What clients like about us, and why they come to us, is that we do offer this one-stop-shop. If we were competing on just one element, such as just compensation for damages, we would not be able to attract the clientele that we attract.
Winn Solicitors (WS) offers a one-stop-shop accident management service for customers, including compensation, provision of replacement vehicle, medical services and professional advice.
WS started as a very specialist service in relation to road traffic accident work. We have evolved to become a one-stop service for someone who has suffered from an accident and it was not their fault. Insurance works differently in the UK than it does in the US — UK insurers have a lot of discretion in how they settle traffic accidents. Sometimes the insurance companies of the two parties will apportion blame for an accident to both drivers, even if only one was actually at fault. This results in each insurance company covering the damages only for its own insured, and the premiums for both drivers going up. This arrangement works in your favor if you cause a lot of accidents, but it is not in your favor if you are an innocent victim.
When a potential client comes to us, we first verify that they were not at fault.
Once we’ve made that assessment, we then:
– Notify the client’s insurance company that there was an accident, but without making a claim on the insurance,
– Pursue for payment the insurer of the other vehicle directly (including compensation for injuries and damages),
– Organize the repair of the client’s vehicle, making sure that it is repaired with high quality materials and workmanship, and
– Arrange for the client to be provided with a replacement vehicle.
While this service offers many benefits to the client, the biggest benefit is that it keeps their insurance premiums down.
When we started this service, it was targeted to wealthy customers who could afford to pay upfront for their repairs and to rent a replacement vehicle and wait for compensation from the insurers. Now we are in a position to offer this service to a wider range of clients. We can do that by having a sister company of the holding group offer interest free credit to the client. This pays the bills for the repairs and replacement vehicle until we recover from the other driver’s insurer. Of course, this means that we have to make sure that we get right our initial assessment of who was at fault, because if we don’t get it right, we lose out.
This service has proven to be very popular — since we started it about 12 years ago, we have grown from a staff of 8 to a staff of 300. It’s been a very rapid growth rate for a very specialist service.
Our route to market is in part directly to clients, and in part indirectly through insurance brokers, who outsource their claims services to us. Because of our expertise in reviewing the evidence, we are able to have many cases judged as no-fault, which saves the brokers’ customers money.
What clients like about us, and why they come to us, is that we do offer this one-stop-shop. If we were competing on just one element, such as just compensation for damages, we would not be able to attract the clientele that we attract. Our clients know us as the place to go if the accident was not your fault — as the place that will take care of everything.
When we applied to the SRA to become an ABS, in some ways the application process was easy and in some ways it was difficult. We expected the part about our operations and business plan to be tough, but it wasn’t. But as regards our investors, the process was not so smooth. The process probably works well if the investors are a few private persons who live in the UK, but in our case we had international capital coming in. This created complications when we needed to complete full criminal record checks on every investor in every place where they had lived. The criminal record check process in the UK is quick and easy and can be done online. But in some countries it is not quick or easy at all, and some of our international investors have lived in many different places in the world. One of them is a woman in her 60s who was born in a no-go zone in Mexico. She ended up having to travel across Mexico in bullet-proof car and with an armed guard in order to return to the town where she lived as a child, as there the criminal record check could only be completed with her personal presence.
As soon as we could in 2006, we changed from a partnership to a corporate structure. We did it partly because it offered certain tax and investment benefits, but also because we understood the regulatory changes that were coming and we wanted to be ready for them. In particular, we wanted to be ready for capital investment as soon as the rules permitted it. The changes to the rules did not happen as soon as we thought they would so we turned our attention to other things. But later our financial advisor mentioned to us that he had recently met an investor, JZ International (JZI), who was interested in regulated sectors and in the legal sector in particular, and asked if we would be interested in meeting them. Of course we were interested. At that time, we were growing so fast we were at the top end of their investment criteria, so JZI brought in Souter Investments as a co-investor. They did a pretty thorough due diligence on us, and then in August 2013 the investment was finalized.
We wanted outside investment because we saw it as the only way to be able both to grow the business as well as to take some cash out. Funding from banks is not an option for us because banks struggle to understand our model, and notably to understand the time involved in recovering payments. Banks are used to lending on invoices of 30, 60, 90 days payment. They are not used to lending on the outcome of litigation. So, the only way for us to grow as rapidly as we did over a ten-year period was to fund ourselves by taking as little cash out of the business as possible. When we received the investment from JZI and Souter, there was finally some cash for me and the other directors to take out.
As for the money that remained with the business, some of that money has been earmarked for future acquisitions.
JZI explained to me that they invest in regulated sectors, such as finance and banking, because they see regulations as barriers to entry, thus the businesses they invest in will not face fierce competition. They became interested in law, they told me, because they foresaw that the new regulations would force smaller players out of the field, in favor of larger ones who can streamline their processes and handle work more efficiently. They saw that as the smaller players leave the market, they will leave open opportunities for the larger players to acquire their assets and grow further. JZI told me that they spoke with approximately 100 other legal businesses before choosing to invest in us, so they learned the legal sector thoroughly and got a good idea of what it looks like.
In our governance structure, we have two boards — an operational board and, above that, a strategic one. The operational board is made up mostly of lawyers – that is the board that oversees the company’s work on a day-to-day basis. There are lawyers on the strategic board, but they are not in the majority. The strategic board takes a big picture view of finance, potential acquisitions and growth.
This structure has required us to change our decision making processes — some decisions are discussed more thoroughly and take a bit more time to be made. We appreciate the business approach that our investors bring to law — they bring a level of strategic thinking that we didn’t have before. They are always on the lookout for new opportunities for WS and they have contacts that have proven beneficial for the business.
WS is in the process of implementing a share option scheme for its employees. We want to do this as we think everyone works harder if they have a piece of the action. We think that our employees will have more drive to see business succeed if they know they will share in that success.
I don’t understand arguments that having nonlawyers as shareholders will cause us to act unethically. I don’t think it works like that. There are business interests and there are client interests — those interests are tied as our business interest is to serve the client’s interest. I can say that WS’s investors are very very conscious of the existence of ethical rules and in no way do they want WS to breach them. And it is not in their interest that the rules be breached — if they are, WS could be fined and will lose its authorization. Our investors put a lot of money into our business — they don’t want to lose their investment.
Allowing outside investment into law firms has increased competition in the legal market. Banks are not keen to lend money in the legal sector — at least not large amounts — because it is a sector that banks do not understand. Investors, on the other hand, are coming in and are learning about the sector. And when they decide to invest, they drive competition harder and faster. What you see in the UK is that some of the best companies have attracted investment, and they are using that investment to push aside some of the less competitive players. It’s like investing in any other business — it permits the good ones to grow quickly and destroys the weaker ones. It has brought capitalism into the legal world. Whether you like it or not depends on where you sit. If you are one of the successful businesses, then obviously it is good for you. But if you still sit with your little quill pen and you are still writing things by hand on a note pad somewhere — you probably will not think that it is good for you.
I believe that over the coming years the changes in the UK market will accelerate. I think that we will see more businesses with good ideas to reach a greater number of customers — they will develop a good business model and a good delivery model, they will be able to raise funds more quickly and easily. These new models will be seen as delivering greater value to the customer, and the older models will be pushed out of the market. Overall, legal services will become both better and less expensive.
It’s not clear to me why the US rules haven’t changed yet. What is the argument for keeping out competition? For keeping out investment? The longer the US takes to change its rules, the greater the advantages that UK and Australian firms will have over US firms once the US does finally change its rules. If I were a lawyer in the US, I would be preparing myself now for these changes.
To download a pdf of this and the other stories, please click below.