Future challenges and opportunities for law firms

By Sam Snelson, senior manager
samsnelson@lubbockfine.co.uk
020 7490 7766

We assist our solicitor clients in a wide range of accounting, tax and compliance matters including, in the role of Reporting Accountant, helping in their compliance with the Solicitors Regulation Authority (SRA) client money rules, as well as a providing advice and support on various business matters. I recently attended the ICAEW Solicitors’ Special Interest Group: Solicitors Annual Conference where the theme was Future Challenges and Opportunities, and it covered a broad range of topics of relevance to law firms.         

Sean Hankin, Head of Forensic Investigation for the SRA, and Stinta Hjort, a policy associate for the SRA, gave an interesting update on the client money reporting process and future changes to the rules.

Their presentation outlined how the Phase 1 and 2 changes to the SRA reporting have had an impact. Of the 7,500 firms holding client money, 923 qualified reports were submitted in the year to November 2017, down from 2,797 in the year to November 2015. This shows the change to qualify reports based on an assessment of the firm overall, as well as certain firms (particularly those holding only small amounts of client money) being scoped out of the requirement to report.

There were some particular areas of the client money rules which were highlighted as being of interest to the SRA’s forensic team. These included the correct preparation of regular three way reconciliations, the incorrect use of suspense accounts and the use of client account to provide banking facilities, as well as ensuring firms had good systems in place for the return of client funds.

There was also an update on the new rules arriving as part of Phase 3, which is expected to roll out at the earliest in late 2018. Despite earlier reports, the definition of client money is now expected to remain broadly the same, though firms that only hold money for fees and disbursements will likely be able to rely on an exemption. The rules are anticipated to be less prescriptive and more focussed on outcomes, with hard limits like the 2 day and 14 day rules expected to be removed. However, it was noted that firms currently compliant with rules would likely continue to be compliant once Phase 3 is implemented.

We will continue to monitor the progress in relation to the new update, and provide assistance in its implementation once more is known.

Another interesting talk was a high level review of the impact the increasingly digital world of finance might have on law firms, and the power behind the use of data to make better, more informed decisions. This talk, by Bernard Marr 'How Law Firms Can Survive In This Digital World of Finance', covered a wide variety of sectors and new technologies.  He really highlighted how fast things are currently changing and the importance of having an appropriate strategy to capitalise on this.

The impact of technological progress is something we are acutely aware of in our profession, and we have commented in the past about new developments changing the face of accounting, such as cloud accounting in our blog post last year:

https://www.lubbockfine.co.uk/blog/cloud-accounting-what-it-and-why-do-we-need-it

Other talks covered new approaches to the structuring of law firms, the challenges and opportunities of listing a law firm, as well as more negative aspects such as combating cyber fraud and what to do in the case of a failing law firm.

If you would like to discuss any of the above matters, and how they might impact you, please get in touch with Sam Snelson samsnelson@lubbockfine.co.uk or Lee Facey leefacey@lubbockfine.co.uk.

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