

If you look at the formation of firms and where they’re likely to go in the future, as a newly graduated lawyer do you seriously think you’re going to join a partnership and make a partner in so many years? In the 10 year window there will be half as many firms doing conveyancing.

Modern Law would like to thank all for attending.

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The Features

Financial Roundtable The need to closely monitor the financial stability of a law firm has become increasingly important as pressures around external capital injections and alternative business models continue to bite. So, what should law firms be doing when it comes to finance?

Charlotte Lamb, Modern Law, reports.

SA: 2014 NatWest benchmarking suggests that revenue growth has been supported by the recruitment of additional staff and as such profit margin remains flat – is this your experience?

AP: Not necessarily. If you ask a Legal Aid firm or a smaller scale personal injury (PI) firm, they would probably disagree with the notion that revenue has grown.

In certain sectors we’ve got growth and that is supported by firms employing fee earners. That may have an impact on profit but actually the overall average profits remaining flat is more down to reductions in profit in other sectors.

GT: Which sectors are you seeing growth in?

AP: We’re seeing growth in Corporate and Commercial, we have done in Litigation for a while but that seems to come and go. Private Client work also seems to be on the up.

SA: The profit margin in the North has fallen by 3%, which would reflect changes within the PI industry.

AP: I would agree with that, firms further South seem to be faring better.

GM: The degree of specialisation of firms has an impact, if you are predominantly skewed towards those practice areas that are subject to the wider market then issues can arise. Our turnover has grown and our investment in new people will secure increasing profitability in this next financial year. This Alternative Business Structure (ABS) world will, I think, encourage more specific work type external funding, such as in the case of litigation.

SA: Are firms doing enough to measure, manage and create efficient working practice in order to protect margin?

LG: The report says only 36% of firms have a detailed time recording policy, and that reflects what I see in PI firms.

Without this data it is extremely difficult to manage WIP and profitability. The PI sector are regularly challenged in profit costs recovery on issues of conduct and hourly rate. Law firms cannot begin to analyse their profitability without a

handle on these key metrics. There is still a lot of money to be made in PI work but the majority of the market is still nowhere near as efficient as it should be.

AP: Lawyers are there to provide solutions rather than selling time, but in order to deliver those solutions and generate profits you need to employ people, and the cost of those people is based on time. In certain areas of the law, fee income is based upon selling time, but more and more firms are moving away from fees based on time and towards fixed fees.

GM: There’s a distinct type of lawyer achieving a better result for clients by taking longer over a case, rather than driving through on pure efficiency. The more profitable solutions for running cases, may actually be affecting the client outcome negatively.

LY: There’s a trade off both ways.

SA: Something I’ve found that keeps coming up is counter litigation. We were talking about processing systems getting smarter and more efficient but the barrier is that we can’t afford to miss anything by putting it through a process channel. If we do, we open ourselves up to counter litigation, which we can’t afford.

AP: Firms need to be aiming to cut out the unnecessary gaps between the stages and the pinch points. As we become more efficient at using technology, we’re going to be cutting down on people.

LY: Do you think we’re going to be cutting down on people or just increasing productivity?

SA: External investors in PI firms appear to be facing some challenges. I don’t believe there have been as many external investments in legal firms as people had initially anticipated. ABSs were always going to be an Evolution rather than a Revolution but some of the ABSs that have materialised seem to be looking down into the abyss. Are legal firms an attractive investment opportunity, either now or in the future?

JM: It’s rare to come across strong Finance Directors in law firms, often that

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Attendees Chair Steve Arundale (SA) Head of Professional Sectors & Financial Institutions, Sectors & Specialist Business RBS/NatWest Malcolm Bennett (MB) Director NatWest Lesley Graves (LG) Managing Partner Citadel Law Ben Holmes (BH) Managing Director Invest in Law Jordan Mayo (JM) Managing Director Smedvig Capital Glyn Morris (GM) Partner - Head of Finance Higgs & Sons Andy Poole (AP) Legal Sector Partner Armstrong Watson George Thomas (GT) Associate Smedvig Capital Louis Young (LY) Managing Director Augusta Ventures

insight level is missing. Most successful businesses in other sectors are able to tell you how much money they’re making on each client and each product and therefore it’s much easier to get under the skin of the business and see how it grows. Law firms often don’t have that level of insight that makes it difficult for investors to understand.

