updated on 24 May 2016
Never in the history of legal acronyms have three letters caused such a stir. We're talking, of course, about alternative business structures (ABS). And with three years having passed since the first ABS licences were issued, it's time for an update on all things 'Tesco law' and what it now means for aspiring legal professionals.
The legal world has been alive with much debate and speculation over the past few years, thanks to alternative business structures (ABS). Who could ignore the controversy whipped up by the Legal Services Act, which passed into law on 30 October 2007, and from which the ABS market was borne? Since the first ABS licences were issued back in March 2012, the matter has shown no sign of fading into the background, as more and more firms rush to gain ABS status. In 2014 PricewaterhouseCoopers (PwC) became the first of the ‘big four’ accountancy firms to acquire an ABS licence, with KPMG and EY following suit later that year. However, it isn’t just the auditors that are driving demand for ABS licences. After Co-operative Legal Services acquired its ABS licence in 2012, the march of the consumer brands began in earnest – major player Direct Line announced its ABS status in January 2015, while some are now arguing that lawyer-led ABS organisations are leading the way in legal services. Many lawyer-led ABSs have come from established law firms joining the ABS fold too; for example, national firms Irwin Mitchell and Weightmans obtained their licences in 2012 and 2013, respectively.
So, to recap: an ABS licence allows a non-legal organisation to offer legal services alongside its other areas of business (as in Direct Line and PwC’s case). For law firms, it allows them to have non-lawyer management and ownership of the business and, crucially, it means they can access external investment – a key reason for many firms’ interest in ABS. The intention of the new rules is to establish a greater variety of legal services providers, thus broadening and diversifying the market for the consumer. Writing for the Law Society’s Junior Lawyers Division in 2011, legal journalist Ben Rigby neatly summed it up: “ABS will be able to act as a one-stop shop for legal and other services, aimed at meeting consumer needs, and introducing a more commercial and innovative environment for legal services” – hence the somewhat sarcastic moniker, ‘Tesco law’. Since 2011 the ‘one-stop shop’ business model is one that consumer brands such as the Co-op, Direct Line and Saga have readily signed up to, and yet more are set to follow. There has even been an ABS established for dental-related legal services.
Many firms clearly see becoming an ABS as a requirement for a more successful future.
At the other end of the spectrum, many established law firms have commented that, for them, the opportunities afforded by ABS are likely to be pivotal for their continued success in such a dynamic market. Speaking to LawCareers.Net in early 2013, Helen Cannon, Irwin Mitchell’s then graduate manager, made it clear that the firm intended to use its ABS status to encourage growth and maintain a strong market presence. She suggested that the firm viewed the changing market “as much more of an opportunity than a threat”; however, it recognised that there would be “a number of new entrants” to the market. In 2015, after two and a half years as an ABS-licensed firm, Andrew Tucker, Irwin Mitchell Group’s CEO, agrees that the firm’s corporate structure has been “a great enabler of growth and expansion”. Andrew is keen to add, however, that “being an ABS on its own is not something that allows a firm to be truly competitive. For this, firms need to have an innovative culture and put clients’ needs at the centre of everything they do”.
Despite this, many firms clearly see becoming an ABS as a requirement for a more successful future. Since the first licences were issued, the total number of ABS-licensed firms has swelled to around 500 and now includes a diverse range of consumer brands, traditional law firms and newly established firms – all of which are eager to take advantage of the new rules.
It’s still relatively early days and, despite the speculation, the real impact of ABS on the market is hard to measure. What is clear is that many different views exist on how the legal landscape is changing as a result of ABS. April French is the editor at Who’s Who Legal (publisher of The International Who’s Who of Business Lawyers, as well as a range of legal-market-analysing special reports). A law graduate herself, April is in a unique position to comment on the effect of ABS as viewed by law students and legal professionals alike. She thinks the impact of ABS on the legal market will depend on the types of firm that acquire the licence. “Accounting firms, for example, have long had a strong share of the legal market, in areas such as tax and real estate,” she says. “They are already home to many lawyers (even if they are not technically practising as lawyers at the time). The result of these firms becoming an ABS, therefore, will probably not create as big a ripple in the market as predicted.”
Many commentators agree that the ABS market is bringing much-needed innovation to the legal sector, with firms delivering a more client-focused and cost-effective service. In 2013 Hatti Suvari, a non-legal partner and co-owner of Red Bar Law LLP, told LawCareers.Net that her ABS-licensed firm built its business around the belief that “law firms should be run for the ultimate benefit of the client”. This is an opinion that most law firms now share. In fact, it’s an attitude that’s being instilled in trainees, too. Natalie Brody trained and qualified as a solicitor at national law firm Shoosmiths (which, incidentally, isn’t an ABS). She believes that, regardless of the firm’s business structure, a client-centric approach should always be at the core of legal work: “Trainees at Shoosmiths are encouraged to provide the best client service possible. It means that when we complete our training contract, we already have a good understanding of how to deliver both high-quality legal work and client satisfaction.”
I think law firms in general are a long way behind the levels of innovation at LLPs in industries such as financial services.
However, April thinks this kind of innovation is just the tip of the iceberg. “Change is not just needed to make legal services more client-focused and cost effective,” she says. “The role of the lawyer must become more flexible and more accessible to women, minorities and those from less-privileged backgrounds. This in turn will increase the range of opinions and original thought within firms, and throw up new ideas as a consequence.” Does she think the ABS market can provide a breeding ground for these changes?: “I think law firms in general are a long way behind the levels of innovation at LLPs in industries such as financial services. But some ABS firms are making a difference, yes. An example that’s been cited to me many times is Keystone Law, which is known both for its unique approach to client services and for providing a good work/life balance for employees.”
