Working with Solicitors

New Model Adviser Conference & Awards January 2011

This presentation is directed at professional advisers only and should not be distributed to, or relied upon by retail clients

Drivers of change

Duties of Care Regulation – Financial Services and Markets Act 2000 Legislation impacting on professional work Client expectations – service standards Competition for clients Downward pressure on fees Impact of economic conditions Risk management 2011 new Solicitors Code of Conduct – “outcome focussed

regulation” The Legal Services Act 2007 – England and Wales

Legal Services Act 2007- Background

Need for common standards for professional practice

Office for Fair Trading report 2001 / Sir David Clementi review 2004

Different regulators potentially creating confusion, complexity and inconsistency especially for the public

Identified a need to increase competition, flexibility and choice

Legal Services Act 2007 – Key Provisions

Full implementation October 2011

Creates a single supervisory board - the Legal Services Board

Creation of a single point for consumer complaints – the Office for Legal Complaints

Establishes the Alternative Business Structure (ABS)

Alternative Business Structures

The Act removes restrictions on the ownership and structure of legal services businesses

Up to 100% external ownership

External investment

Listed companies

Ability to create a “one stop shop” for legal and associated non-legal services

No obligation to form an ABS but competitive pressures may influence decisions

Alternative Business Structures

Benefits

- Increased access to finance

- Increased flexibility

- Increased efficiency and economies of scale

- Easier to hire and retain non-legal staff

- New providers should lead to innovation and price reductions

- Increased access to legal services

- Ministry of Justice – Legal Services Reform fact sheet

Implications of the Act

Entry of well known brands – “Tesco Law” Basic services will be commoditised Price will become a basis for competition Revenue streams under pressure Pressure on costs Increasing use of technology End to hourly billing?* Easy alternatives - online services Impact on the number of firms** Legal firms may need to change the services they offer

*Lord Neuberger, Law Society Gazette April 2010 **Money Management February 2008 – 35% high street law firms to disappear

Change is happening

SAGA Legal Services

AA – legal documents

QualitySolicitors – “next generation” of legal services

Co-op – hiring solicitors and predicting £200m turnover in a few years.

The Times - May 2010

Other retail, banking, and insurance brands expected to enter the market

What are the options?

Carry on as now

Adopt different business structures

Mergers/acquisitions

Use technology to raise standards and lower costs

Specialise in certain markets

Compete on price or offer bespoke services

Widen range of services

Provide holistic advice

Work with a network of specialists

Potential for referrals

81% of solicitors see opportunities for more referrals

82% of solicitors refer once a month or less

How IFAs are sourced:

Personal or professional recommendation – 92%

Firms with a strong local profile – 51%

Professional networking – 41%

IFAs who proactively contact - 38%

Source: J P Morgan Asset Management Professional Connections Survey 2010

Referrals

Solicitors Regulation Authority

Ethics Guidance on the meaning of “independent intermediaries”

Where clients require advice etc. on investing in an asset that can rise or fall in value—for example, an endowment policy, life insurance with an investment element, or a pension policy— rule 9.03(6) of the Solicitors' Code of Conduct 2007 (the Code) states that they must only be referred to independent intermediaries authorised to give investment advice.

July 2009

FSMA 2000

Part XX - provision of financial services by members of the Professions

Exempt regulated activities – what professionals are permitted to do without the need for FSA authorisation

Incidental and complementary to professional services

Does not permit the giving of investment advice to clients

Areas of advice

Investment matters are increasingly complex

They are a part of many areas of professional work

Trusts and estate planning

Private clients

Probate

Financial planning and divorce

Personal Injury – investment of settlements

Property department

Corporate department

Adding value

Value IFAs can provide to solicitors

Building long term relationships

Retention of clients

New business from existing clients

Obtaining referrals from clients

Business from new clients

Source: J P Morgan Asset Management Professional Connections Survey 2010

Issues to consider

Be knowledgeable/expert/specialist

Have appropriate/higher qualifications – STEP/SOLLA/Resolution

Understand their regulatory regime for financial services

Understand how they work and their issues

Provide flexibility of remuneration

Provide a service to the professional practice

Have a clear client proposition

In conclusion

Benefits you bring to professional firms

Client management – new and existing

Risk management

Operational/regulatory support

Experience of adapting to significant change

Additional revenue

Wider range of services

Differentiated

Creation of a “new” business

Important information

Information regarding tax and practice is based on AXA Wealth’s understanding of current legislation and HM Revenue & Customs policy/practice. Tax treatment is subject to change and individual circumstances.

The information contained in this presentation does not constitute advice. It is designed for financial adviser use only and is not intended for use with individual investors. Any sample screen shots displayed

are correct at date of issue but may be subject to change.

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