20 Jul 2016 10:00am

Probate: beyond death and taxes

Probate offers ICAEW firms a real business opportunity, but success depends on far more than passing the exams and waiting for clients to die, writes Rachel Willcox

Death and taxes, as the saying goes, are the only certainties in this world. For accountancy firms they are also a business opportunity to explore: the market for probate services has opened up, allowing them to add another string to their bow.

It’s now almost two years since ICAEW became an approved regulator and licensing authority for probate services after the Legal Services Act 2007 extended the provision of “reserved” or regulated legal services to appropriately qualified individuals who are not solicitors.

The move could not have come at a better time for those firms facing dwindling audit revenues as a result of changes to the audit threshold. To date, ICAEW has licensed 200 firms to provide probate services, double its initial, perhaps conservative, estimate.

Given the obvious synergies to those firms already offering estate administration services – currently representing around a quarter of ICAEW’s 10,000-strong membership – non-contentious probate has long been the missing link and a source of frustration among some accountants that the largely administrative process it involved had to be passed on to a solicitor. Many firms also believe they can often supply the service to both client and non-clients at a considerable saving compared with banks and lawyers.

At the same time, being able to offer a cradle-to-grave service to clients combining IHT planning and probate sits comfortably with a desire among practitioners to reaffirm their position as a one-stop-shop for business advisory services. Many firms have already bitten the bullet – they see probate as a natural adjunct to their private client services.

“Getting someone else involved has meant extra fees for clients and a disruptive process at a time when people are going through a bereavement. It’s attractive to just do everything through one person,” explains Peter James, ICAEW’s head of regulatory affairs.

Kingston Smith was one of the first firms to get an ICAEW probate licence, although it is now licenced by the SRA for a broader range of legal services.

“I have clients I’ve acted for since I became a partner in 1983,” explains senior partner Martin Muirhead. “You understand their business and their affairs. Probate gives you the ideal bridge to become involved with the next generation. It’s a natural extension of tax and clients have the faith that they’re using someone who has been their trusted advisor for generations and can fulfil a holistic role.”

Price Bailey partner Charles Olley agrees that intimate knowledge of clients’ financial affairs gives accountants the upper hand when it comes to probate. “To walk away from that on death seemed inefficient,” he says.

Despite concerns about stepping on the toes of solicitor clients, particularly where they benefit from referral arrangements, most accountants say they have seen no noticeable difference in attitude nor the level of referrals from solicitors since becoming authorised to conduct probate.

For James, the key is for firms to think long term. The Legal Service Act gives ICAEW firms the opportunity to set up alternative business structures (ABSs), bringing together solicitors and non-legal professionals to develop a whole host of other legal services on the coattails of probate. “You need to look at what your firm will look like in five years’ time. If your relationship with a law firm is because of a relationship with one partner, would it make sense to ask that person to join your practice? That’s something that couldn’t even be contemplated five years ago.”

“Accountants always claimed tax was their domain and now lawyers do tax,” Muirhead says. “There’s a blurring of boundaries between the professions. Once you have a relationship, clients come to you for everything. So we have more opportunities to refer work to solicitors than ever before. It’s actually helping us build relationships with solicitors.”

In reality, few firms are managing to generate huge fees on the back of probate alone. According to a survey by training provider SWAT, the majority of respondents are generating fees of between £1,000 and £10,000 per authorised principle from probate and estate administration work, and a quarter of respondents admit that the fees generated are less than half what they had predicted.

Perhaps more worryingly, 8% of respondents to the SWAT survey said they had failed to generate any revenues in that area, begging the question, is a probate licence worth the effort?

James stresses that focusing on revenues from probate alone misses the wider business opportunity that it can present to firms. “In itself it’s not a lot of money but it can create hooks into other services.” A 2-3% fallout of probate-licenced firms suggests that it makes sense economically, he says.

Price Bailey’s Olley, meanwhile, says firms that expect probate services to be a quick win should think again. “These things take time,” he warns. “We were appointed a day after we got our licence and despite being completely on top of things it took a year to dispose of everything bar one asset.”

If you’re serious about the revenue-generating capabilities of probate, you need to do more than simply pass exams and wait for their clients to die, warns Jane Mather, a divisional director at SWAT. “Firms need to have a planned strategy for implementation and marketing. You need to inform staff and we need to raise awareness of the fact that accountants offer this service.”

The sensitive nature of probate may make some practitioners reticent when it comes to pushing their services. And they are right to be wary of our collective reluctance to discuss dying and bereavement; only 35% of respondents to a survey for the Dying Matters Coalition had made a will and just 7% had discussed what sort of care they might want if they were unable to make their own decisions.

The fact that 8% of respondents to the SWAT survey had managed to generate fees of between £50,000 and £100,000 per authorised principle shows the business potential exists. But realistically it is going to take some time before the general public realises that a solicitor isn’t their only option for probate work, says Graeme Hills, head of the legal practice and a partner at Duncan and Toplis Probate Services, sister organisation of the accountancy firm of the same name. “We definitely need to educate people. It’s up to firms to push that. Some clients have no idea,” Hills says.

Any firm considering a probate licence should conduct a feasibility study addressing who in the firm will be licensed and the way the business will be structured, and should be realistic about the regulatory aspect of becoming licensed, a process Hills describes as “quite detailed and complex”.

At the same time, the skills implications of a probate service line should not be underestimated, and not just in terms of finding enthusiastic personnel who are willing to do the exams. “You need to make sure you have adequately skilled people to do it and enough of a flow of probate work to maintain the skills of the people involved,” Muirhead says.

Although Hills thinks it is too early to say how much the firm’s investment in probate will pay off, his advice is clear: “If you’re going to do it, do it wholeheartedly. Be prepared for a slow income stream but the benefits are there for the long run.” According to the SWAT survey, 40% of respondents expect significant growth in probate work over the next five years.

The practical issues proffered by probate work certainly keeps the work interesting – from sorting out gun licences and pets to the complexities of overseas property.

At Price Bailey, Olley says he has even ventured into the domain of second-hand car sales as the firm looks to sell a vintage Alpha Romeo on behalf of one probate client.

"This is an opportunity for accountants to develop a continuing relationship with a family particularly where they have a good bedside manner,” explains Clive Stevens, chairman and head of taxation at Kreston Reeves, which became licenced by ICAEW for probate in November 2014.

The firm has three partners and 15 support staff in its probate team. In its first year it generated billings for probate work of around £350,000 from a standing start. But probate isn’t for everyone, he warns.

“There’s a psychology element to it. If you’re an emotional person and don’t like dealing with people at a vulnerable time, don’t do probate.”

Updated regulatory guidance for ICAEW members and firms undertaking estate administration work explaining when they would need a probate licence is available from icaew.com

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