MB: To get to that point we need to see more Finance Directors.

GM: If you’ve got a firm that’s done that already and they understand their profitability model very powerfully then they’re less likely to need external investment because they’ve generally got

The Features

‘There’s a distinct type of lawyer achieving a better result for clients by taking longer over a case, rather than driving through on pure efficiency. The more profitable solutions for running cases, may actually be affecting the client outcome negatively’ Glyn Morris, Higgs & Sons it all sorted and they’re making the money they want to make, unless they chose to scale up to a much greater degree.

AP: We do a lot of succession planning, which is going to be a huge issue for the profession going forward. These issues focus on the same things as investors look for in terms of making the firm attractive. The key points are not just to make profits and generate cash, but to demonstrate that they are making them, how they’re making them, how they’re going to continue making them and reduce reliance on key individuals, whilst also putting a structure in place that limits liability.

JM: There is an illusion of competition; a lot of firms are doing business in the same way (what we would call an old fashioned way). Within that there aren’t a great many investment opportunities.

In 5 or 10 years, as more and more external capital, external expertise, technology, sales and marketing comes into the sector, it’ll look very different and traditional law firms will struggle to keep up with the specialists.

SA: If (as a result of the General Election), the economy went back into recession, what would legal firms do and when would they do it? What did they learn from 2008/9?

LY: In the last 5 years, larger firms have realised they can’t sit on their laurels and that they have to fight for the work that comes in. There is definitely

a different approach. The structures still need to be changed, but that’s happening with the ABSs. AP: In general, firms are becoming more and more businesslike. Firms are employing more Finance Directors and professional managers and some of the ABSs have facilitated this.

SA: How does the client fit into this?

Clients still acquire legal services on a trusted, tight philosophy.

GT: The current model isn’t broken, law firms are still making money; the change that might break it will be the introduction of new pricing models.

We’re are also starting to see an increase in TV advertising campaigns which will lead to increased brand awareness.

GM: Many traditional law firms fail to understand that the modern consumer is entirely comfortable with living their life online, purchasing everything that they buy online.

JM: Technology makes the client’s interaction with law firms much richer and makes firms more accessible.

LG: There are significant opportunities available in terms of reducing inefficiency. People are not using IT as efficiently as they should be and it may only take a few significant players to take the PI model to the next level.

AP: This all comes down to measurement and management. I co-authored the Law Society’s Toolkit on Financial Stability in firms and there is a focus on what law firms should be measuring. It comes back

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to the productivity and the recoveries, the basic data that firms need in order to be able to manage the business correctly and incentivise people to behave in the right way.

JM: Do you find lawyers measure quality measures such as customer satisfaction or referral rates?

AP: Some do; as an accountancy firm we do and we target and incentivise people on Net Promoter Scores. Some of the bigger law firms do that but most don’t.

MB: What our clients are doing is quite sporadic, some of the more advanced firms do seem to be focussing on measuring quality.

SA: A lot of firms refer to it as their ‘culture’: “we’re a firm with a strong customer led proposition, we pride ourselves on good client care, it’s in our culture.”

JM: And how do you know if that ‘culture’ translates externally to good service unless you measure it?

SA: What does the political landscape hold in terms of a future for the legal services sector and what would a change in Government mean?

BH: The Conservatives haven’t got everything right around access to justice, but overall we’d be in a much worse position if a Labour coalition Government comes in, in May, with their over-spending and the subsequent damage to the economy this would cause. I would urge another Conservative Government to re-address the balance over access to justice.

LG: Over the past few years I’ve seen significant inefficiencies in the claimant sector, which have meant that injured people don’t get the right amount of compensation. On the other side, insurers have moulded their offering in terms of a one-stop-shop and put the claimant lawyer outside of the process, with the taxpayer ultimately paying for the medical and rehabilitation treatment of seriously injured people through the NHS and local authority budget, rather than the private route where the tortfeasor pays. This model is clearly insurer and commercially driven and I see no evidence that the Conservative Government have the rights of injured people on their agenda.

Modern Law would like to thank all for attending.

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The Features

Personal Injury Roundtable The Personal Injury (PI) industry has changed dramatically over the last few years. So, how are the firms who remain on the claimant and defendant side fairing, what can we expect from the sector in the years to come, and how will this affect the client?

