‘Tesco law’ sets IFAs against lawyers in fight for clients

By PETER RANSCOMBE
Published on 15/07/2012 00:00

INDEPENDENT financial 
advisers (IFAs) are expected to go head-to-head with law firms as deregulation in the Scottish ­legal market draws in fresh competition.

Tom Murray, the newly ­appointed chairman at Edinburgh-based Gillespie Macandrew, expects the “alternative business structures” (ABS) will be attractive to IFAs.

ABS will allow non-solicitors to own law firms, in effect opening up the market to allow other companies to offer legal services. The measures were branded the “Tesco law” when they were introduced south of the Border because supermarkets and other large businesses were expected to start selling advice.

The Law Society of Scotland has said that firms could start applying to use ABS as early as the autumn and Murray thinks IFAs will look to move into the legal sector because of seismic shifts in their own industry.

Changes under the UK government’s retail distribution review (RDR) will come into force in the new year, meaning that all IFAs will have to charge up-front fees for their services. The RDR has been designed to stop IFAs from recommending only the products from which they currently receive commission. Murray said: “The legal marketplace is changing quite rapidly. Some of the new entrants will be very good so we have to adapt in that marketplace. The banks will do a lot more legal work in the future and IFAs will be moving in too, offering fee-based advice.”

Murray said his firm was tackling the challenges by focusing on six key areas and has recently recruited six partners to beef up its expertise.

“I’m not going to be changing the strategy,” said Murray. He said turnover from the six key areas had grown by 10 per cent last year. That compares with 2 per cent turnover growth for the firm as a whole in the previous financial year.

“I don’t think our key clientele in Edinburgh would be wanting their legal services from supermarkets, but they will be targeted by IFAs.”

Murray has taken over as chairman from Simon Leslie, who held the post for 15 
years. Kirsty Macpherson, who leads the firm’s energy and natural resources group, has also been appointed to the firm’s strategy board.

Other Scottish law firms have already started positioning themselves for ABS, with Pagan Osborne chief executive Alistair Morris changing his firm from a partnership into a limited company so that it can retain cash for investment. Morris expects competition from the likes of the AA and the Co-operative.