In this Guest Blog, Victor Olowe, Managing Director of Winzest Consulting discusses the impact of In-Deed on the conveyancing market.
In recent weeks, a number of commentators have given their respective perspectives on the ‘perceived’ failure of In-Deed. The comments ranging from ‘I told you so’,’ What were they thinking’ to ‘What a shame’. I must admit that when In-Deed was launched, I was surprised with both the timing and the business model particularly in view of the competitive landscape in the conveyancing market. However, on reflection I now realise that the In-Deed model is exactly what disruptive business models aim to do.
Whilst some will consider In-Deed a failure, I take a contrary view and see In-Deed as paving the way for further necessary disruption in the conveyancing market. As Thomas Edison famously stated ‘I have not failed. I’ve found 10,000 ways that won’t work’. Regrettably, I share the analysis attributed to In-Deed that the current conveyancing market in some aspects is dysfunctional and not operating optimally in the best interests of all consumers.
A key benefit arising from the In-Deed experience is the increased transparency of the critical success factors for competitive advantage in the current conveyancing market. To succeed in this market, you need to be prepared to pay whatever the ‘distributors/introducers’ of work demand in order to gain access to consumers.
Whilst in principle I am not against referral fees, the proportion of the ‘headline fee’ that some ‘introducers’ are receiving from legal firms is of concern. It is difficult to rationalise how a legal firm can continuously pay over 25% of the headline fee to an introducer and consider that their independence is not at risk of being compromised. My heart bleeds for the hardworking and committed conveyancers up and down the country whose hands are being effectively tied behind their backs and forced to obtain referrals at an excessive cost, which is frankly so unfair.
It seems to me that the current competitive advantage relies on information asymmetry i.e. some introducers have more information which enables them to influence the buying behaviour of consumers. For example, some estate agents acting for the seller are able to influence the buyer to use their recommended conveyancer.
However, it is unclear to me whether there is an explicit obligation to declare to the buyer that they are acting for seller and recommending a conveyancer may be a conflict of interest and asking the buyer to seek independent advice or shop around so that they can make an informed decision. In similar circumstances in the legal services market, such potential conflict of interest would normally necessitate stronger safeguards for consumers. However, it appears based on the current regulation in this area that it is perceived that the risk to consumers is low which is surprising.
Although the current system benefits from the limited knowledge and understanding of consumers, it is evident from other markets that a disruptive business is going to enter this market and find a way to improve consumer empowerment (information parity) to a point where the dominant role of introducers in the conveyancing market will be reduced.
It was worrying when a recent commentator stated that ‘Estate agents’ grip on conveyancing market forces In-Deed sell-off’. If that statement is accurate, then it should cause alarm. One of the significant concerns with regard to the proposed implementation of Alternative Business Structures (ABS) was the inappropriate direct control of legal firms through non-lawyer ownership and safeguards were put in place in the Legal Services Act 2007 (I recognise that there is an ongoing debate whether some of those safeguards are disproportionate). However, if it is correct that estate agents are exerting such indirect control on legal firms, then I wonder whether the existing safeguards are adequate.
However, it is unlikely that such disruption would arise from the beneficiaries of the current system, which would be such a missed opportunity. The recent experience of Blockbuster should be a reminder that competitive advantage is transient and a major strength today could become a weakness tomorrow. The Blockbuster case study is such a fascinating story because they had an online business that it wound down before Netflix became a dominant force. Unfortunately, they could not see a future where consumer behaviour would change to make Netflix successful and so dominant in the content rental space. One of the key factors that changed that market was the increased empowerment of consumers to own DVD players due to widespread reduction in prices.
I predict that similar game changing consumer behaviour will occur in the legal services market and it will happen when there are more credible, user-friendly tools to address information asymmetry and empower consumers. The focus on supply side regulation can produce some benefits but market changing consumer behaviour will come from a greater focus on consumer empowerment.
Helping consumers to approach legal firms confidently and without fear will result in a legal services market where their needs are met and the legal firms are properly rewarded for the value that they provide. There is a strong push from a diversity of stakeholders for legal firms to deliver better value and service to consumers, which is welcome and commendable. However, we should be careful that the continuous call for improvement is not perceived as ‘lawyer bashing’, which inadvertently may result in ‘throwing away the baby with the bath water’.
I am hopeful that when we look back in ten years time at the conveyancing market, that we would be able to appreciate the contribution of In-Deed to the development of a better conveyancing market. A market where consumers have a better appreciation of the value of good conveyancing services and the legal firms can make good returns for providing transparent, value based services underpinned by great customer service and strong ethical values.