Conveyancing Panels - Marketing heaven or unwanted slavery?

Love them or hate them conveyancing panels continue to remain a predominant feature within the conveyancing industry.   The majority of these work on a model whereby a company operates and manages an electronic platform on which it allows third party associates such as a broker or an estate agent or lender to introduce a client to a solicitor who has become a member of the conveyancing panel.

The panel manager allows the broker or agent or lender to access a national network of conveyancers and provides the broker or agent to make a financial gain from steering the client to one of the panel’s chosen conveyancing firms.  This means that in addition to raising a commission for the work the broker or agent has undertaken, the third party is able to make some extra money through making the referral.  In many cases the client is oblivious to such an arrangement often following the agents/brokers recommendation  blindly.

In addition to this the panel manager is also able to secure a slice of the cake for managing and allowing the third party to access via online software a network of preferred conveyancers.

So what does this mean for the consumer?

For the consumer it will normally mean higher prices since when receiving a quote for conveyancing services from the agent or broker it is in the majority of cases probable that the consumer will be paying a higher price than that had the consumer gone direct to the conveyancer.  The consumer is in these cases paying the broker’s commission, the panel’s management fee and also a higher fee for searches and other incidentals. 

Here is how it works.  The consumer is encouraged to use a solicitor which the broker is able to access through the panel.  The consumer is quoted a fee of say £800 plus VAT.  The consumer accepts and the panel solicitor who invariably will not be local, is instructed.  On completion the client pays the £800  to the panel solicitor.  Out of the £800 paid by the client the solicitor will be required to pay the panel manager company £500, which the panel manager will then share with the broker/agent/lender for making the referral.   The net effect of this is that the consumer has paid 100% more than he or she would have paid if she had gone to the solicitor direct.

On top of this the consumer will also be paying more for identity checks and searches.  This is because the panel manager has arrangements with the third party suppliers of these services under which the panel manager will receive a cut of the fee paid bu the consumer for those services.

In addition to higher prices, the consumer is often introduced to a conveyancing company out of the area and one which may not have the best of reputation.   It must be kept in mind that many of the panel solicitors will be forced due to the low amount of the fee it retains to facilitate the work with the minimum of resources.  The client is expecting a £800 service whereas the conveyancer may be only due to the low return be able to offer a service more commensurate  with the low legal fee retained.

The question to which this gives rise is whether the broker or agent is acting in the best interests of the consumer in not in some cases making it clear that the client may be paying more for their conveyancing services.  Don’t get me wrong as there are some brokers and agents are up front about the arrangement  and do offer to set off the commission received against their fees.

So how does this work for the conveyancer.

The upside is that the conveyancer receives work on a regular basis and has no direct marketing costs to pay.  The conveyancer only pays for the ‘lead’ on completion so this helps with cash flow.  Providing the conveyancer discloses the introduction fee there is no professional objection to the arrangement per se.  The problem lies more with the restraints the Panel Manager may apply.   Most Panel Managers have ‘pet’ suppliers such as search companies and insist that as a condition of panel membership the panel solicitor must purchase the searches from that supplier.  This extends to money laundering checks, indemnity insurance and solicitor account checkers.  This means the conveyancer is deprived of the freedom to choose and work with his or her own preferred supplier.  It also means that the client is often paying more for these items given the Panel Manager is receiving a slice of the charge from the suppliers of these services. At the end of the day the conveyancer is left with a small fee for the work and left with no opportunity to share in the financial benefits of third party arrangements.

Panel work for some conveyancers clearly works and provides savings on marketing costs.  Balancing this however with the shortcomings of the arrangement one is forced to raise questions about the economics of undertaking 'Panel' work.  There is also the question of whether the sharing of fees both legal and those hidden in the supply of third party searches has now reached a level whereby the panel solicitor may be so compromised that a conflict of interest should be considered and indeed acted upon.

So what has gone wrong? 

The decision of accepting and working for a client on a reduced fee was when considering the high cost of marketing is per se a reasonable one to take.  The problem now is that the some panel mangers have become too greedy by looking to reduce fees further ( so as to increase their slice of the cake ) and to also prevent the conveyancer from operating any commercial third party relationships other than those permitted by the panel manager.   There is now a major imbalance between looking after the interests of the client and the panel conveyancer and meeting the financial demands of the panel manager’s shareholders. To the extent some panel managers are witnessing a mass drop in the number of conveyancing firms willing to participate in their schemes.

So what can conveyancing firms do?

The model operated is not unique, nor difficult to establish. Its open to conveyancers to look to set up their own networks and third party relationships.  Surely this must be a more preferable option to the slavery some panel managers now expect from their panel solicitors.

MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877067 or via email at davidp@mjpconveyancing.com