Tag Archives: Legal

The Rise & Fall Of The Interest Rate – Why A Review Of Client Bank Accounts May Be Overdue

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Without giving away my age, when I was born, the base rate stood at 5%. When I left school, it had risen to almost 15% and then when I left university, it had fallen back down to almost 5%.  We are all acutely aware that the base rate has been at 0.5% since March 2009, a timeframe of over 7 years.

Thinking about those days where interest rates were much higher, law firms were in an enviable position of being able to make a profit and generate cash flow from the interest earned on client funds held in general client bank accounts. For some law firms, this created an additional layer of profit for sharing amongst the partners of the day or for re-investment back into the firm; for other law firms, it masked the true profitability of delivering legal services and no doubt created financial pressures as the recession hit in 2008/09 and the demand for legal services fell and changed.

It has been the case that law firms have not been able to generate the same levels of profits from bank interest for many years now and I wonder whether there has been some complacency about checking whether the best deal in the marketplace is still being obtained. The rules remain in place of where client money can be banked and how it must be ring fenced from monies belonging to the firm itself; however, there are numerous options and providers of client bank accounts.

I would encourage a regular review of the client bank accounts being used to ensure that law firms are able to take advantage of any preferential rates. There is no shame in making the money work harder. Where interest becomes payable to a client under the rules, it can also generate a better return for the client depending on your interest policy  – which incidentally should be in writing. Surely this can only be a good thing in providing legal services in a day and age where competition and pressure on margin is ever increasing.

Helen Clayton – Head of Corporate Services & Legal Specialist 

What Is Your Strategy For Clinical Negligence Services?

shutterstock_219074173It has been confirmed that the introduction of fixed recoverable costs in clinical negligence cases is still planned for 1 October 2016.  Whilst research shows that it has been more difficult for those on lower incomes to pursue claims, it is evident that there has been an increase from those on middle incomes.

There has been and will be much debate on this subject. My concern lies with how and indeed whether law firms are considering their strategy for delivering these legal services.

We have already seen a great shift in firms delivering personal injury legal services; downsizing, doors closing, focusing on other services, selling off books of WIP and of course those with deep pockets being able to purchase books of WIP and firms in their entirety.

If the limit comes in at £100,000 as planned, what does this mean for your caseload?  What percentage of your firm’s clinical negligence matters are below this threshold?  Do you actually hold this data?  For many, it could be as high as 80%, if not more. What does this mean for funding, staffing, space requirements to name just a few considerations?

Where we have seen PI firms succeed is where there is process and control with strong infrastructure.  Does your firm have this? If not, what is the plan?  Do you have working capital to throw at building the infrastructure in what is now a short timescale or are you prepared to take on additional external borrowing, if available, or inject additional partner capital? Cash is the answer here (as ever) if you want to succeed in the new world.

Success will also be built on readily available data on matters. The IT you have in place should be adequate to give you this information so that you can make quick strategic decisions. Economies of scale are going to produce the financial results you need for your firm to flourish and deliver the type of service you want to your clients.

Is now the time to get out of delivering clinical negligence services before the market is potentially swamped with firms trying to offload work that is draining their resources? Or are you ready to be a consolidator?

Yet again, we are about to watch significant change unfold in the profession and I wait with bated breath to see how firms react in the next few weeks – assuming they are proactive and not reactive.

Helen Clayton – Head of Corporate Services