As anticipated, the SRA has published a consultation this week on whether the entities it regulates should be allowed to use a third party escrow account instead of being required to hold client money in their own client account. This liberalisation makes sense for a lot of reasons some of which I explore in an article I have just written for the Law Society's Legal Compliance Bulletin. Some of these are summarised below. It is easy to foresee that in a few years a substantial number of firms will no longer hold client money. It's the right thing to do, but I can't help but feel that we will also lose an element of what makes solicitors distinctive.
Client accounts are expensive to run, both for firms, and also in the costs of regulation associated with ensuring that they are not misused, accounting, investigations, and where necessary, compensation. The use of third party managed accounts may offer a lower cost alternative that continues to provide appropriate protection. Consumers, meanwhile, do not necessarily require their money to be held by lawyers, where funds can be disbursed directly from bank to bank.