March of the big brand
Date: 24 June 2011
Authors: Jon Robins
Issue: Vol 161, Issue 7471
Categories: Opinion, Legal services, Profession
When Theo Paphitis and Deborah Meaden turn their attentions to the dusty world of legal services, it’s probably worth checking out. Smarta.com, founded by the social media entrepreneur Sháá Wasmund with the support of the two Dragons, last month announced that they were to partner with RBS and Natwest to launch a legal service aimed at small and medium-sized businesses under its “Smarta Business Builder” banner. “I’m not just proud to recommend Smarta Business Builder, I’m suggesting that all small businesses use it too,” enthused Theo on the press release.
Making legal services affordable to cash-strapped start-up businesses is a compelling prospect. RBS also runs Mentor, a regulatory compliance service for 14,000 businesses, and RiskRemedy, an online self-service employment law and health and safety compliance package also aimed at the SME market.
Opportunity knocks
John Muncey, head of Mentor, sees deregulation of legal services as a “huge opportunity” for RBS and reckons that the big brands have “the potential to dominate” a legal services market which at his estimation is worth £12bn (consumer) and £3bn (SME). He reckons that half of consumers are open to the idea of using non-lawyers for legal services and six out of 10 are likely to use a bank. RBS/NatWest, he says, was number eight in a list of preferred suppliers of legal services.
His view is consistent with the recent YouGov SixthSense poll that found that only four out of 10 consumers (40%) would not choose legal services from the big brands. RBS wasn’t on the list but another bank (Barclays) scored highest of the brands (19% of respondents expressed an interest) just ahead of the Co-op and the AA (18%).
Where do legal services fit in to the Smarta vision? “We looked at the common reasons for failure in a business—not managing cash flow, not planning properly etc—and we found it easy to develop tools to address those problems,” replies Smarta’s chief operating officer Kevin Burke. “The default behavior of small businesses is ‘Don’t do anything’. They don’t use accounting software, about 80% of small businesses use spreadsheets and most send the proverbial shoebox full of receipts to their accountants. More than 50% of businesses don’t have a website and many small businesses don’t bother to go to a lawyer.” The business builder service is to plug that “access to justice” gap.
One-stop-shop
“The bundling of legal services with other complimentary services is exactly the kind of one-stop-shop envisaged by Clementi,” says Richard Cohen, a solicitor and executive chairman of the legal IT specialists Epoq. His company provides the online legal documentation that supports both Smarta and Mentor. Epoq is also working with many of the institutions—including HBOS, AA, Saga, MORE TH>N, NatWest, and Allianz—already operating in the legal services market.
As the Ministry of Justice noted as the Legal Services Bill was being contemplated: “The creation of a one-stop-shop for consumers will mean that they can benefit from the convenience of purchasing legal services and non legal services under one roof.” It’s hard to identify a client group that needs a multidisciplinary range of advice (of which legal is but one element) but isn’t likely to have the money to pay for, more than start-ups. Smarta offers two packages: a basic service for a £20 monthly subscription and a £30 service which include access to a legal helpline and other non-legal services. (Mentor offers a monthly subscription but over a one or three-year period.) Small businesses grow into big businesses. The big brands are excellent at keeping in touch with their customers (as opposed to solicitors who forget their clients once a case is closed). It’s fairly easy to see why the Dragons are taken by Smarta.
It’s striking to note the enthusiasm of the new market entrants for online legal services as compared to the relative resistance from the mainstream profession. The YouGov study is interesting in what it has to say around consumer attitudes towards online services. The availability of such services was found to be a positive influence by more than four out of 10 respondents (42%) when looking for a solicitor. Over one third (37%) could “be persuaded to change from one law firm to another if a reduced fee was offered to the same service provided the client provided some initial details about the legal matter online”.
Regulatory challenge?
A final thought, these new style legal services could be a challenge for the regulators. “The question remains what legal services should be regulated and how should they be regulated,” says Cohen. I recently wrote about Professor Stephen Mayson’s paper published last year which reflected upon the “reserving” of legal activity being “a fundamental pillar of the Legal Services Act”. Prof Mayson argues that 80% of what law firms do isn’t covered by the six “reserved” legal activities. He went on to express “surprise and concern” that the LSA structure was built on “tenuous foundations”.
These new services operate entirely outside of that model of regulation. “Consumers need protection,” says Cohen. “But the specific challenge to the regulators is to come up with a regulatory regime that doesn’t inhibit innovation we’re seeing in the likes of Smarta.”
Jon Robins is a freelance journalist & co-author of The Justice Gap.
E-mail: jonrobins@aol.com
Website: www.jonrobins.info
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