Regulatory changes in the UK legal market have allowed supermarket chain The Co-operative, haulage company Eddie Stobart and insurance provider Direct Line to adopt alternative business structures (ABSs) and offer legal services in a range of areas. Could these firms challenge the magic circle in pure revenue terms one day? Possibly.
If we assume that entry into the magic circle is broadly measured by revenue, then one brand that could potentially be a challenger is Direct Line, which claims to have around eight million policyholders. Its stated intention is to provide customers with legal advice on personal injury and non-injury claims, including debt recovery, employment and contract matters. But, imagine if it were to add legal services like conveyancing to its portfolio: it could then be knocking on the doors of the magic circle.
Consider this scenario. If we assume, on the back of the recovery in the housing market, that 15 per cent of Direct Line’s policyholders move home using its conveyancing services and are charged the average conveyancing fee, its annual fee income could reach circa £1bn. This would put Direct Line within spitting distance of the magic circle.
The larger firms would probably argue that these upstart legal service providers will have little impact on their revenues, as they do not tend to compete in the same areas of law. However, this might be a short-sighted view. Many of the larger ABS firms have brands that are known and trusted in the minds of potential clients. This presents a very real competitive threat to most law firms, which need to start responding if they are to survive and thrive.
Branding and voice
My friend and colleague Philip de Lisle was talking to the senior partner at a large law firm the other day about this very issue and he suggested that one of the biggest competitive challenges that the firm faced was that it did not have a voice in the wider market because its brand wasn’t known outside of legal circles.
Thus, in the face of increasing competition, law firms should be developing their brands and voice in the market. This does not mean that they should just commission a refresh of their logo, website, letterhead, marketing materials and business cards. They must go much further and understand that their brand is not just about a logo and tagline. It’s about following the four C’s: character, client experience, collateral and conversation.