Do solicitors want to be accountants?

In the detail of the radical overhaul of the separate business rule, announced recently by the Solicitors Regulation Authority (SRA), was the decision to allow solicitors to include additional non-legal services within a traditional firm, without the need for an alternative business structure (ABS) or a separate business.

The most significant of
these ‘additional services’ is accountancy. It is clear that the SRA intends to liberalise services that can be provided in this way to give traditional firms the opportunity to compete against their new rivals, who are already able to provide a wide range of legal and non-legal work.

If all goes to plan, the new separate business rule will be in place soon – by 1 November 2015. But what difference will it really make, and will solicitors actually be competing with accountants?

Some services, which are
not strictly legal in nature, are already permitted by chapter
12 of the SRA Code of Conduct. These include estate agency, financial services, acting as a bailiff, and providing company secretarial services, via section 9(1A) of the Administration of Justice Act 1985.

The SRA’s decision means that this list would be extended to include ‘services that consumers might reasonably expect to be delivered together with solicitor services, and where it is in consumers’ interests for them
to be delivered’.

Additional services

The regulator decided to make two sets of additions to the list. The first covers professional and specialist support services to business, such as human resources, recruitment, systems support, and outsourcing. The second addition is described simply as ‘accounting services’.

In previous months this column has noted accountants’ incursion into the field of legal services. The Institute of Chartered Accountants in England and Wales (ICAEW) is now a regulator of probate work and ABSs. It expects more than 200 firms of accountants to make use of this in the first year since it became a legal regulator. ICAEW is being encouraged by the Legal Services Board to become a regulator of the entire range of reserved legal work by 2020.

The Law Society is clearly unhappy that accountants have won so much ground to date, and riled that ICAEW was not required to divest itself of its regulatory arm, as the Society was pressured to do. For its part, the SRA, in encouraging solicitors to take a broader view of their clients’ needs, is clearly concerned that accountants might be gaining the upper hand.

The SRA’s recent news release on this subject was headed: ‘Levelling the playing field’. However, the tit-for-tat is not equal. Accountancy services are unregulated (except for audit work, which is excluded from the proposal), and it is only a professional rule from a previous era which has prevented solicitors from providing accountancy services to date. Accountants, on the other hand, are being admitted to the privileged business sector of reserved legal activities.

Furthermore, the SRA has stipulated that the client services which might in future be included on solicitors’ menus should be confined to those which ‘consumers might reasonably expect to be delivered together with solicitor services’. This begs the question of whether consumers would really expect their solicitors to provide accountancy services.

Solicitor brand

Consumers know – or think
they know – what solicitors do, whereas the various types of accountant have long been involved in non-mainstream activities, and the addition of legal services would come as no great surprise. Consultancy has become a major activity for larger firms, and many high street accountancy practices have strayed into the field of tax-efficient investment as a logical extension to their routine work.

So, when it comes to diversification, the solicitor brand could be an inhibitor.
A previous SRA director referred to ‘a market no longer defined
by professional titles and one
in which the artificial barriers created by those titles are breaking down rapidly’.

The solicitor qualification commands respect when applied to individuals, but now that legal services are available more cheaply from other types of lawyer, the solicitor brand could not only continue to identify solicitors’ firms with the traditional model but also push some practitioners unwillingly up market. It is striking that some firms, most notably Slater and Gordon, refer to themselves as lawyers rather than solicitors.

Solicitors wishing to provide accountancy services would be most likely to do so by recruiting an accountant. But solicitors have not distinguished themselves when it comes to managing non-mainstream disciplines, and in the final analysis it will be those who can manage businesses who will prosper in the multidisciplinary world of the future.

Reducing restrictions is consistent with the SRA’s encouragement to solicitors to adopt a more holistic approach to their clients’ needs. However, it may be that the SRA’s ambitions for solicitors are beyond solicitors’ ability to deliver. SJ

Ian Muirhead is a director of SIFA

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