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Accountants and lawyers to join forces

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20th May 2009
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The Legal Services Board (LSB) recently unveiled plans for alternative business structures (ABS) which will allow lawyers and non-lawyers (such as accountants) to own and manage the same business. Gina Dyer assesses the plans and the possible implications for the accountancy sector.

In a recent discussion paper entitled ‘Wider Access, Better Value, Strong Protection’, the LSB said it wanted to widen the availability of legal advice in order to create ‘a more competitive and consumer-driven market for legal services’. The proposals include allowing joint accountancy and legal companies, as well as joint legal and commercial firms.

While the decision to open the market to ABS was made in the Legal Services Act of 2007, the new paper puts forward plans for when and how it will be implemented. A consultation exercise will run until 14 August and the new plans are likely to be in place by 2011.

A step towards “Tesco law”?
In a speech at Legal Week’s ‘Future of Legal Services Forum’, LSB chairman David Edmonds said: “Widening access is about intervention in the market place to encourage suppliers to make available services that people want and need at prices they can afford”.

He also argued that increased competition would be good for the legal services sector, saying: “All firms will need to respond to the changing market, whether they adopt ABS or not”.

However, a recent report in the Daily Telegraph dubbed the plans as a step towards ‘Tesco law’, with critics arguing that it could undermine the quality of advice given out.

“It is a radical step”, admits Charles Wilson, a partner specialising in corporate and commercial law at law firm Trowers & Hamlins LLP. “It’s going to be particularly significant for areas of law such as personal injury and conveyancing as these are the sorts of areas which would be attractive to commercial entities like Tesco”.

However, he refutes claims it will dilute the quality of service: “It’s just the method of delivery and the composition of the entity giving the advice that will have changed; it’s still the case that lawyers will be carrying out the legal work. Provided the relevant protections are in place, it shouldn’t affect the quality of work”.

Accountants and lawyers
In the case of accountants joining law firms under the new structures, the transition might not be so bad: “The criticism here is that commercial bodies (such as supermarkets) who buy into law firms in future will not be able to apply the same technical and ethical standards as a qualified solicitor. I don’t think that sort of criticism could be levelled in the case of accountants joining legal firms because they are professionally qualified and are used to complying with same sort of ethical standards as lawyers are”, says John Davies, head of business law at the Association of Certified Chartered Accountants (ACCA).

For accountants, a key sticking point is likely to be the fact that they will have to sign up to the rules of the legal regulatory body. “The specific question is to what extent will there be conflict and friction between the rules of the accountancy bodies and the law regulators? That’s something that needs to be looked at in detail”, notes Davies.

In the case of audit firms, there could be a barrier to entry into the new structures. “There is a real problem with regards to audit firms getting involved in these operations because they have to be controlled by qualified auditors. There’s no way one of these new legal structures could be created which deals only with audit work because that sort of work has to carried out by firms controlled by qualified auditors”, says Davies.

He therefore suggests that if accountancy firms are going to get involved with ABS, “it will be a question of the companies buying small stakes in the law firm and taking a minority role in the work that it does”.

The LSB’s discussion paper states that the first ABS licences should be granted in mid 2011, but the new regulatory bodies still need to be appointed and a new licensing framework will need to be created to regulate the process. “There’s got to be a rigorous appraisal of the rules to identify what provisions are going to be made to identify problems and encourage other professional services to take part in these ABSs”, says Davies.

He also stresses that consultation is required in the wider professional community to assess whether there is a real interest on the part of other professional services providers such as accountants in these new structures.

In the current financial climate, there may well be a business case for joining forces, according to Wilson: “It could bring savings in terms of operating costs and overheads, and hopefully some of that saving will be passed onto clients. It’s only going to increase competition and perhaps lead to some interesting new mergers and tie-ups forming in the coming years”.

Summary of proposals

  • The discussion paper argues that professional regulations have tightly restricted the management, ownership and financing or organisations permitted to offer legal services. It proposes scaling back these restrictions, suggesting that each of the approved regulators of the legal profession can become a licensing authority, able to grant licences to new types of providers with alternative business structures (ABS).
  • The new ABS firms might include a practice with a majority of non-lawyer managers; a high street firm offering accountancy services alongside legal services; or a large corporate firm offering personal client advisory work alongside larger scale work.
  • The first ABS licences should be granted in mid 2011. This will require a new licensing framework. A high level ABS implementation group will be set up to consult with regulators and stakeholders on the development of the regime.
  • The LSB will act primarily as an oversight regulator with backstop direct licensing powers. A number of other approved regulators are expected to become licensing authorities.
  • LSB will issue its own licensing rules in the first of 2011.
  • Licensing authorities will also have to develop rules to deal with the risks associated with ABS.
  • Regulators will need to shift their focus from regulating the conduct of individual lawyers towards regulation of the entity providing legal services.

The full discussion paper can be accessed here.

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Replies (9)

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By DavidDock
05th Jun 2009 09:27

Accountant
A key sticking point is likely to be the fact that they will have to sign up to the rules of the legal regulatory body. “The specific question is to what extent will there be conflict and friction between the rules of the accountancy bodies and the law regulators? That’s something that needs to be looked at in detail”.

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By AnonymousUser
26th May 2009 06:54

Good idea !
Then, I propose the final year professional body requirement of EIGHT PAPER EXAMS joined with LLB (Hons).

