ABS will shake up market for referral fees

Published: 07/09/2011

The Legal Services Act, due to come into force in October, could have a profound effect on the payment of referral fees, according to one of the UK’s leading solicitors.

Under the Act, businesses outside the legal sector, such as insurance companies or supermarkets, will be able to offer legal services for the first time through the creation of Alternative Business Structures (ABS).

Referral fees have been in the spotlight recently, with the Legal Services Board ruling that a blanket ban on fees should be avoided in favour of more specific censures by individual regulators where there is a case for protecting consumers’ interests.

However, Eddie Goldsmith, partner at Goldsmith Williams, believes the introduction of ABS may have its own significant impact on the market dynamic by reducing the need for referral fees.

Goldsmith said: “The Legal Services Act will shake up all areas of the legal sector and referral fees will be one of the areas most affected.

“As new competitors arrive in the marketplace, law firms may look to take greater control of claims management functions to reduce the dependence on referral fees, while claims management firms will doubtless recognise the clear financial benefits of creating their own ABS and apply for licences accordingly.

“Meanwhile, the likes of Tesco and other larger brands seizing on the ABS opportunity should have little difficulty in using their own marketing strength to attract clients, reducing the scope for referrals.

“The introduction of the Legal Services Act offers limitless potential for ambitious organisations and this likely diversification could revolutionise the market for referral fee payments.”

Goldsmith Williams is hosting an event, The Legal Services Act – Taking the law into your own hands, at Holiday Inn Regents Park, London on 27 June, starting at 9.30am.

Professor Stephen Mayson, director of the Legal Services Institute is the keynote speaker and a range of experts will provide valuable insights into aspects of ABS. The event will provide networking opportunities and each delegate can claim five CPD points and a certificate of attendance.

Content correct at time of publication