Charlotte Lamb, Modern Law reports.

Attendees Chair David Bott (DB) Senior Partner Bott & Co Jonathan Clay (JC) Partner & Head of the General Insurance Sector BLM Karl Hirst (KH) Barrister No.5 Chambers & Compliance & Legal Director Outspire Group David Marshall (DM) Managing Partner Anthony Gold Solicitors James Maxey (JM) Managing Director Express Solicitors Ltd & Ontime Reports Ltd Hilary Meredith (HM) CEO Hilary Meredith Solicitors Sally Moore (SM) Head of Personal Injury Department Leigh Day Tania Sless (TS) Partner DAC Beachcroft

‘On the defendant side there’s considerably less people in the room then there used to be as firms have merged or overwhelmed each other’ David Bott, Bott & Co

DB: What are the biggest challenges facing your firm or practice over the next 12 months?

JC: The market is incredibly challenging from the claimant and defendant perspectives with deregulation and the manifestation of change that comes with that. In the next 12 months, from our perspective, the challenge is to ensure we deliver what our clients want and to demonstrate value.

DB: On the defendant side there’s considerably less people in the room then there used to be as firms have merged or overwhelmed each other.

The defendant world is a decade ahead of where the claimant world might well end up.

TS: There is growing consolidation on the claimant side but this is not yet comparable with the consolidation on the defendant side.

DB: Do you think there will be more consolidation on the defendant side over the next 12 months?

JC: New insurers are entering the market around certain niche areas and there is a lot of work there but we don’t currently have the presence that we feel we should have. Staying on Panels is critical.

TS: There are still some small firms out there and it’s difficult to see how they can continue.

DM: On the claimant side, it is important to carve out a distinctive, visible niche. We deal with serious injury work in a rapidly changing marketplace and face competition from companies with huge advertising spend and others with access to external capital. The way we compete is to focus on the personal element of our service.

HM: Maintaining your presence and market share is always a challenge.

A number of firms are trying to swim upstream and move into higher value cases. This is particularly the case for us as people see military work as a

ML // Modern Law Conference Supplement 2015

‘MedCo seeks to cure an ill that isn’t there’ James Maxey, Express Solicitors Ltd & Ontime Reports Ltd niche and profitable area. The other big challenges are going to be cash flow and the court fee hike, which is astronomical.

SM: To distinguish what you have to offer from the people who are saturating the market, whether they are solicitors or companies like InjuryLawyers4U, is difficult. Cash flow is obviously an issue and it is important to maintain the quality of work being done in the face of financial pressure.

DB: As pre-portal extension costs dissipate, many believed 2015 was going to be the year where old style WIP was statistically irrelevant as far as the running of your firm was concerned. Do you agree?

SM: It is hard to say for certain.

However, given the slow turn around in cases, there may be more personal injury firms exiting the market over the next 12 months.

DM: On lower value cases, the WIP has gone through mostly but not on the higher value cases, there are still a lot of pre-April 2013 cases working their way through. There will be more consolidation but extra demands on cash flow.

JM: The capacity for people to continue running unprofitable firms for many years knows no bounds, they will carry on taking the same drawings whilst the money diminishes and the last few big cases will finish off. They will eek it out until the dust is left at the end.

DB: Do they benefit from their ignorance of their financial plight?

The Features

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‘Cash flow is obviously an issue and it is important to maintain quality work in the face of financial pressure’ Sally Moore, Leigh Day become ABSs and own medical agencies to improve the quality of the medico-legal reporting for their clients.

MedCo seeks to cure an ill that isn’t there and prevent clients, with their solicitors selecting the appropriate expert.

DM: I’m not a fan of MedCo, I think it’s a sledge hammer to crack a nut.

JC: The profession doesn’t benefit from that ignorance. A decent sized or even a modest personal injury case was often seen (to high street solicitors) as being one of the things that would keep it turning over. I can’t imagine anyone here feels that a practitioner who has 4 or 5 or a dozen of those cases every year is necessarily good for our profession.

KH: With all of the cash flow problems firms are facing, I am beginning to see more Professional Negligence claims against solicitors especially as firms hurry to diversify beyond their core specialisms.

