CLCs Annual Regulatory Return Presentation of findings 2018/19 4 - PowerPoint PPT Presentation

CLC’s Annual Regulatory Return Presentation of findings 2018/19 4 September 2019

Background

Background and methodology All firms licensed by the CLC are legally required to complete an Annual Regulatory Return. The Return covers a range of topics pertinent to the CLC’s regulatory functions. An email invitation was sent to the key-decision maker at each of the 212 CLC-regulated firms , with a link to complete the online Return. Online fieldwork took place between 10th June – 19th July 2019. Firms were asked to report on data for the last completed Professional Indemnity Insurance (PII) year (i.e. the one reported to PI insurers at the time of renewal in June), unless otherwise specified in the question text. IFF Research have carried out the Return on the CLC’s behalf since 2017. www.iffresearch.com 3

Presentation coverage This presentation will cover the following key findings: • Scope, volume and sources of work • Prices charged for services • Changes in client purchasing behaviour • Experiences of fraud A note on analysis: • Anti-money laundering practices Comparisons will be made with the preceding years’ Return where relevant. • First-tier complaints Significant differences between firm • Lender panels sub-groups such as ABS status will also be highlighted. • Bullying and harassment policy www.iffresearch.com 4

Firmographics Firm composition On average firms employed 4 full-time qualified fee-earners, 6 unauthorised fee-earners and 12 administration and support staff. Over half of firms (60%) reported that at least some of their legal work is carried out by non-authorised staff. Multiple-entity firms A minority of firms (13%) reported that their business structure includes more than one company Half (50%) of these firms reported that they share staff across the companies. Alternative Business Structure (ABS) Just under one-third (30%) of firms held ABS status ABS www.iffresearch.com 5

Scope of work

Proportion of time dedicated to each work area Most firms (98%) dedicated at least some of their time to residential conveyancing (sale or purchase); on average firms spent 82% of their time dedicated to this work area in 2018/19. Average proportion of time (%) dedicated to each work area 100% 90% 84% 82% 80% Firms with ABS status were more likely to spend more of 70% their time on re-mortgaging (8% on average) compared to firms without ABS status (4%). 60% 50% 40% 30% 20% 5% 5% 5% 4% 4% 10% 3% 4% 3% 1% 1% 1% N/A 0% Residential Re-mortgaging Commercial Will-writing Equity release Probate Other conveyancing conveyancing 2018/19 (n=212) 2016/17 (n=230) A6 What proportion of your firm’s time is dedicated to the following types of work? Please enter a percentage from 0 to 100% for each type of work, with the total proportion summing to 100%. www.iffresearch.com 7

Proportion of transactions conducted in each work area The majority of firms who dedicated time to residential conveyancing (sale or purchase) reported that 84% of their transactions (on average) were conducted in this area of work. Average proportion of transactions (%) conducted in each work area 100% 84% 90% 83% Firms with ABS status (12%) conducted a greater proportion 80% of their transactions in re-mortgaging than those without 70% ABS status (5%). 60% 50% 40% 30% 18% 20% 12% 12% 11% 10% 10% 9% 8% 7% 6% 10% 2% 2% 0% Residential Re-mortgaging Commercial Will-writing Equity release Probate (n=60) Other (n=28) conveyancing (n=172) conveyancing (n=68) (n=65) (n=207) (n=116) 2018/19 2017/18 A7 What proportion of your firm’s transactions are conducted in the following types of work? Please enter a percentage from 0 to 100% for each type of work, with the total proportion summing to 100% www.iffresearch.com 8

Proportion of income gained from each business area Residential conveyancing was the main source of income for most firms. Around half (49%) of firms that carried out residential conveyancing (sale or purchase), reported that between 91-100% of their income was gained from this work area. On average residential conveyancing made up 84% of their income. Average proportion of income (%) gained from each work area 100% 85% 84% 90% Firms with ABS status (11%, on average) reported a greater 80% proportion of income from re-mortgaging compared to firms 70% without ABS status (4%, on average). 60% 50% 40% 30% 16% 15% 20% 9% 9% 8% 8% 8% 8% 6% 5% 10% 2% N/A 0% Residential Re-mortgaging Commercial Will-writing Equity release Probate (n=60) Other (n=28) conveyancing (n=172) conveyancing (n=68) (n=65) (n=207) (n=116) 2018/19 2016/17 A8 What proportion of your firm’s income is gained from the following types of work? Please enter a percentage from 0 to 100% for each type of work, with the total proportion summing to 100% www.iffresearch.com 9

