ABSs – the way forward for accountants – or a pipe dream? Peter Scott Consulting

The Clementi report “in the areas of consumer debt, inheritance planning or personal taxation, a combination of both legal and accounting skills could be a valuable asset for the client. Research carried out by MORI suggests that there is some consumer interest in the convenience and accessibility of one stop shopping” Sir David Clementi Final Report, December 2004

What is an MDP ABS? The Clementi report described MDP ABSs as ‘practices which bring together lawyers and other professionals to provide legal and other services to third parties’

MDP ABSs should be about developing competitive strategies for both accountants and lawyers Strategy before Structure

PETER SCOTT CONSULTING With ABSs in mind - how can accountants and law firms become more competitive? “Competition is a process by which … - services that people are not prepared to pay for; - high cost methods of production; and - inefficient organisations are weeded out and opportunity is given for new…services, methods and organisations to be tried” * Could accountants joining forces with lawyers in an ABS help each to achieve greater competitive advantage? * Everyman’s Dictionary of Economics

Competitive challenges for lawyers The economy Legal Services Act implications Greater regulation and compliance PI insurers’ attitudes Technology Client needs are changing Greater need for resource A fragmented profession A need to become more competitive

With those challenges in mind, if accountants came together with lawyers in an integrated MDP ABS… Would = 5?

Fifteen years ago, some accountants certainly thought so… Klegal (KPMG) Tite & Lewis (Ernst & Young) Garrett & Co (Anderson)

What were those accountants at that time seeking to achieve?

They saw that the client bases and client services of law firms were - under developed - under resourced - under provided for and could be better exploited

They saw that by bringing their skills to the one stop shop concept with lawyers was a way to build greater competitive advantage for themselves In the terminology of the time, they saw the practice of law as another of their ‘lines of business’ (LOBs)

Strategically, could the MDP ABS now provide some accountants with the opportunity to build greater competitive advantage? …and what could MDP ABSs do for law firms?

PETER SCOTT CONSULTING Your objectives? To build competitive advantage by: - better servicing clients - access to better market knowledge - access to larger markets - a means to better exploit opportunities - a means to obtain referrals The successful MDP ABS is likely to be the one that adds client added value - the WOW factor!

Research your market Only make decisions based upon sound knowledge derived from, for example, speaking to your clients and prospective clients. Will there be a need in your market for the one stop shop?

What will clients want? Will they want to buy professional services from a one stop shop? Will they care? How will the MDP ABS gain competitive advantage over rivals (both law firms and accountants)? What will be the USP of the MDP ABS?

PETER SCOTT CONSULTING How will your clients want to do business in the future? Analyse your client base how clients are currently doing business How this may change in the future inward / outward referrals NB - it is good CRM to talk to your clients about their businesses

PETER SCOTT CONSULTING An MDP ABS? Will it meet your client’s needs? Will it meet your needs? What does your law firm partner seek from the tie up? Culture? Do you have a PLAN?

PETER SCOTT CONSULTING To better service your clients? How will you add value to your client? Identify your focus/market positioning - what are to be the “drivers” of your MDP ABS? - what will your MDP ABS become known for? - selected/restricted work areas/sectors? - “ad hoc” based project work Will the MDP ABS make you more competitive?

PETER SCOTT CONSULTING Your fears? Quality/reputation Loss of referrals Loss of clients Liability? Other concerns?

Culture Culture is about the way we behave Are we like them? Is there a cultural fit? Think compatible cultures, not necessarily the same culture

PETER SCOTT CONSULTING If you are going to do this … Will need a clear strategy Will need to manage the implementation

PETER SCOTT CONSULTING Some key issues to be determined Branding? Exclusivity? The entire businesses of each party or just a part? Performance: - levels of service/quality? - pricing/fee sharing? - know how? - regulatory?

Regulation? The Clementi report considered that the most fundamental issue with MDPs was that of regulatory reach. “how could a legal services regulator exercise power over people who were not lawyers, were offering clients a different professional service and might have different codes of practice in areas such as client handling?”

Alternatives to the ABS structure? If there is significant regulatory overlap, the attraction of running an integrated MDP is negligible. However, if your clients want the one stop shop, are there alternative structures whereby accountants and lawyers can achieve their objectives?

We all become accountants! If a law firm does not provide reserved activities and its solicitors do not need to call themselves solicitors then they could give up their practising certificates and join an accounting firm

A strategic alliance? However see - the Outcomes in Chapter 9 of the new SRA Code on fee sharing and referrals relating to “where there are arrangements with third parties who introduce business to you or with whom you share fees” - and the Outcomes in Chapter 12 dealing with separate businesses Tread carefully

Will a regulatory impasse mean that the opportunity to create a new and effective alternative business structure for the benefit of both consumers and professionals be lost and Sir David Clementi’s vision fail to become a reality?

Any questions?