DB: Quite a few firms in Liverpool have moved out of PI and moved into Professional Negligence; specifically solicitor on solicitor claims. As costs go down the ability to preserve quality is diminishing and we are at risk from Professional Negligence claims. You can’t be against the rise of law firms going against other law firms because they’re actually doing what’s right for the clients.

TS: In all other areas of the law, people have to price the service and give the client certainty. Conveyancers would say ‘welcome to our world’, so would criminal lawyers.

JM: Conveyancers can price the service though. We’re operating in a market where the government decided what we can charge and it includes VAT so there’s no competition in our market place.

TS: Claimants have killed the ‘Golden Goose’; we were settling cases for £2,500 and the costs have come in at

£40,000, something had to be done.

JC: There was disproportionality between the value of the claim and the costs that were coming through, and the opportunity was missed 15 years ago with Woolf when fixed fees were first discussed.

SM: The pendulum has swung against claimants; the Government and the insurance industry have used claimant lawyers as an easy target.

DB: Will any political party or Government be better for lawyers and their clients?

HM: As much as we dislike politicians, they all dislike us.

KH: I’m equally cynical about all of them; ultimately they are politicians (regardless of the party they represent) and they seem to want to take access to justice out of practitioners’ hands and interfere in it as much as they can.

SM: I can’t imagine it being any worse under a Labour Government than it is under a Conservative Government.

They see lawyers as easy targets, when in actual fact, they are attacking injured claimants.

DB: Are you confident in the future for the PI sector and what do you think it will look like in 5 years time?

HM: There will always be victims of accidents, especially serious accidents; I can’t imagine them ever being dealt with online. There will always be a PI sector but in 5 years time it will be vastly smaller (in terms of the number of firms), than it is now and possibly very niche and specialised.

JM: I’m really worried for those with small to medium sized claims, I don’t want to see people walking away with a far smaller payout than they deserve because they were put through the machine and spat out. The accidents will continue to happen but who knows what it will look like in 5 years time.

SM: You have to feel confident because people continue to be injured and they need good representation. We have to hold on to the fact that we are a profession and we are providing an important service to injured people, and make sure that the client comes first in what we do.

Modern Law would like to thank all for attending.

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DB: What will the impact of MedCo be and is it a good idea?

JM: MedCo is about more than whiplash and more than solicitors owning medical agencies, the challenges run far deeper. The Government Insurer alliance thinks we need to stamp out the ‘60,000 fraudulent claims’, which is a questionable statistic in itself. Firms

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The Features

Private Client Roundtable Digitally savvy clients and an overall increase in the use of technology are having a dramatic impact on Private Client practitioners, but what’s on the horizon and could a new government spell disaster for the sector? Catherine Baksi reports.

Attendees Chair George Hodgson (GH) Deputy Chief Executive STEP Clare Archer (CA) Partner, Private Client and Tax Pennington Manches Richard Bretherton (RB) Solicitor and Chief Executive Ochresoft Technologies Limited Kieran Bowe (KB) Partner Russell Cooke Toby Graham (TG) Partner, Head of Contentious Trusts and Estates Farrer & Co Marie Harrison-Strading (MH-S) Trainer Ochresoft Technologies Limited

‘[A] lawyer is more than someone who just dispenses legal advice. We act as a sounding board and help clients with a range of non-legal issues – you wouldn’t get that from an app’ Toby Graham Farrer & Co

GH: We have gone through a period when many firms de-emphasised private client work. Do you think the sector has a bright future?

TG: De-emphasis is a euphemism that describes the closure of private client departments in many leading City firms. There were two reasons for this – corporate work became more profitable and private client work became less profitable. But the pendulum has swung the other way.

Post 2008 corporate work became flat while private client work has become more international and lucrative.

Some of the bigger firms are thinking about doing it again so they can do international or contentious work. The future depends on the type of work that firms do. For domestic UK wills and trust work the future is not bright, but it is looking better for international work. But an Ed Miliband government that introduces changes to the nondom regime will drive clients away from London. That is a big raincloud on the horizon.

KB: The future for UK domestic work is more challenging, but there are opportunities presented by the ageing population and the now wealthy babyboomer generation. The challenge is how we can not only deliver legal advice, but add value and client service.

