Subject Area: Strategic Planning, Administration and Support
It is a time of great change and we are seeing countless mergers and acquisitions and the arrival of the much-vaunted new Alternate Business Structures (ABSs). The current rules under which law firms and chambers operate, however, could actually be restricting their ability to evolve and are thus favouring the new entrants that are already changing the legal landscape.
It’s a time of great change. We hear that phrase a lot at the moment in the legal services sector. We are seeing countless mergers and acquisitions and the arrival of the much vaunted new Alternate Business Structures (ABSs). There is an air of anticipation and a desire to drive businesses forward, to really make a difference in the way in which legal services are delivered and to some extent to the way in which new clients are sourced, including innovative marketing, referrals and strategic partnerships.
It’s the latter part that has given rise to a very interesting debate amongst the members of the Barrister Chambers Marketing LinkedIn group, so much so that it needs to be highlighted and discussed by a wider audience. This article includes thoughts and comments from Chris Baylis, CEO of Riverview Chambers and part of the LawVest ABS, John Cooper QC, Scott Baldwin of St Mary’s Chambers and legal journalist Guy Rigby.
It is a concern that chambers are no longer competing on a level playing field and instead they are being discriminated against. Let me explain …
In recent weeks, we have seen some very innovative marketing initiatives launched for the legal sector. They have been met with varying degrees of enthusiasm. First was the launch of the Instant Law Kiosk and then came ReferMarket.
For those that are unaware, Instant Law Kiosks are new kiosks (think telephone kiosk) opening in various libraries and public sites to give members of the public instant and convenient access to legal advice. The premise is that members of the public enter the booth and select the relevant area of law button from a panel. They are then connected directly via video link to a legal professional specialising in that area of law who can determine if the person has an issue that warrants legal help. Should it be the case that they do, then the case progresses with the company who has "sponsored" that area of law button (obviously the individual has the right to walk away and instruct whomever they like, but in reality they are unlikely to do so, such is human nature). St Phillip’s Chambers in Birmingham has been the first set to sign up for this initiative.
ReferMarket is not a public access scheme. It is an inter-professional referral system. The premise here is that firms and chambers monetise cases that they would normally have given away for free. For years we have referred clients to colleagues or peers because we cannot fulfill the client's need. It’s naïve to think that this doesn’t happen, after all who is going to say a flat "no we can’t help you" to a client without trying to offer them an alternative? Sometimes we get a bottle of wine in return, sometimes we get a referral back. We only tend to refer to people that are within our immediate vicinity and we hope that they will fit the client need. ReferMarket widens that vicinity and allows referrers the ability to select a provider based on reputation in that specific area of law (the system includes a reputation index so you can clearly see how reputable a firm/chambers is before you refer a case to them). The result is that the client’s needs are fulfilled and because there is a referral fee, the case (which we may or may not have previously gained anything from) generates some cash for the chambers/law firm bottom line.
Both of these initiatives are very different, however they have one thing in common: they are both basically referrals. There is an argument that this is no different than paying for advertising in directories or other marketing costs. Essentially though the bottom line is the same; money has been spent to generate cases.
"The problem of definition needs to be addressed, referrals can mean different things to different people. For example, the Instant Law Kiosk: this could be construed as a referral, but on the other hand it could be advertising. There needs to be a level playing field and there needs to be regulation so that the client’s best interest is served and they are not limited to that particular service provider. Provided the client is aware of their options it shouldn’t be a problem. The new marketing initiatives are interesting. The Bar has to move forward with the times, but it must do so in the client’s best interest. My initial concern with the ReferMarket model is that at first glance it appears not to be in the client’s best interest. It appears like a closed decision; a firm selling their wares; selling their client. The autonomy and power of the consumer is limited. The provision of legal services affects people’s liberty, their families, their ability to own their own homes, etc. The client needs to retain the power and to have some say over the case. They should not be treated as a commodity."
But what if the client does have a say? What if the referral is based not solely on highest price but on a selection of criteria such as reputation of the firm to do the work, client feedback and value?Cooper continues:
"We need to have a better definition of a referral. There is a stigma attached to the referral word. Maybe under new definitions they shouldn’t be called referrals. As long as the new innovations are properly regulated, are transparent and have the client’s best interest at the centre, then it is possible for them to be used."
The ReferMarket debate was vehemently discussed on the Barrister Chambers Marketing LinkedIn group. Scott Baldwin, Senior Clerk of St Mary’s Chambers, Nottingham and a pro-active marketer made his point very clearly: "I can't see how we can use it. Para 307(e) of the Code of Conduct: A barrister must not make any payment to any person for the purpose of procuring professional instructions".Chris Baylis, CEO of Riverview Chambers, explains his view of the referral situation and how the rules differ for ProcureCos:
"The Bar Code of Conduct prohibits direct referral fees. Rule 307(e) of the Code of Conduct states that a barrister must not make a payment for the purpose of procuring professional instructions. However, under the ProcureCo model, barristers may market their services with a view to procuring work. The only issue with regard to referral fees is providing full transparency to the client. The question that should be asked is: what is in the best interest of the client? In my view the client should have full transparency of the legal services that are being offered, so that they may make an informed choice."
So the following questions need to be asked:
What is a referral fee and how do you differentiate a "referral" from a "strategic partnership" or other marketing cost?
If the legal services sector is converging (and we can see that it is by the sheer numbers of ABSs registered) then are non-ProcureCo chambers at a distinct disadvantage when it comes to what they can and can’t do marketing-wise to generate cases?
Do the BSB rules on marketing need to be revised so that the Bar is able to compete on a level playing field?
How do you make the provision of legal services, including referrals, transparent for the client?
