There has been a lot of bad publicity recently about the legal profession, or, to be more precise, some elements of the legal profession. The Law Society has been ‘slammed’ for allowing solicitors to satisfy their greed in taking some of the miners compensation for their industrial diseases, and is just a recent example. In addition, the Law Society continues to struggle to battle with its back and present log of complaints against solicitors. Against this background, the government has not only decided that it needs to open up the provision of legal services widely, but it needs to take control of the regulation of the legal profession, including barristers and other lawyers, not just solicitors.
Back in December 2002 (Ah – I hear you saying – before ‘Mortgage-Day’) I examined the basic tenets of whether opening up the legal services delivery would be in or against the public interest. Time (as it does) has moved on, and we are now looking at this happening within the next few years. Looking into my slightly dusty crystal ball, I can see not only Tesco but Virgin and RAC Law making huge impacts on the legal market and these changes could radically affect you, your clients and the whole mortgage industry.
A change for the better?
Will the changes be good or bad then? Well – it is sensible to revisit how we arrived here and then it will be easier to answer.
Solicitors haven’t got a very good reputation , so to a large extent, the government knew that we were an easy target. In the 80’s, the government started the process of opening up the conveyancing market via the introduction of licenced conveyancers, but they have not really had any great effect on the monopoly of solicitors. At the time, the government also considered allowing banks and building societies to do conveyancing for their customers but, in the end, there was no great appetite on their part and nothing further was done.
We now, however, have an appetite by the government and there is maybe more of an appetite from outside the legal sector to open up competition. So what are the pros and cons?
Well, on the positive side of opening up to the institutions there would seem to be benefit to the consumer. Certainly large institutions are good at marketing a product and, when they get their service right, (that is a big one) they generally do a good job. Giving them access to a lucrative market would no doubt see some innovative products and the competition among the institutions could very well see major benefits to the consumer both in terms of pricing and service.
On the other side, we all know that institutions do tend to be faceless – they sometimes have hidden agendas (tying up mortgages with home insurance, etc) and when they get it wrong they do it big style (dependency on endowment selling).
So, the arguments are finely balanced in my view. Would the customer rather have their legal work done by their lender/consumer facing organisation against the comfort of their own legal adviser with only their interests at heart? The argument is emotive as the lender/third party would say that the customer’s interests will be fully protected.
Some might say that the lender/third party would say that, but there is nevertheless a strong argument that, in this ever more complicated world, the need for independent advice is needed more and more (do you recognise some familiar arguments and parallels with the mortgage industry?).
Opening up
The reality is that the legal market will and is being opened up. Subject to whatever safeguards the government thinks appropriate, consumers will be able to go to their lender/non-legal organization for their mortgage, their insurance and their legal work. All the costings will be sold in fancy marketing and paid for over the term of the mortgage and that will be the end of it – maybe. Will that be good for everyone? I am not sure.
At the end of the day however, the consumer gets what the customer wants and I cannot see the government resisting the move towards allowing the institutions to compete with the lawyers. As ever, this is seen as a threat to some, as an opportunity to others.
There are, as you can see, obvious parallels to what is happening in the mortgage industry. The last decade has seen the institutions go into property selling, insurance, and recently buying up distribution channels. It is still a fluid market and no doubt the monoliths in the market are, as we speak, looking to square the circle by insuring they own/control all the different channels in the house transfer process. That is good business sense for them but would you and your clients be comfortable with the lender owning and controlling everything? As ever, some will be and some will not.
What is needed, in my view, is options. If the customer wants everything to be dealt with on a ‘one-stop’ basis, then fine. If the customer wants independent advice, and considers that an essential part of the process, then that should be available.
I still believe that independent solicitors have an important role to play in this ever more complicated world that we live in. But then I would say that, wouldn’t I?