Another ABS-licensed firm that’s leading the way for innovation in the legal world is Weightmans LLP. Sarah Littlemore is Weightmans’ training principal and head of learning and know-how. She agrees that giving aspiring legal professionals of all backgrounds better access to legal training should be a priority for law firms. “Weightmans has always looked at non-graduate recruitment as a positive route to enter law and we continue to support this as an ABS firm,” says Sarah. “We were recognised nationally for our approach to apprenticeships, being the first law firm to embark on the new Level Four Higher Apprenticeship scheme in Legal Services.” In 2014 the firm promoted marketing director, Sarah-Jane Howitt, to its partnership. In doing so, she became the first non-lawyer partner in the firm’s history. While a move like this is typical for ABS-licensed firms, it demonstrates just how far the legal profession has changed and how willingly established law firms are embracing the changes. “Weightmans prides itself on its people-focused culture,” says Sarah, “and the appointment of Sarah-Jane to the partnership is testament that the firm values the contributions of its people, whatever role they play.”
To understand the impact of ABS on the recruitment of legal professionals, it’s important to acknowledge the different ways an ABS licence can be implemented; for example, a consumer brand operating a legal services arm is a very different proposition to an established law firm that acquires an ABS licence to expand or restructure its business, or a new-entrant law firm starting from scratch as an ABS. Do trainees make a conscious choice to train with a firm that has a particular business structure? Natalie explains her view: “Most trainees I know (myself included) want to train and work at a well-respected law firm, whether the firm is an ABS or otherwise.” Is this because trainees believe they’ll have a better grounding by training and working at a law firm, as opposed to a consumer brand’s legal services arm, for example? “I’d say it’s more about the variety a full-service law firm gives a trainee, in terms of the diversity of practice areas to work in,” says Natalie. “Ultimately, I think trainees choose a firm based on its values and culture, and whether they feel comfortable working in that environment.”
So if a firm’s values and culture are more important to trainees than its business structure, what significance do the firms themselves place on their ABS status and its role in the recruitment process? Sarah argues that, for Weightmans’ recruitment team, the arrival of ABS at the firm hasn’t made any difference to recruitment. “The characteristics and skills in the people we look for hasn’t changed since Weightmans became an ABS,” she says. “As we have always done, we look for client-focused individuals, who have a high level of commercial awareness and who are agile, adaptable and responsive to a business environment.”
Our recruitment process allows us to assess candidates’ core skills and match them against the culture and values of the firm.
Nicola Stanley, Irwin Mitchell’s graduate manager, agrees: “At Irwin Mitchell, we continue to place emphasis on recruiting the best talent and offering trainees a solid training programme, in order to provide them with the experience they need to become an exceptional qualified solicitor. Our recruitment process allows us to assess candidates’ core skills and match them against the culture and values of the firm.” Interestingly, Nicola comments that one of the qualities the firm looks for in candidates is customer-service experience and a demonstration of “how they have met and exceeded client expectations in previous roles”. Is this something that carries more importance since the introduction of ABS, with new-entrant firms like Red Bar Law touting a more client-focused service? Nicola notes that experience in customer service and exceeding client expectations are “important qualities for all Irwin Mitchell employees to have and are not necessarily linked to ABS, but should be considered by all firms in the current climate”.
Certainly, some big changes are taking place in the legal profession at the moment. And, perhaps in another few years, the true impact of ABS on the legal sector will be more apparent. Unfortunately, the apocalyptic, sensationalist conclusions will have to wait until then. Right now, our message is much the same as it was in 2013: the landscape may have changed, but the future for aspiring legal professionals is as bright as it’s always been. As Sarah comments, a more accessible legal world is slowly emerging from the ABS haze, which will “likely see more people finding alternative routes into law, without necessarily going to university”. Of course, any firm – ABS or otherwise – can provide alternative routes into law. Legal apprenticeships and paralegal roles, for example, are an increasingly popular way of entering law and are options offered by a growing number of ABS and non-ABS law firms throughout the United Kingdom.
For Samantha Hope, the graduate recruitment and development manager at Shoosmiths, candidates must continue to demonstrate “entrepreneurial and business acumen”, as well as showing an awareness of how to provide great client service. But she adds that candidates need to think carefully about their own requirements of the training contract: “My advice to candidates is to think about what a firm can offer them, as well as demonstrating their own skills to the firm. Business structures aside, the most important thing candidates seeking a training contract need to do is to find a firm that shares their values; that helps them to learn and thrive in a supportive atmosphere; and, ultimately, enables them to become the lawyer that they want to be. I think the firms that have a forward-thinking attitude, which encourage diversity and allow their people to think outside of the box, are those that will provide the best environment for trainees to develop and grow.”
For Irwin Mitchell, it has been a time of great opportunity and Andrew confirms that it is a good time to be entering the legal world. “New trainee solicitors must be alive to the changes that are taking place,” he says. “But they are entering the profession at an exciting time of change which will revolutionise the relationship between lawyer and client.”
We may not yet fully appreciate how much ABS could impact on the legal profession. But this much is clear: they are certainly here for the long haul.