Law firms have had it too good for too long and should not be surprised that others want a slice of the action in the wake of the Legal Services Act.
The warning shot came from Karl Chapman, a serial entrepreneur who is aiming to shake up the legal services market following the implementation of one of the Legal Services Act’s main provisions enabling non-lawyers to own and run law firms.
Mr Chapman launched Riverview Law earlier this year, following a lengthy study of the legal services market, and believes it is “one of the biggest business opportunities” he has ever seen.
The firm offers legal services for a fixed fee with advice provided through Riverview Solicitors and Riverview Chambers.
Mr Chapman outlined his vision following a conference organised by the Chartered Institute of Purchasing and Supply (CIPS) at the University of Birmingham, which Riverview Law was supporting.
Supporters of the new regulations say the old system sheltered the legal market from the normal competitive pressures other sectors of the economy are subjected to.
“If you look at the margins of the top 100 law firms they are between 20 and 50 per cent – you wouldn’t get that in any other competitive market,” said Mr Chapman.
“Where you have got a market with such margins being achieved it is not surprising we see new entrants saying we can deliver a better, higher quality service at a lower price and that is what we are doing. The margins are so high there is plenty of scope for people like us to enter.”
Riverview Law was launched in February having been two years in the planning and Mr Chapman, who himself read law at the University of Birmingham, said he believed the firm would eclipse his other ventures which have achieved turnover of more than £400 million.
“What became abundantly clear in the research we have done is that this is by far the biggest business opportunity I have ever seen,” he said.
“This area is incredible and no one is sitting down with the customer. The legal market has been dominated by myth and regulations.”
He added that the Legal Services Act was a catalyst for change but said he believed it would have happened anyway.
“What it did do was create a market opportunity,” he added. “The biggest change is the customer. The customer has had enough and wants to buy services in a different way and the customer is going to drive change.
“The legal market is set for dramatic change and some law firms get it while some don’t.
“I think you are going to see the entry into this marketplace of a lot of new entrants, of which we are just one.”
One of the speakers at the CIPS conference was Professor Stephen Mayson, director of the Legal Services Institute. He said: “The world will look very different and we are going to get competition for business. No longer can lawyers sit back and think the business is going to walk through the door.”
Mr Mayson added that competition, loyalty to brands and brand values would come into play and economies of scale would give some new entrants into the marketplace the opportunity to “provide something very different”.
He added: “Because of standardisation and even commoditisation I think we will see one stop shops and I think we will get cheaper and higher quality.
“Not everything has to be done by lawyers. Roughly 80 per cent of what lawyers do is not a reserved activity – it doesn’t have to be done by lawyers – so 80 per cent of the market is open to people.
“Lawyers have to price it effectively and deliver it efficiently but it is going to be a very different marketplace.”
Perhaps the biggest endorsement of Riverview Law’s entry into the marketplace is evidenced by the fact it has been backed by DLA Piper, one of the world’s biggest law firms.
DLA Piper has taken a stake in the fledgling firm as part of its strategy going forward in a fast-changing legal world.
Sir Nigel Knowles, joint chief executive and managing partner of DLA Piper, who was also one of the conference speakers, said: “For the smart innovative people there is an opportunity to benefit from the reordering of the market. Big firms like DLA Piper won’t be able to compete on price with ABSs and nor should they want to.
“DLA Piper realised this and decided to take a stake in Riverview Law. Nobody actually got it like Karl Chapman. He is a successful entrepreneur and studied the legal services market for two years before launching Riverview Law.
“No law firm could get it better or so right as Karl has. The relationship was good and we decided to proceed with Karl.”
Sir Nigel said he believed Riverview Law would be in “the vanguard” of changes in the legal world and added: “We have a strategic stake, we are not running and managing Riverview Law – Karl Chapman is a great guy and an inspirational guy which is why we have backed him.
“DLA Piper is the leading global law firm is not best equipped to serve the SME market and what we now describe as the commodity market and therefore to have a strategic stake in Riverview Law - that is focusing in areas we can no longer serve properly - is a perfect situation to be in.
“It is better to take a stake in this new dynamic part of the market than to simply ignore it altogether.
“Out strategic investment in Riverview Law allows us to deal sensibly with the work we shouldn’t be doing while we concentrate in a more focused way on the work we should be doing.”