In the year between August 2017 and July 2018, 351 law firms ceased practicing. Relevant principals will now be relying on run off cover to protect them in their retirement from law.
Run off cover is a significant expense. For all of the 351 legal principals above, there are more unable to shut up shop because of prohibitive costs, particularly the required three years’ premium paid up front [so disclosed by Alan Radford, Chair of the Law Society’s Professional Indemnity Committee in September this year to the Law Gazette]. For the average £1m firm with a PII premium of £50,000 this will be £168,000 including IPT.
Larger firms may be able afford the protection, but for the extensive community of sole practitioners and traditional 2-4 partner firms, the costs involved with closing their practice may just be too much, so they have to carry on. Our legal population is aging fast, and in danger of the losing the relaxed retirement they have worked so hard for.
Added to this worry, 2020 marks the end of SIF – the Solicitors Indemnity Fund which currently protects previous practitioners once their mandatory six years of run off insurance has expired. Since the accepted term to file a claim under The Limitation Act extends to 15 years, this leaves a far too extensive a period in which you are personally liable, during your retirement or period of ill health. The risk to your home and security is, for many, too great.
So what are your options? How do you ensure that when you take the decision to stop practicing, you can actually focus on everything else in life, outside of law?
For sole practitioners, or small firms without obvious successors already in the business, options are clear and limited – close, merge, or sell. With the problems and expenses of closure, what are the options for sale or merger, and are they a safer bet?
Joining forces with another firm certainly looks like a tempting prospect. No longer left with sole responsibility, you benefit from joining forces with another principal, along with their support systems and client lists. Sounds good, but more often than not local firms will have the same issues with an aging partnership and, if they do merge with your firm, they will only really be interested in your client list and wills bank and not in the brand you have developed. What if you want to exit, but see your brand and all it represents protected?
Through the right sale, you are able to both hand over all current and future responsibility, yet retain your legacy within the profession, continuing to serve your local trusted clients for as long as you wish without the burden of control.
Echelon Law have specialised in working with “local hero” law firms to facilitate exactly this scenario. We are in a position to acquire your equity, provide state of the art IT systems and full support functions, look after your staff and clients and protect your established reputation. If you have a proven history in your area, and we all get on well, a deal with us might just be the solution to your succession problem.
The Echelon Law board of directors is highly experienced and includes 3 directors with Managing Partner experience. Our website has plenty more information about us, as well as contact details to start the discussion which can save your retirement. You can also contact our Strategy Director, Andrew Roberts, directly via: firstname.lastname@example.org.
The earlier in the process we talk, the better, so speak to us now to put your mind at rest.