Reserving will-writing and estate administration activities under the Legal Services Act 2007

 In Wills

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…. Should we have reservations about reservation?

Reserving will writing

On 27 September 2012, the Legal Services Board released its latest consultation on “Enhancing consumer protection, reducing regulatory restrictions: will-writing, probate and estate administration activities”.

Somewhat confusingly, given the reference in the title to ‘reduction’, its conclusion (as in its previous consultations) is that will-writing, administration of estates and activities ancillary to both provided for fee, gain or reward should be added to the list of reserved activities under section 12 of the Legal Services Act 2007, thereby requiring them to be subject to regulation. Probate is to remain a reserved activity.

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The current position

Currently, anyone can provide will drafting or administration of estate services, whether they fall under the auspices of a regulator or not. There are some voluntary regulations schemes (e.g. the Institute of Professional Willwriters) but: a) not all providers’ sign up to them and; b) it has been found that even when providers did sign up, they have a tendency to leave the schemes when the regulatory bodies try to enforce their rules.

The reasons for regulation

The LSB’s research has found that the following incidents occur regularly enough to make regulation preferable:

  • Wills sampled were found in a startling number of cases (one in five from the samples tested, where wills were written by solicitors or independent will-writers) to be unclear and/or not to deliver the testator’s wishes  (Provisional Report, annexed to the September consultation (“PR”), [37], April 2012 Consultation (“AC”), [42]).
  • Providers (particularly in the unregulated sector) were often found to be more interested in selling services, rather than tailoring those requested to an individual’s needs (PR, [36]).
  • There is a tendency for the services provided to be needlessly complicated, sometimes, to maximise fees (PR, [35], AC, [37]).
  • The costs of services not are not always clearly explained (PR, [36], AC, [40]).
  • Wills are often lost, particularly because many independent will-providers only remain in business for a few years (PR, [37]).
  • Estate assets are found to be vulnerable to fraud (note that there is nothing preventing those with findings of dishonesty against them from operating in this market (AC, [52])) and also to delays (PR, [38]), though there were few technical errors found in the administration of estates (AC, [18]).
  • Estate assets are not always appropriately safeguarded (e.g. by being kept in a separate client account).
  • As probate services are already regulated, non-regulated providers cannot currently provide a seamless service, having to reject the probate stage of work, or send it out of office for completion. This can increase delays and costs (PR, [39]).

From my position as a barrister (seeing the results of ineptly drafted wills or mishandled administrations), in principle, regulation in this sector would be a good thing, for the consumer at least, if not for litigator’s bank balances. However, any regulation will need to be sensible and effective, taking account of the realities of the types of work involved. This is the LSB’s intention; to regulate on the basis of the risks involved.

What activities will be covered in practice?

If the proposals are approved:

  • Someone drafting their own will, or a friend’s will, or someone acting pro bono, will not be regulated.
  • DIY will-packs will not be covered. The theory behind this is that the consumers in these circumstances will not think that they have been provided with a will-writing service (PR, [27]).
  • Similarly, advice about different types of testamentary instruments or the content of a will will not be caught, unless the provider goes on to actually draft the will. I have some reservations (no pun intended) about this. I agree that people should be able to draft their own wills without regulation and I can see that if someone takes part, but not all, of the advice that is given to them by an advisor, then they are doing that at their own risk. But if advice is received, which is followed to the letter by the client in the belief that the advice is correct and resulting in the production of a will, I cannot understand why this should not be a regulated activity. It might be more difficult to police advice of this kind, but this is not the reason given by the LSB for excluding this type of work from its proposals. Its explanation is that, as no will is actually drafted by the provider, the service is not reserved. However, in my view, if the direct result of the advice is that a will is created, the regulatory position should be the same.  The client will be expecting that the advice will be correct and will be surprised that such advice does not carry the same protection as will-drafting. The alternative protection for the clients would be to oblige providers to spell out that this type of advice is not regulated, but such advice is hardly going to inspire confidence in the provider.
  • Related tax advice will not be regulated, unless a connected and reserved service is also provided.
  • It will not be possible to avoid regulation by offering to carry out the reserved service for free, in return for payment for an ancillary service or a gift under the will. This will still be deemed to be a service carried out in expectation of fee, gain or reward.

