Lawrence Cook, Thesis Asset Management
Alternative Business Structures: An Overview
Since alternative business structures (ABS) were first announced in the Legal Services Act 2007, there has been much talk about them, but perhaps less action than might have been expected. Here, we share our experience of ABS, focusing on financial services delivery to clients. It is not all plain sailing, but there are clear dos and don’ts.
Traditional Referral Models in Law
The old model: ‘the reciprocation hamster wheel’
Knowing who to trust will always be very important in professional circles. Learning from experience who to refer to for work outside of the lawyer’s remit takes time, and once a trusted professional has successfully handled a number of your clients it is a relationship you want to maintain.
However, too much business referred to one investment manager or IFA, where little formal due diligence has been carried out, has the potential to leave the firm exposed. Alternatively, the scatter gun approach of referring clients to many IFAs about whom little is known is equally, if not more, risky.
Best Practices for Joint Ventures
A successful JV: The dos
• Have a formal written process for making referrals, which will ensure a good audit trail.
• Chat with the JV partner when making a referral to talk through the soft issues, ensuring the client is appropriately handled.
• Ensure fee earners are kept informed after the referral – this will provide encouragement to do more.
• Use the experience of your JV partner to think about a broader range of client needs, which may lead to more effective client engagement.
• Put in place a contact management programme ensuring key fee earners and the JV partner representatives meet regularly with a formal agenda.
• Use your quarterly JV board meeting to look for improvements.
• Consider up-skilling fee earners in their client engagement skills. Not all are naturals at developing conversations outside of their specialist area.
Common Pitfalls to Avoid in JVs
The don’ts
• It’s not just about private client work. Other disciplines can gain greatly by being involved.
• Don’t try to feed too many mouths by having too many partner firms to the JV. This is likely to result in expectations not being met.
• Relying on an informal engagement process between fee earners and JV partners is a recipe for disappointment.
• Don’t make it complex. This will reduce internal engagement.
The Future Potential of ABS for Law Firms
Alternative business structures have great potential to deliver a more effective service to clients and deliver value to solicitors. We expect considerable growth and success for those firms that can grasp this opportunity.
Lawrence Cook is the director of marketing and business development at Thesis Asset Management
