LegalZoom and the Future of Law Practice

In April of 2012 there was a very interesting discussion on the Wealthcounsel member listserve about LegalZoom and its impact on the future of law practices.  The discussion was started by Orange County estate planning attorney David Hiersekorn who began a message with:

“I attended a conference this last week and got to hear some pretty smart and influential folks talk about technology. That, and a six-hour drive home, gave me some time to think about our profession and how we are handling technology. Some of you know that I’m obsessed with redefining our industry to better match the way people live and work in the modern era. Well, apropos to nothing, here are some thoughts and observations. I’d love to hear what others have to say.

I’ll start with a couple of examples from history. In the 1870s, Western Union had several opportunities to buy the rights to the telephone. They made a calculated business decision to ignore the telephone, believing that it was only a local communications tool and that people wouldn’t want to communicate over the telephone. We all know how that turned out. More recently, Blockbuster was given an opportunity to buy Neftlix for $50 million. They passed on the deal. Blockbuster is now going out of business.

In both instances, the large, sophisticated companies made phenomenal, existence-threatening mistakes because they lacked the imagination to see what the telephone would become or what online video would become. In both instances, they mistakenly believed that people preferred their method of delivery. The only evidence, by the way, was that people had historically chosen their method of delivery.

Think about that. Blockbuster decided that people would choose the store over the mailbox based solely on the fact that people chose the store when the mailbox WASN’T AN OPTION. It’s stupidity.

Today, our industry is threatened by LegalZoom. I’ve heard people say that ‘my clients wouldn’t go to LegalZoom.’ Really? Are you sure? Because, if you actually believe that, you might be qualified for a spot on the Western Union or Blockbuster Board of Directors.

WE HAVE NO MORE EVIDENCE FOR THAT BELIEF THAN WESTERN UNION OR BLOCKBUSTER HAD WHEN THEY MADE THEIR FATAL DECISIONS, EITHER.”

If you are an attorney whose practice areas includes any of the types of “nonlegal” services offered by LegalZoom then you are competing with LegalZoom whether you want to admit it or not.  One of my areas of practice is the formation of limited liability companies.  I have formed 3,400+ LLCs since I started counting in 2002.  My main competitor is LegalZoom, not other attorneys who charge a lot to form an Arizona LLC and do not give clients much in return.

One of the reasons I form a lot of LLCs is because I only charge $599, a price that includes an $85 filing fee.  Check out what I give my clients for $599.  I also made a video in which the KEYTLaw Girl explains what people get for $599.

httpvh://youtu.be/oIjhKMA3nQ0

My price to form an Arizona LLC competes with LegalZoom’s price.  To help convince people they should hire me to form their Arizona LLC, I wrote an article called “Why You Should Hire Richard Keyt instead of LegalZoom to Form Your Arizona LLC.”

My point is that if you are competing with LegalZoom you need to do the following:

• Recognize you are competing with document preparers.

• If you elect to continue to practice in the same area of law as the document preparers then you must take action that will make you competitive, i.e., compete head on with the document preparers.  You must be able to convince prospects why they should hire you.

• If you are not willing to  compete with the document preparers then find and develop another area of law, but make sure the new area of law is one that cannot be replaced by technology.

I tell my son who is a CPA who just graduated from the Arizona State School of Law that he should go into practice areas that cannot be replaced by technology.  The most obvious area that will never be affected by LegalZoom and the document preparers is any type of litigation.  Until they deregulate the practice of law, a law license will be required to litigate.

The absolute worst areas of law that will be the most adversely affected by the document preparers are any legal services that produce documents such as entity formations and wills and trusts.  A lawyer friend told me recently that a client of his sold a $35 million office building without using an attorney because he used documents he got off the internet.

In the old days lawyers had a monopoly on legal knowledge and they would disclose that knowledge for a big fee.  Now knowledge is readily available at the click of a few key strokes and a Google search.  Legal knowledge is free or it can be obtained relatively inexpensively on the internet.  This new way of obtaining legal information has destroyed the old law firm model.  If you are practicing law the old way you can bury your head in the sand and hope your practice survives or you can adjust with the times and use technology to make you more efficient, productive and more money.

All lawyers should read a related story in Atlantic entitled “Why All Law Firms are Doomed to Fail.”  The article says:

“The legal industry is in crisis. But its archaic partnership models are built for inertia. . . . Most big corporate law firms aren’t built to run like modern businesses. . . . As Indiana University Law Professor William Henderson wrote yesterday for The AmLaw Daily, fundamental aspects of their business models are under attack from entrepreneurs who are finding ways to do tasks cheaper and more efficiently.”

The eLawyering Blog has a couple of interesting posts on LegalZoom and its affect on attorneys and the practice of law.  The first one is called “LegalZoom: The “Good Enough” Legal Solution.”

“LegalZoom, the leading online provider of legal services to consumers and small business, as predicted here previously, finally filed for an IPO last week. The company is seeking to raise $120 million to expand their services both in the US and internationally.  LegalZoom’s data in the S-1 filing is now available for everyone to analyze:

• In 2011, 490,000 orders were placed through their web site;
• 20% of all limited liability companies in California were done by LegalZoom;
• During the past ten years, LegalZoom has served over 2,000,000 customers.
• Revenue in 2011 was $156 million.”

The second article is “What Lawyers Can Learn From LegalZoom.”

“Unless you’ve been asleep for the last five years, you have probably heard of LegalZoom, the California-based, non-lawyer legal document preparation company that claims it has delivered over 1,000,000 wills to consumers, and that it is the largest incorporation company in the country. . . . Consumers don’t seem to care that they are not dealing with a law firm. As lawyers, we know the service they are selling is risky for consumers, but for consumers it delivers a “good enough” result. LegalZoom would not be growing at this fast a rate if they weren’t offering something that consumers want and value.”

What do you think?  If you are competing with LegalZoom, what have you done to convince prospects to hire you instead of LegalZoom?