CA: The real trend is towards highvalue work from abroad, but there is

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still a need in the domestic market that good lawyers can fulfil. Tax regulations have become more complex, plus there is added concern over what the regulations do not say and how courts may interpret that. There is no doubt that firms will have to work smarter and better.

RB: The great problem has been that lawyers have been very bad at providing service (as against legal expertise) to their clients and the worst thing is that we think we are good at it.

We are now experiencing businesses coming into the market that are all about sales and service. We are not good at recognising that when you win a client you need to keep them.

GH: We are seeing many providers moving into the digital world for many of the more mundane things that we do, such as making a will. Are you nervous that this will start to bite into the normal client relationships?

MH-S: Firms are changing their approach and recognising the changing demands.

KB: Online presents challenges and opportunities and we have to look at how we address them. Some clients are happy to access information online without having to speak to anyone, but others want their hand held throughout the process.

TG: Parts of the law can be commoditised, but an essential

The Features

CA: Compliance people already are involved in business decisions – they have a say on which clients we represent.

TG: Regulation distracts us from the really important issues.

‘The problem is not with new bright young lawyers coming into the profession, but the missing generation of private client lawyers created when firms stopped doing it’ Clare Archer, Pennington Manches element of private client work is the relationship with the lawyer and that lawyer is more than someone who just dispenses legal advice. We act as a sounding board and help clients with a range of non-legal issues – you wouldn’t get that from an app.

RB: Large investment is coming into law firms from people who are looking to commoditise work. They have huge marketing budgets and are clientfocused. They want to grab the client for life.

GH: We are operating in a rapidly ageing society. What effect is this having on your day-to-day practice?

KB: Capacity work will become greater with the ageing population. Clients are also looking at ways to help their children and grand children financially.

MH-S: Lasting powers of attorney and wills are being made by people at an increasingly young age. People are putting plans in place earlier.

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look at creating more ways of avoiding tax. The second groups are those companies and wealthy non-doms who are not resident anywhere. The UK can’t deal with these on its own and the work the OECD is doing on it will lead to change across the board.

CA: The real problem is not the aggressive tax planning, but the fact that we are seeing people who are just trying to pay the correct tax, but who are worried that they may be caught out and exposed to reputational harm when they are doing nothing wrong.

There are vulnerable elderly clients whom we can no longer protect in a tax efficient way in the same way that we used to. It is a great shame.

GH: A feature of modern society is that it is increasingly international.

Are you seeing shift to more crossborder families?

CA: Virtually every family has a cross-border issue due to the more multicultural society.

MH-S: Families are becoming much more complex in general.

GH: There has been an increase in the UK in Sharia products.

GH: In some jurisdictions, we are seeing moves towards increasing transparency, with automatic tax information exchange and public registers of beneficial ownership.

Do you think this will have a major impact in the UK? CA: There is more data protection, yet at the same time, more data is being made public.

TG: Public market data is fine, but people’s private details are different.

People have a fundamental right to privacy. There are still legitimate reasons for wanting to keep your affairs private.

The assumption that if you do so through an unusual structure you must be doing something wrong, is unfair.

GH: Tax has a major impact on many aspects of the advice you give to your clients. We have seen the public and political mood swing turn increasingly hostile, not just towards tax evasion, which has always been illegal, but also to tax avoidance and aggressive tax planning. What impact is this having?

TG: The current frenzy is media driven and lacks genuine substance. There are two types of taxpayer. The first group are wealthy residents here who are paying tax and not engaging in aggressive tax planning. If there is a change of government and a significant increase in the tax they have to pay, they will decamp to Switzerland or

GH: Is it often said that we are living through a golden age for regulation in legal services. Is compliance and the management of regulatory risk taking a bigger role in your firm?

MH-S: Compliance and anti-moneylaundering are always at the top of the list for the firms I visit. We have seen a growth in the demand for compliance training.

GH: Compliance didn’t used to be at the centre of the business, now everyone from the senior partner down gets involved.

TG: It is worrying that the compliance people will run the business. There is risk in everything that we do. We can’t have them making business decisions.

GH: Given all the changes in the private client world, is legal training fit for purpose?

MH-S: Because the structure of firms is changing, with more work being done by paralegals, there is a need to reassess training needs and the level of training required within firms.

CA: The problem is not with new bright young lawyers coming into the profession, but the missing generation of private client lawyers created when firms stopped doing it.

