SME firms defend client account model
LawNet's in-depth survey of SME law firms, representing thousands of practitioners, shows that the overwhelming majority believe there are no credible alternatives to the client account model.
According to the feedback, gathered by LawNet to inform a consolidated member response to the SRA’s consultation on client money in legal services, the alternatives outlined are viewed as less efficient, more expensive, detrimental to client protection and most importantly, severely lacking in capacity to serve needs. Importantly, firms argue that changes would lead to lower, not higher, levels of consumer protection.
The submission also suggests that some of the proposals, such as prescription regarding advance payments, reveal a lack of understanding of how firms work.
The collective voice of LawNet firms calls instead for a more evidence-based and proportionate regulatory approach. Rather than pursuing unnecessary structural changes to client money handling, the firms argue the SRA should focus on strengthening oversight and fostering trust with the profession.
LawNet, the dominant voice for firms in the £2m-£25m turnover range, responded to represent the views of firms employing more than 3,000 lawyers across England and Wales.
Consolidating comprehensive responses to the three-stage survey from the 66 SRA-regulated members who took part, LawNet’s 178-page response, includes 150 pages of direct commentary, highlighting the concerns of its members over the proposals.
Chris Marston, chief executive of LawNet and a former leading banker in professional services, explained:
“We haven’t pulled any punches in this response as our members had very strong views, but these reactions aren’t just anti-change, they are backed up by reasoned arguments.
“These views are representative of a substantial and diverse group of firms; a group which sets high, voluntary standards on top of the requirements set by their regulator. All members must maintain our own ISO-9001 quality standard, our Excellence Mark for client delivery, and carry a minimum £10m of PII cover.”
He added: “My previous role, as a senior sector-specialist banker, gives me an insight into how client accounts work from both sides of the banking relationship, and the practicalities for firms and their clients. I trained over 150 specialist relationship managers at Lloyds Bank to understand the Accounts Rules. Our members’ responses to our survey were detailed, nuanced, comprehensive and rooted in the real world of law firm operations. They understand their obligations under the Rules, specifically in Rule 7.1 regarding the payment of a fair sum of interest to clients. Their responses displayed a depth of understanding that, frankly, was absent from many of the consultation proposals.
“This has been a major work to deliver, making an important contribution to the consultation exercise, and we hope that the SRA will find our members’ comments informative and useful. Client accounts are efficient, work to the benefit of clients and offer higher levels of consumer protection than any of the alternatives that have been suggested. I’m not alone in seeing it as perverse that the SRA should suggest an exercise in regulatory arbitrage that so many of us believe would lead to higher costs and lower levels of protection.”