Many UK solicitors believe the risks associated with client accounts have grown in recent years, but are concerned losing control of the accounts would impair their ability to deliver services effectively, according to a new survey.
The survey of over 300 solicitors in UK law firms, conducted by Censuswide on behalf of payment platform Shieldpay, found that 63% of respondents believe client trust would increase if firms stopped holding client money in traditional client accounts. However, 85% said they wouldn’t be able to deliver legal services effectively if that were the case.
Two-thirds of respondents (67%) said the associated risks linked to holding client money have grown in recent years. Many of the solicitors questioned said they were worried about breaching Solicitors Regulation Authority rules, with 41% concerned about the requirement to return money promptly when there’s no longer any need to hold it.
The considerable resources required (22%) and the admin-heavy process (19%) were also cited as challenges to managing client accounts.
When asked whether law firms should continue holding client money, the response was split almost evenly: 51% agreed they should, with 49% saying they shouldn’t. Half (49%) believe third party managed accounts (TPMAs) would be a viable solution.
However, the survey also identified resistance to change: 35% said nothing needs to change as ‘it’s the way it’s always been done’. Cultural resistance (54%), reluctance to change processes (44%) and a lack of awareness or understanding of alternative models (43%) were all reasons given for keeping client accounts.
If the SRA were to introduce a mandate to use alternatives to client accounts, 28% of respondents would prefer a gradual shift, while 22% would switch immediately. A quarter (24%) said a hybrid solution, such as operating a TPMA with a client account, would be the most viable solution.
‘Many law firms will be relieved that the SRA has paused immediate structural reform to client accounts’ said Sophie Condie, CEO of Shieldpay.
“However, what persists is the operational burden that client accounts are weighing firms down with a landscape of increasingly sophisticated cybersecurity threats. What the sector needs now is clarity on the alternative money management solutions available and how these meet regulatory requirements without impacting delivery of legal services.
“As the legal sector stands at a crossroads, we argue that the route forwards isn’t an all or nothing approach, but instead a hybrid model that acknowledges the complexity of the challenges firms are facing.”