RB: When I trained, there was no business training; we did articles within the law firm. Now lawyers are being taught marketing and client relationship skills, but a lot of lawyers still struggle with that. The general public take legal expertise for granted; it’s all about the other bits that make a relationship.

TG: There is not a problem with the training; the problem is that everything is becoming very specialised, so it is hard for a one size fits all training model to work.

GH: If you were Prime Minister for a day, what would you change to make life easier for your clients?

CA: The simplification of regulation legislation. And, I would change the inheritance tax threshold and the income tax thresholds.

RB: I struggle to think of any one thing that would really make a significant difference. There is a need to be clear as to what is tax avoidance, which remains permissible, and tax evasion. It needs to be made clear that you are entitled to arrange your tax affairs in a way that the law allows you to. And if that law changes in three years time, you cannot be criticised for what you had done then.

TG: The index to the UK tax statutes is longer than the entire tax code of Singapore; tax laws are absurdly complicated and need to be simplified.

Modern Law would like to thank all for attending.

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The Features

Technology Roundtable The use of new and innovative technology in the legal sphere has grown rapidly in the last few years, but are firms making use of and embracing technology or do their efforts still leave a lot to be desired? Catherine Baksi reports for Modern Law.

Attendees Chair Sucheet Amin (SA) Managing Partner Aequitas Legal Founder & Managing Director inCase Christopher Bates (CB) Partner Technology and Commercial Group, Ashurst Peter Bodley-Scott (PB-S) Director Premier IT Timothy Hill (TH) Technology Policy Advisor The Law Society Sally Holdway (SHo) Head of Innovation Quality Solicitors Sajid Husain (SHu) Chairman and Co-Founder Legal Connexx Chrissie Lightfoot (CL) CEO The Entrepreneur Lawyer/Author Naked Lawyer book series Warren Smith (WS) CEO Access Solicitor Tim Wallis (TW) Mediator/Director/Solicitor Trust Mediation & Expedite Resolution

‘You have to look at what the consumer wants, and don’t start with the idea that it’s a legal service’ Tim Wallis, Trust Mediation/ Expedite Resolution

SA: When it comes to innovation, how do you identify good ideas?

CB: When we think about innovative ideas, they are in two parts, inward facing and outward facing. The outward facing ideas are how we can deliver to clients better, and the inward facing ideas are about how we can be more efficient and drive better turnaround.

Technology enables both of these things. We have to identify a need and find out what’s in the market to address it. High on our agenda since our merger with Australian firm Blake Dawson is to enable greater collaboration across our international office base and improve communication across our lawyers in different jurisdictions.

SA: When you are identifying problems and looking for solutions, do you engage with the factory floor?

CB: Partners are on the factory floor. I am a fee earner, not just in a management role. I live and breathe the same issues as others. Our IT strategy is driven by management, but that is made up of active fee earners.

SA: What are you faced with when looking at IT in law firms?

SHo: There is a wide range of people in firms interested in technology. You need to ask ‘who is the end user?’

The answer is often twofold - it is fee earners, support staff, but primarily it is the consumer who is engaging with the legal service. You need to spend time to make sure systems are as intuitive and as simple as possible to use. We do front-end scoping, working with pilot firms with new products, which informs how the end product evolves.

CB: Technology is a red herring when talking about challenges – the challenge is winning the hearts and minds of the users. Technology is an enabler and you need to educate the people you are working with who will have varying degrees of technological competence – some lawyers will be IT savvy, while others may still dictate emails for their secretary to send.

WS: Less is more. Technology needs to

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‘Clients are increasingly searching for lawyers online, but lawyers cannot make the economics of online client acquisition work’ Warren Smith, Access Solicitor help people, but it is really important that you have an end to end solution. If you have lots of different technology that is not joined up, it will create friction.

TW: It is complicated to make things simple. Five years since we started the portal, we are getting feedback to see how we can improve it. If you look at who’s doing what around the world, there are some interesting things, such as the small claims consumer software in British Colombia and the Rechtwijzer in Holland – an online family law programme.You have to look at what the consumer wants and don’t start with the idea that it’s a legal service. We need to take our lawyers’ hats off and look at things completely broadly.

SHu: When we develop a new game, no one is trained-up on how to use it.