Volume of work

Predictions of growth over the next 12 months Firms varied in their predictions of growth - a similar proportion each predicted that their volume of work will grow over the next 12 months as predicted it will stay the same. A minority of firms were more pessimistic and predicted their volume of work to shrink. Expectations of volume of work over the next 12 months (%) All 2018/19 (n=212) 45% 42% 13% All 2017/18 (n=212) 41% 48% 11% Grow Stay the same Shrink ABS firms were more likely to predict growth (63%) compared to firms without ABS status (38%). Firms who carry out probate were more likely to predict growth (55%) compared to firms who carry out commercial conveyancing (39%). A26 Now thinking about your firm’s volume of work overall in the next 12 months, do you expect that it will grow, shrink or stay the same? www.iffresearch.com 11

Role of Brexit on growth predictions The majority of firms who predicted a growth in the volume of their work were not affected by ‘Brexit’ in their response – yet those who predicted shrinkage tended to attribute this to Brexit Expectations of volume of work over the next 12 months (%) All who predicted 5% 15% 42% 33% 5% growth (n=96) All who predicted no 9% 29% 31% 17% 13% change (n=89) All who predicted 48% 33% 7% 7% 4% shrinkage (n=27*) A great deal A fair amount Not very much Not at all Don't know Brexit tended to have a negative effect on growth predictions - 65% of firms who expected their work to shrink and had a view on Brexit, said that it had a negative impact on their answer. A26 Now thinking about your firm’s volume of work overall in the next 12 months, do you expect that it will grow, shrink or stay the same? *Caution: low base, findings are indicative only www.iffresearch.com 12

Greatest risks over the next 12 months Brexit, cybercrime and fraud / money laundering were the most commonly cited risks that firms anticipated over the next 12 months. Business risks receiving ≥5% of mentions More firms (30%) identified 30% Brexit - current and future effects Brexit as a risk in 2018/19 19% compared to last year (19%) 26% Cybercrime 22% 25% Fewer firms identified fraud / Fraud / money laundering 34% money laundering as a risk 12% General economic instability / recession / credit crunch (25%) compared to 2017/18 8% (34%) 12% Access to lender panels 8% 10% Downturn in the property market 16% 8% Rising costs / rates 7% 6% Legislation / regulations 9% 6% Competition 10% 6% Referral fee agreements between estate agents / independent law firms 8% 6% Online conveyancing / other legal services 5% 5% Finding staff with the right skills and qualifications 2% 2018/19 (n=212) 2017/18 (n=212) A65 Thinking about your firm overall, what are the greatest risks confronting your organisation over the next 12 months? www.iffresearch.com 13

Greatest risks – in firms’ own words “Increased compliance requirements which are a “Ongoing threat of cyber crime. We have a Cyber burden on small practices. The effects of Brexit. Liability Policy in place and continue to be aware of The increasingly aggressive attitude of estate ongoing threats. We must all continue to be agents forcing clients to use their preferred vigilant. Online Firm's charging very low fees conveyancers and mortgage advisors.” make it difficult to compete.” “Staff. We are struggling to find experienced “Brexit - The impact of Brexit as we loom nearer to and qualified staff to cover the additional October 31st. Consumer confidence may decrease, work that we have coming into the people hold off buying etc. business.” Fraud - Increased focus on Conveyancing firms.” “We are constantly at risk of cyber attacks but this means that some emails do not get through. In addition, getting good staff is always hard - this is the biggest barrier to growth.” A65 Thinking about your firm overall, what are the greatest risks confronting your organisation over the next 12 months? www.iffresearch.com 14