The aims of the proposed regulation

The principles behind the regulation are stated (PR, [3]) to be:

  • keeping the market open to all types of will-writing and estate administration providers;
  • ensuring that proportionate protections, including access to redress, are in place for all consumers irrespective of who provides their service;
  • providing the opportunity for all providers to be regulated on an even-footing to support a fair and competitive market for both consumers and businesses; and
  • improving the existing legal services regulation that applies to the majority of providers in these markets.

The nature of the regulation

The LSB wants to use a different form of regulation from that used by legal service regulators. It is to be “flexible” in order to be able to adapt to the needs of different types of providers (PR, [55]). It will not prescribe in detail how each regulator must regulate (Draft Guidance, annexed to the September consultation (“DG”), [9]). Instead, each regulator will have to demonstrate that it can meet the minimum standards for outcomes set out by the LSB in a proportionate way. Neither under nor over regulation will be tolerated (DG, [29/31]; Summary of feedback to the April Consultation (“F”), [36]). I am sceptical as to whether regulation of this type will be able to provide consistency across the board. If each regulator can have different rules and or sanctions, it seems inevitable that some will serve consumers better than others.

The outcomes are as follows (DG, [21]):

  • Consumers receive appropriate information and advice which enables them to make an informed decision about whether and how to use will-writing, probate and estate administration services. This should include information about the potential risks in will-writing, probate and estate administration transactions and any related services provided alongside them.
  • Consumers can make comparisons and informed choices between services and providers of will-writing, probate and estate administration services based on clear, useful information about the services that will be provided and their costs.
    • This is likely to include explaining risks to consumers such as the effect of naming a professional executor (DG, [53]).
    • Regulators will have to maintain a register of authorised providers (DG, [55]).
    • There will have to be transparency about complaints and quality indicators such as experience (DG, [56]).
  • Consumers receive good quality advice and services.
    • Each provider will have to demonstrate that it has the appropriate skills, knowledge, systems and controls to deliver a consistently good service (DG, [57]) but there must be multiple ways in which a provider is permitted to demonstrate this (DG, [67]). The LSB takes the view that there is no set formula of qualifications and training that an approved regulator could say that each entity must have. It seems to me that if there is no set of qualifications, the process of regulating will be incredibly time consuming. Further, the LSB indicated in its earlier consultation that, in its view, legal qualifications will not be necessary (AC, [153]). For some tasks (e.g. gathering in assets of an estate), this may not be necessary, but the regulators will have to be very careful to ensure that those working in the industry have sufficient knowledge to recognise when something is outside their competence.
  • Authorised providers act in the best interest of each client.
  • Authorised providers act with integrity and promote and maintain adherence to the professional principles.
  • Consumers’ confidence in the owners, persons that hold a significant interest in and employees of entities authorised to undertake will-writing, probate and estate administration activities is at least as high as for other authorised providers/law firms and is equally justified.
    • There will be a ‘fit and proper person’ test for each owner and person that holds significant influence in each provider (DG, [59]).
  • Consumers are deservedly confident that their advisors are regulated appropriately and effectively.
  • Consumers are aware of the opportunity to complain, and their complaint is treated seriously and handled promptly, fairly and effectively.
  • Consumer money and assets are protected, with risks of consumers’ money being lost by the provider minimised.
    • Client money must be held separately and not used for the business (DG, [84]).
    • One suggestion is that client money could be held by third party financial institutions (DG, [93]).
  • Consumers have an appropriate level of assurance that recompense is available where a consumer suffers detriment caused by the provider as a result of negligence or dishonesty (fraud and theft).
    • As part of this, each provider must have professional indemnity insurance (DG, [86]).
    • The regulator must also be able to pay compensation, whether by its own insurance or by its providers paying into a shared pot (DG, [90/91]).
  • A range of authorised providers deliver examples of innovative and flexible ways of providing accessible and good value services.