The LSB published its thoughts on referral fees last autumn. In that document they plainly state that a referral fee is only a bad thing if it can be shown negatively to affect the quality of the advice/advocacy given. So, provided that there is some mechanism for measuring the quality of the advice and client satisfaction then, as far as the LSB are concerned referral fees are appropriate.
In effect what we have is one side of the profession allowing new and innovative marketing, and one side of the profession disallowing it1. At time of writing, Ken Clarke is reviewing the whole referral fee debate, and thus we are waiting for a decision. Should he take the view to ban all referral fees, would it actually stop the practice? With so many law firms and chambers forming "strategic partnerships" where referrals flow back and forth, would these also be outlawed? What constitutes a strategic partnership and how would they be monitored? One course of action is for an organisation to own the whole supply chain from top to bottom: claims management company to law firm and barrister chambers; might as well add in insurance company and/or bank and maybe a supermarket! If the organisation owns the lot, then they won’t be referring on to others but that doesn’t bode well for the legal profession as a whole.
To me it seems incongruous that the Bar is actively encouraging direct and public access but is simultaneously preventing marketing practices that attract the very same direct and public access. The same marketing practices that all the other providers of legal services employ every day of the week. It is putting chambers at a disadvantage.
According to the Instant Law Kiosk and ReferMarket owners there has been a very good take-up of the services by law firms. It would be a shame for chambers to miss out on revenue potential, especially when many need it to stay in business.
When asked for his opinion on the new ABSs, and in particular how LawVest have structured to compete in the market, John Cooper responded:
"In our model, we own the client relationship. We are the first port of call for the clients. Our barristers own the case and run it in its entirety. We then bring in our solicitor colleagues’ skills as and when required. This way we keep costs to a minimum and deliver what the client wants: their matter resolved in an efficient and transparent way and at a fixed cost. The client then doesn’t have to worry about instructing multiple parties or what the hourly and total cost of those instructions would be."
But surely the "strategic partnership" is yet another form of referral? Cooper continued:
"I think it’s a very imaginative approach provided that they can serve the client’s best interest. More and more people are becoming aware of direct access and that they can approach barristers directly. The Bar has economies of scale that it can use to its advantage. In the future I can see more structures like Riverview. Chambers will have relationships, possibly even formal relationships with solicitors where they can share work and resources."
"The business relationships would need to be formal, transparent and regulated. It all comes back to the definition of a referral and the nuances of professional arrangements. The BSB needs to very clearly and concisely define referrals."
"It is a difficult line for the Bar Council to tread (in representing a broad spread of member opinion) and even more so for the BSB, which has been also anti-referral fee but will come under tremendous pressure, both in relation to the new existence of legal comparison websites (as Jon Robins reported in a recent NLJ feature (on solicitors)), and on ABS development outside the ProcureCo model. Other comments about an overly prescriptive approach ring true, but the difficulty faced is that having banned referral fees by a regulatory method, the Ministry of Justice have passed the problem of fees "dressed up" as marketing but which are actually referral fees to regulators, who then take a reactive approach and ban everything so as to cover any gap, which benefits no-one."
"There is a definite difference between being a member of a comparison website where you pay a fee per case that is referred to you and, say, having a deal with a firm of solicitors who will send you all their work if you pay them a percentage of the income you receive for work done for them back to them. The problem I see is where do you draw the line? The first example could quite rightly be called an admin fee the second example is just buying work but in both cases you are paying for work to be referred to you. As a regulator how do you differentiate between the two and what about the grey areas between these two examples?"
I don’t envy the role of the Regulator, it is indeed a grey area. However, it doesn’t have to be. The world is becoming a more commercial place. The referral model, whether it manifests itself as a site such as ReferMarket or an organisation set up to generate leads is more than likely here to stay. It doesn’t mean it’s a bad thing, or that it automatically is detrimental to the client. It’s just a different way of working. It also doesn’t mean a guaranteed price war. How often have you bought the service that is in the middle of the price range because you thought the customer experience would be better than the cheap option? I know I have and will probably continue to do so. I am also increasingly persuaded to purchase something after reading recommendations, again I discount the high and the low and take heed of the middle ground. There is no reason why the referral model couldn’t operate in this way too.
The regulators have the perfect opportunity to take the lead and advocate that all referrals are to be registered. Once registered, referrals can be monitored and the client care rating system used as a reliable indicator of the level of quality and services received. It doesn’t take much to audit a site such as ReferMarket and when coupled with the use of a twice yearly client survey, the regulator is in a much better position to make decisions regarding client care levels and the whole principal of referrals.Baylis commented:
"The BSB has been supportive of what we are doing and how we are adapting to the changes in the market. I would like to think that over time both the BSB will show an increasing amount of support towards commercially-minded sets such as ours, as the SRA has shown with law firms. It’s an incredibly exciting time for all of the legal profession. The Bar offers a sound option for clients which we should all be proud of and able to exploit to its full potential."
As for the future, I think there will be two main drivers for Chambers marketing in the coming year: increased customer loyalty and measured return on marketing investment. With many years of delivering both, I can tell you that the pressure to account for all marketing spend and to deliver a high return on investment is immense. In commercial operations such as ABSs they will be focussed on delivering the client satisfaction side and the ROI. They will be looking for innovative ways to achieve both. These new ideas may be some of the tools they use in their marketing mixes.Baylis added:
"Clearly the changes being driven by the Legal Services Act present an opportunity for the Bar. New entrants such as insurance companies and banks are permitted to spend their marketing money on the activities that gain them the best return on their investment. As more non-legal entrants invest in the legal market there will be a greater pressure on those organisations to account for their spend. Everything will be analysed to a greater degree and return on investment will be the driver behind targeted marketing activities."
I do think it will be horses for courses, some people just won’t like the idea, whilst others may see a benefit. Should the Regulator choose to be involved, then the whole process becomes less contentious and of benefit to everyone.