So we apply a test for our products – without training, can someone run this work-flow? We call it the social media test – would a Facebook or Twitter user be able to use it with minimal training?

Developing products in that way makes the user experience better.

SA: Is the advent or AI (artificial intelligence) a good or a bad thing?

CL: I’m an advocate of it. It can improve legal efficiency, making faster horse solutions. It joins speed and quality to make more cost-effective outputs. It is all about increasing the productivity of the individual lawyer – maximizing their output and maximizing their value, to make them more efficient and profitable.

CB: The children of today are the clients of tomorrow, but also the talented lawyers of tomorrow. We need to

The Features

‘I strongly disagree that existing social media platforms can deliver legal services. I wouldn’t want to use any existing platform due to the lack of security and data protection’ Timothy Hil , The Law Society understand how best to retain that pool of talent – mobile working will be increasingly important. Removal of the legacy mentality of having jackets on seats is key. Ashurst has full functioning remote working available across the firm and people are increasingly taking advantage of it.

SHu: Voice recognition will be key and a lot of the lawyer’s work will be done by the software.

TH: If we’re looking to the future are we anticipating ‘faster horses’ or an entirely new mode of transport? Is AI about speeding up processes or transforming them?

CL: Initially AI will be used to create faster horse solutions, but its greatest benefit will come later. By 2020 AI will be more intelligent than the human brain, it will start to reason and judge –it will be extremely beneficial for lawyers and clients.

TH: The big legal issue will not be how AI might deliver legal services, but how the law controls AI. CB: There is a human element to the job that we do. The work will be done efficiently through AI, but there is still a relationship angle that is a very important part of how legal services are delivered. There is a real challenge to integrate AI with the need to maintain human relationships.

SHo: For clients it’s an emotional purchase, not just a legal one.

CL: We will get to the point where buyers of legal services will trust the

technology and be comfortable with it. Currently many lawyers (and maybe buyers too) are resistant to it.

SA: Where does social media sit in legal services – is it just about marketing and brand awareness?

SHu: The next generation will know nothing but the cloud – everything will be done in the cloud. Social media is how people are starting to communicate and services and products will be used as a way of delivering services.

TH: I strongly disagree that existing social media platforms can deliver legal services. I wouldn’t want to use any existing platform due to the lack of security and data protection.

SHo: It’s an incremental journey. There are lessons that can be learned from how people interact with social media.

For instance our new customer platform is designed to look more like an instant messaging format than a traditional flat legal form.

SA: What should firms be thinking about when it comes to embracing cloud technology?

PB-S: The question is at what stage the average high street law firm is ready for the type of change that we have been talking about. The legal profession is very conservative and risk averse. Most firms do not have the data in place to overlay technology to extract the value from that data. My concern is that firms are not ready for such a huge cultural

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change. Maintaining the human element is important. Clients will question the value of what lawyers are providing if you do not connect with them. Instead of leading with the technology, you need to think about what the problem is that you are trying to solve. Technology is merely an enabler. You have to leverage the human element of what you are providing to the front end of the offering. If they consumer thinks the process has been commoditised, they will expect the price to go down.

CL: Lawyers need to get across the value of what they are doing for their clients. For the foreseeable future humans will provide the judgment and gut instinct that is based on their experience, in providing legal service - a computer cannot do that, yet.

PB-S: To get to Utopia is a heck of a journey. Firms are not ready for it yet and technology will never replace the human element.

SA: A big question surrounds snooping and data security. If Microsoft loses its appeal against the US court decision that US companies must hand over private information of web to US law enforcement agencies when served with a warrant, we will potentially be in a situation where we will not be able to use any of the services we have discussed.

TW: That point has bothered us about the claims portal. We need to keep the information in Europe, so that it is not caught. We need to have an assurance that the data held is secure. The cloud is an ill-defined area and we need to make sure data does not go across the Atlantic.

SA: Is regulation and compliance shackling the ability to innovate?

PB-S: The regulations play to the advantage of UK-based cloud providers. It does restrict companies, but being based within the UK is something that we can use as a unique selling point. It plays into the hands of vendors. Criminal barristers can’t use dropbox to store documents, so we have developed our own UK version.

WS: Access Solicitor has definitely experienced significant barriers and frustration, but you have to work within the system and lobby to change the unnecessary constraints.

