Research indicates a preference for third-party managed accounts (TPMAs) over traditional solicitors’ client accounts among consumers, driven by concerns over security and misappropriation risks.
A recent study commissioned by the Solicitors Regulation Authority (SRA) and conducted by consulting firm Thinks reveals a shift in consumer trust towards TPMAs. Many consumers express a willingness to incur additional costs for what they perceive as better protection of their funds. This inclination towards TPMAs stems from an increasing consciousness about safeguarding client money, prompted by past instances, though infrequent, where funds were misappropriated by solicitors failing to adhere to rules.
Thinks’ ‘deliberative’ research approach involved comprehensive sessions with participants in Sheffield, London, and Cardiff to gauge their informed opinions. Participants consistently prioritised reducing the risk of fund misappropriation as crucial for building trust in legal services. They found the existing client accounts insufficient in providing adequate security. Conversely, TPMAs were favoured for the additional layer of protection offered through financial specialists.
This preference aligns with the SRA’s long-term vision, which sees TPMAs as a viable substitute for client accounts despite market maturity challenges. Participants mentioned a modest fee, commonly around £50, is acceptable for enhanced financial safety, especially considering the infrequent nature of legal service transactions.
While the SRA commissioned Thinks’ in-depth research, a separate, shorter survey involving 2,009 consumers showed varied comfort levels. Seventy-nine per cent felt secure with solicitors holding their money, but this confidence dropped to 55% when a third-party financial specialist was involved. However, the Thinks study offered more detailed insights and indicated that consumers, when well-informed, were more open to TPMAs.
Furthermore, some participants proposed that interest accrued from client funds should be redirected to a compensation fund if not to the client, highlighting a need for transparency and fairness in how monies are handled by solicitors. The current regulations were perceived as ambiguous, leading to inconsistent practices among legal practitioners.
In related findings, SRA data from 2023 underscores the urgency for change, as 43 law firms faced closure for mishandling client funds. This is nearly double the previous year’s total, underscoring systemic issues within current client money management practices. The data also points out that many firms closed due to financial pressure or lack of succession planning among retiring senior lawyers.
The preference for TPMAs among consumers highlights a critical demand for better security in managing client funds within legal services. As the legal landscape evolves, adopting TPMAs could enhance consumer trust and satisfaction by prioritising safety and transparency.