Further, as noted above, regulation is to focus on what services are going to be provided, rather than on the qualifications of the individuals supplying the services. So, regulators will be responsible for ‘identifying’ the risks that the services each provider proposes to supply will pose to consumers, and regulating accordingly.

There will be a process of appeal, first internally to in-house (AC, [161]) and then to one independent body (DG, [46]): the First Tier Tribunal of the General Regulatory Chamber. There will also be access to the Legal Ombudsman (DG, [76]).

The effects of regulation

The intention is not to reduce the range of providers, but all will have to be regulated. Bodies which are currently authorised to regulate probate activities are going to have to re-apply to regulate for the newly reserved matters and to review their regulation for probate matters so that it complies with the new ‘flexible’ style of regulation being promoted by the LSB. There may well need to be new bodies established to regulate the totally unregulated areas of the market.

It is suggested by the LSB that putting this regulation in place will increase consumer confidence and, thereby, increase the number of “purchases” being made (PR, [45]).  I find it unlikely that there will be an increase in consumer confidence as a result of putting flexible regulation in place simply because the LSB pointed out in an earlier consultation document that consumers did not understand the different levels of regulation which already exist (AC [96]).

Further, the word ‘competition’ appears a lot. One of the aims is to promote competition to drive prices down. I have concerns about this. There may well be providers who are over-charging. However, there are a lot of providers who are already offering will-drafting at bargain basement prices. If prices are driven even lower, in order to make ends meet those providers are going to have to take on a large volume of work to make their business viable. Too much work is likely to mean either too little attention paid to the work being done or work being delayed. It could, it seems to me, also encourage what I would see as bad practice, such as taking will instructions by telephone, rather than having a face to face interview with the testator. While this may be seen as more convenient by the consumer and, therefore, preferable (AC, [92]), it can only lead to wills failing to do what they need to and/or to challenges to the will later on. This can already be seen in the conveyancing world. I struggle to see how this can be a good thing.

A decision has yet to be made as to whether legal professional privilege will be applied to all providers, though the LSB is in favour of its application (F, [97]). This must be right; the benefits of privilege should attach to the service, not the type of provider. The LSB is awaiting the outcome of Prudential PLC v Special Commissioner for Income Tax which is being heard by the Supreme Court in November 2012 (a case about the application of privilege to accountants) before coming to its conclusions:

  • Rather worryingly though, it displayed a fundamental lack of understanding about the nature of estates when considering this question, stating in its previous consultation that “One consideration will be potentially reducing the evidence that would be available to the courts for example where there is ambiguity in the intention of clauses within a will or a will is being contested. As the client will be deceased by this point, they cannot waive their right of confidentiality” (AC, [206]). This is to misunderstand how estates devolve; the personal representative will be able to take any necessary decisions about privilege, once a grant has been obtained.
  • The LSB also suggested that another matter to take into account in this regard is that if privilege was to apply to non-lawyers, this would require providers to make provision to protect client’s confidentiality (F, [98]). Whilst I am not a data protection specialist, I would have thought that the Data Protection Act 1998 would already have put sufficient requirements on all providers.

The timetable

While the proposals are a long-way towards being settled, there is still time to weigh in. The current consultation closes on 8 November 2012. The Report can be found at http://bit.ly/RQhYQa

If the LSB’s views are not changed by this consultation, it will make its final report to the Lord Chancellor in February 2013. If the regulations are approved, regulation will only take effect when: a) there is at least one approved regulator and licensing authority with arrangements which allow for different types of providers; and b) providers are authorised in sufficient numbers to ensure that access to justice, consumer choice and competition is maintained (PR, [62]). It is thought that this will take at least two years from February 2013 (PR, [63]). The LSB’s preferred transitional process will not include transitional regulation (PR, table at p 29 and [77]).

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