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Legal Zoom- The End of Lawyers?

May 30, 2013

MC900441513

Legal Zoom- the End of Lawyers?

Here’s a true story: I’m sharing a suite of offices with a group of lawyers. One of the lawyers, we’ll call him AJ, calls me into the conference room to witness a will for his clients. After the appointment ends I ask him what he charged for the will.

AJ: $2500
Me: Did you do any sophisticated estate planning?
AJ: No, just a simple will and a life insurance trust.
Me: I have to get your kind of clients. I charge $600 for that.

The moral of the story is that since pricing in legal service lacks transparency, you don’t “get what you pay for”; And, there is really no way for a client to know what the appropriate fee is for a specific service.

That’s why most lawyers charge by the hour. Clients prefer that, even though they claim otherwise. Almost every time I propose a flat fee, the client chooses an hourly rate.

Being paid by the hour doesn’t encourage efficiency, but, like the famous quip about democracy, it is the worst way, except all the others.

So, when it comes to Legal Zoom, I’d like to leave it at: “You get what you pay for”. But, the above story disproves that, so I’d like to analyze what the value proposition of Legal Zoom is.

For those who don’t know, Legal Zoom is the market leader of on-line legal document preparers. When I say Legal Zoom, I mean that specific company and all its on-line competitors, much like someone in the mid-west would ask for a Coke, even though they wanted a Pepsi.

Just a few facts about Legal Zoom:

1. They are amazingly successful. Their market penetration is noteworthy.

2. They have made a negative significant impact on lawyers that derived much of their income from the services that Legal Zoom offers.

3. They have spawned a ton of competitors: many with little differentiation in their offerings, some with significant differentiation.

Here are two areas where Legal Zoom does most of its business: Wills and Corporate Formations (Incs and LLCs).

1. Wills- For $69 Legal Zoom will give you a will. That’s about 10-20% of what any lawyer will charge. Big savings, but I think this is a mistake. You only die once and a will is a pretty important document. See my blog post below: https://lawyeroutsourcing.wordpress.com/2013/01/29/5-reasons-you-need-a-will-even-if-you-are-under-40/.

Plus, the law of inheritance and guardianship of minor children is pretty complicated: Do you want to trust yourself, guided by a computer, to get it right? I think you might want to spring for a seasoned professional in this case.

2. Incorporations (also forming LLCs)- Legal Zoom charges $100 for this and they give you a standard operating agreement. Actually, I think this is a bit of a waste. Almost all of the states have on-line interfaces that do the same thing that Legal Zoom does.

Can the $100 be justified by 24-7 tech support and all the other bells and whistles that Legal Zoom provides? Maybe, but I‘m not sure the do-it-yourself experience at Legal Zoom is enhanced by $100 of value over the do-it-yourself experience that the State actually provides.

I don’t imagine this blog post will stem the tide of legal consumers flocking to Legal Zoom and its competitors. That was never my intention or aim. I do think the consumer should understand what he or she is getting (and, also is not getting) from these companies.

Avrum Aaron, a 1994 graduate of Columbia Law School, is the COO of Legal Outsourcing Partners, LLC. He can be reached at avrum@lop-llc.com.

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From → LLC, Wills

One Comment
  1. yechiel aaron permalink

    I still like the good human hands on approach that a good lawyer will give

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