A recent survey highlights strong opposition among law firms to the SRA’s proposal to stop them from holding client money.
- The Solicitors Regulation Authority (SRA) is considering a proposal that aims to reduce risk by preventing law firms from holding client money.
- Almost 96% of surveyed small and medium-sized law firms opposed the proposal, citing concerns about client experience and increased costs.
- A significant portion of respondents do not find third-party managed accounts (TPMAs) to be viable alternatives to current practices.
- Law firms express concerns about the financial impact and potential increase in legal service costs if the proposal is implemented.
A recent survey conducted among nearly 100 small and medium-sized law firms revealed overwhelming opposition to the Solicitors Regulation Authority’s (SRA) proposal to prevent these firms from holding client money. The SRA’s initiative, part of an upcoming consultation, aims to mitigate risk, acknowledging that current alternatives are not adequately developed yet.
The survey revealed a remarkable 96% disapproval rate among respondents. Moreover, 58% of participants indicated that the inability to hold client funds would deteriorate the quality of client experience. A further 16% of firms expressed concerns about increased costs associated with legal services.
There is a notable division in perception regarding the impact on client fund protection: 13% believe the proposal would contribute little to safeguarding client funds, while 6% are apprehensive about potential reputational damage to the profession. Another 6% foresee potential bankruptcies among firms reliant on interest from client accounts, a concern the SRA has already highlighted.
Crucially, 88% of survey respondents dismissed third-party managed accounts (TPMAs) as viable replacements for current systems. Alison Lobb, a managing partner at Morecrofts in Liverpool, critiqued the proposal as being analogous to using “a sledgehammer to crack a nut,” arguing that the current system suffices for protecting client money and adding that solicitors have effectively managed these funds for generations.
Alison Lobb further elaborated on the anticipated hurdles, stating that the proposal would complicate the practical management of legal matters, escalate client claims, and introduce new costs and risks. She warned that many firms might need to overhaul their business models, undoubtedly leading to elevated costs for consumers.
The potential economic impact of the proposal was echoed by Neil Lloyd, managing director at FBC Manby Bowdler in the Midlands, who predicted a rise in the price of legal services, potentially impacting the profitability and viability of various firms in the interim.
Mike Leeman, managing partner at Bell Lamb & Joynson in Liverpool, described the idea as an avoidance of core issues plaguing regulatory effectiveness. He anticipated a rise in legal costs for consumers, especially in areas like residential conveyancing and private client services, while TPMAs, although technologically feasible, might compromise client experience and transaction speed.
The overwhelming opposition from law firms suggests significant concern over the SRA’s proposal to restrict their management of client money, signalling potential increases in costs and operational challenges.
