The Legal Services Act, which was passed in 2007 but only became law in October, seems to have been ushered in rather quietly considering the immense changes it will bring to the provision of legal services in England and Wales.
Essentially it means that organisations other than law firms will be able to provide consumer legal services or enter into joint ventures with law firms. Dubbed “Tesco Law”, it opens the door for consumer-facing organisations such as supermarkets, insurance companies and banks to enter this £14 billion market. They will be able to use their considerable marketing skills to put accessible legal services such as personal injury claims, conveyancing and the provision of wills and probate services in front of the general public, backed by their formidable brand names. Among those who have already stated their intention to throw their cap into the legal ring are the AA, the Co-operative Group, Saga, Which? and Halifax.
What does this mean for utilities? Senior utility managers should give careful consideration to entering the market. After all, the conduct of legal business is lucrative – many law firms operate on margins that are the envy of other businesses. And the market is underdeveloped because entry to it has hitherto been protected. A successful legal offering would also add value for utility customers and hence increase the likelihood of their loyalty.
On the downside, public trust in utilities is low at the moment, so winning customers for legal services would be an uphill battle, although utilities are used to dealing with situations “when things go wrong”, and legal services fall into the same class of being a “distress purchase”.
According to a November 2010 YouGov survey on interest in consumer brands providing legal services, it seems that brands are not uppermost in people’s thoughts, with less than 10 per cent saying that they would use a supermarket or high street brand for legal services. However, the fact is that until relatively recently, people would have been sceptical about buying insurance services or a mobile phone contract from a supermarket, but both are now common practice.
It was perhaps predictable that when consumers were asked who they would consider purchasing legal services from in the YouGov survey, it was banks and insurance companies that topped the list, with Barclays the top name with 19 per cent of support, closely followed by the AA and the Co-op with 18 per cent each.
This is not an encouraging picture for utilities, although it is worth noting that banks have fallen from public favour considerably in the year since the survey was done. And the fact is there are 14,000 legal businesses operating in England and Wales and the vast majority of them are poor at promoting themselves. It is a classic example of a fragmented market, with most firms being small to medium-sized, sole traders and partnerships employing less than ten staff, with hardly any experience of advertising and PR.
Utilities, on the other hand, are seasoned campaigners in marketing their products and services and do stand a chance of taking a slice of the market. Any company thinking of turning its hand to law has three options as to how to proceed. It could create its own legal services division employing legal professionals. This would mean considerable investment and carry the greatest risk. However, as well as providing the greatest element of control, this option potentially offers the opportunity for the greatest revenue stream.
Alternatively, it could work with an existing law firm by sub-contracting legal work and white labelling. In other words, leverage its brand. This would be the most economical and risk-free option but does mean legal processes are remote from the brand provider.
Finally, utilities could consider entering into a joint venture with a law firm. Both parties would have an equity stake in the vehicle and share risks and rewards.
Andrew Morton, head of affinity solutions, Pannone Solicitors.