Modern Law would like to thank all for attending.

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The Features

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Responding to the Challenge of Change in Personal Injury Significant disruption in the personal injury (PI) sector has led to innovative businesses succeeding. Unfortunately significant fall out is still expected, as Lesley Graves reports.

H

ow a business responds to the challenge of change involves taking a hard look in the mirror asking the question: “Can the way we do things be improved?” Managing change is difficult as challenging accepted beliefs can sometimes lead to resistance from those who need to change the most.

What needs to change?

Let’s start with undervalued PI claims. Our 5 years analysis from WIP due diligence and operational reviews of PI departments sets out under valuation risks in the following table. The results speak for themselves.

Compensation award bracket

Percentage under valuation risk (either/both liability and quantum)

Under £25K

Approximately 60%

£25K - £500K

More than 75%

£500K - £3M

More than 85%

£3M plus

Approximately 95%

Quality cases with risk exposure Over 80% of the WIP due diligence reports we have prepared involve high quality PI cases. Unfortunately, their value is reduced due to poor fee earner competence and use of process. Over 90% of our reports evidence poor client care, under settlement trends and unnecessary WIP lock up.

An undermined WIP valuation results and when sat within the wider context of a law firm, can lead to significant financial losses, not to mention adverse client impact.

We regularly see cases failing due to competence issues involving basic mistakes including inaccurate assessment of: • Key dates • Liability and quantum • Part 36 offers This can lead to compensation awards being adversely affected letting clients down and eroding profitability.

Increasingly, legal expense insurers are refusing to pay out for lost cases due to poor risk management by law firms.

All of this impacts on professional negligence claims and profitability, not to mention regulatory breaches.

Analysing pre and post LASPO WIP and capital expenditure The bulk of pre-LASPO cases should have been dealt with but cases remain, potentially due to dilatory management.

By limitation date, claims speed up with proceedings issued (assuming a firm has the capital to fund court fees).

Ultimately, dilatory handling of PI claims and poor technical expertise will lead to an erosion of the value of WIP allowing the insurance sector to allege inflated hourly rates, conduct

and proportionality issues. The resulting profitability of cases is questionable as WIP is written-off and capital invested to fund their slow management equates to financial losses. Firms should also ask: “Can we truly analyse our profitability?”

Many firms are trying to manage pre and post-LASPO cases as well as multi-track. Unfortunately, they are often litigated in the same way, resulting in a number of problems, including: • Overworking low value cases • Underworking higher value cases • Missing significant value for clients and profit • WIP and disbursement lock-up • Increased capital requirements • Reduced cash flow • Medical agencies, experts, counsel, costs lawyers chasing payment So, law firms remain financially challenged, as do their bankers, funders, professional indemnity insurers, legal expense insurers, medical agencies etc., as WIP and debt in the sector rise together with the potential for a skewed analysis of where the value and risk within a business sits.

Regulatory issues are also on the horizon from the SRA as regulatory breaches are uncovered.

Don’t play GOD – “Glossing Over Denial” So why are problems like these still rife? Are we in denial about doing things differently or accepting expert help?

Most of the time we can categorise the responses to dealing with challenge as follows: • A belief that revealing problems or asking for assistance is a sign of weakness. This is often an ingrained pattern of thinking which is hard to overcome and can prevent development and success.

• When people are comfortable in long held roles they find it difficult to accept that someone external may have something useful to add. They are frightened of change and unwilling to try something different.

• People are simply too busy to make time for a new project and the changes that inevitably result.

Unfortunately, denial interferes with the ability to act rationally so nothing changes.

Discomfort can lead to positive change There are profits to be made through an expert and efficiently run post-LASPO cases with robust time and financial analysis to deliver meaningful data. Accepting the evidence set out above is likely to cause discomfort in the PI sector and whilst potentially threatening and unwelcome, if we challenge ourselves to do things differently, we may be pleasantly surprised at the positive impact that results.

Lesley Graves is a solicitor and Managing Director of personal injury consulting law firm Citadel Law.

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Delegates

The drinks reception

Delegates enjoy lunch

Delegates

Sir Michael Pitt

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Michael Napier QC

Sharing the Profit Panel

Managing Risk Panel

Questions from the floor

Growning the Business Panel

ML // Modern Law Conference Supplement 2015

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