Can someone tell if Philippines requirement is that its CPA are also Law qualified?

I FULLY support the idea of merging Law and Accounting faculties into one. Excellent idea.

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By The Black Knight
25th May 2009 12:04

Paul
Certainly not, my posting was a reply to paragragh 6 of the telescope posting. My point is that accountancy is open to everyone (and should continue to be so) but that standards of education should be maintained.

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Mark Lee headshot 2023
By Mark Lee
24th May 2009 11:17

This concept has been evolving for more than just a couple of ye
It was an issue that regularly cropped up when I was a partner at BDO (and I left there in 2001).

My view then (and remains) that the facility to join forces will be most attractive to some advisers on the high street.

I frequently encounter two (effectively) sole practitioner accountants who have joined forces to share overheads and yet continue to work on their own clients. If an accountant and a solicitor were to do the same they would have the added benefit of being able to refer work back and forth - which the 2 accountants rarely do as they both do pretty much the same work.

Mark Lee
Tax Advice Network

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Teignmouth
By Paul Scholes
22nd May 2009 16:43

Keith?
Hi Keith, have read your posting several times and feel that it may need clarification, eg would you preclude certain people from one or more ethnic group or gender from calling themselves an accountant? Or would you like the ACCA to start precluding people from less advantaged backgrounds?

Maybe it's me and late friday?

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By The Black Knight
22nd May 2009 13:52

Class War
A good idea, but many firms of accountants and lawyers already work on projects together. There are issues surrounding the quality of advice given by accountants that need addressing before we mix this up and dumb down the legal profession too. The difference between a good adviser and a bad one is down to subject specific education in most cases. The ACCA have never precluded (as far as I am aware) people from less advantaged backgrounds, the exams however may not be for everyone.
In any case anyone regardless of education, ethnic group, gender or background is able to call themselves an accountant, since there is no protection for this term.

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By Oppco
22nd May 2009 13:45

Help me find a good lawyer
I have spent 20 years in practice trying to find a firm of solicitors to work with , who :

Answer their phone quickly
Reply to correspondence promptly
Deal with instructions promptly
Are proactive
Are pragmatic
Have empathy with clients
Understand the commercial realities of running a business (including their own)
Know what clients' need
Take time to understand a client's business
Do not charge excessively
Are willing to speculate time to gain a long term client
Can explain complex legislation in a way clients can understand, then advise the options

I could go on

If there is such a law firm in my neck of the woods (EC2), I would love to hear from them

I

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By User deleted
22nd May 2009 13:02

Looking through the wrong end of the telescope.
This article tells us all about what's wrong with the accountancy profession and why a merger with the legal profession could benefit both.

For whom do both professions exist? No, not for you, Mr or Ms Accountant. Your job isn't there to provide you with a comfortable and secure living. Rather, your job exists because someone - indeed many people - want to buy the services which you humbly offer. So the paramount consideration and question for accountants (and lawyers) is: What can they offer the public and what does the public want by way of these professional services?

The first thing the public want is accessibility. Older readers may remember how stuffy and inaccessible the High Street banks used to be forty or so years ago. Banks didn't like working people and tended to treat them with distain. As a working-class person in the late 1960s, I couldn't get a mortgage from either a bank or a building society to buy a 4-bedroomed Victorian house because it was built in the 1880s and, instead, had to get a mortgage from the local city council. In contrast, an upper-class director of the firm I worked for easily obtained a huge loan from a bank to buy a tumbledown manor house that had failed numerous building surveys.

On the point of accessibility: accountants, like some lawyers, can give off an intimidating, patronising and off-putting attitude towards many ordinary people who want to seek advice about a financial matter, whether taxation, financial or investments.
In particular, they tend to treat with distain those who they believe not to have much money, preferring instead to deal only (perhaps exclusively) with the wealthy. In actual fact, a company like Tesco proves that many customers spending a little can be 'a nice little earner.'

It's not just the 'ordinary man and woman in the street' who is intiminated and turned off by some accountants. Small, often self-made, business people frequently find many accountants, too many of whom are drawn (unacceptably these days) from the middle-class, to be boorish and snobbish when they (reluctantly) seek and use accountants' services as they are forced to do when dealing with the complexity of the taxation regime. Yes, and the same alas applies perhaps more so to those offering legal services.

Apart from a major attitude change on the part of those providing accountancy and legal services, both professions need wider access into them by those who are currently under-represented, such as members of the ethnic population, women, those from working-class backgrounds and, dare I say (yes, I will), those from the growing under-class who have and are disadvantaged by the inadequacies of the State education system.

A 'one-stop shop' where people can buy accountancy and legal services (and any other related services) would seem to make sense if by doing that people are able to better access the services they need and feel more confident when doing so.

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Teignmouth
By Paul Scholes
22nd May 2009 11:53

Friday comment
I feel this topic deserves more than I'm about to give it but it's Friday before a bank holiday weekend.

Given the increasing debate(s) over what constitutes an accountant, eg https://www.accountingweb.co.uk/cgi-bin/item.cgi?id=198504, can you imagine it all going 3 dimensional? "I don't care how big & shiney your letters are there's no way I'm using treasury tags to file papers!"

Roll on retirement.

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