Posted on 04/20/2021 at 07:38 AM by The Biker Lawyers
Subscription-Based Legal Services
This article is based on a series of long internal discussions in our firm based out of Cedar Rapids, Iowa, regarding the ongoing trend of legal startups attempting to shift the business of the legal profession from retainer-based or even fixed pricing per project into a subscription model for clients. We call this model Subscription Based Legal Services (SBLS).
Many have attempted this with varying degrees of success (see Rocket Lawyer and Legal Zoom), but none have managed to create a subscription service that parallels the quality one can achieve by paying a retainer or fixed price for legal services.
What follows is our reasoning as to why an SBLS model is unlikely to work for a variety of legal areas.
This was the first area of investigation for us, as family law cases tend to involve large retainers that many cannot afford, and the consequences of lacking representation are dire and personal, such as losing custody of one’s children. It would be a boon to many, theoretically, to pay the rough equivalent of a Netflix subscription in exchange for having access to family law attorneys when in need. However, there are a few reasons the subscription model cannot work.
First, the ideal scenario where you’re buying the subscription before you have legal needs. In this case, you’re buying the subscription because you want to be covered for legal issues that may arise in the future. This is the same model the insurance industry uses successfully.
However, insurance industries are insuring catastrophes that all parties have an incentive to avoid, such as death or injury. Furthermore, if that catastrophe occurs because a party actively worked to make it happen, it typically nullifies the insurance they purchased.
There is no such incentive for an individual to avoid litigation of their family issues. In fact, there is often an incentive for people to pursue this, such as getting out of a terrible relationship and securing their children. Thus, the catastrophe for which you are purchasing the insurance occurs whenever you decide, and you have the incentive to have that happen. Otherwise, why would you bother with a subscription for legal services?
The second scenario in which you might buy insurance is when you have an active legal need in the family law area. Let’s say you have a custody battle along with divorce heading your way, so you pick up a subscription for legal services. Now you’re paying a small monthly fee to an attorney to handle all of your issues, and you have no reason not to bombard that attorney with emails/phone calls all day/night because you’re paying a set fee.
Your world is collapsing, and you’ve got a lawyer now for $10 a month (hell, you could make it $250 a month), he can’t charge you more for phone calls/emails and responses, so you’re going to want constant updates, hand-holding, and ultimately, as much pressure on the opposing party as you can get.
The problem, broken down
Family law cases use financial incentives to prevent clients from monopolizing time. This is necessary, because clients are naturally going to want a lot of hand-holding as they go through their relationships ending, and if every lawyer gives them that for free, they’re going to keep taking.
There is an incentive for the client to buy this subscription only when they need it, and then stop the moment the case is over. This leads to either incredibly high subscription costs (basically a retainer) or lawyers working for below minimum wage (not gonna happen).
Criminal Defense Law
Let’s start with the most obvious question, who is likely to start a subscription to a criminal defense attorney. The answer is plain: current and prospective criminals.
Criminals already charged
You now make less than a public defender. You’re going to litigate trials for individuals for $10/month? Or, let’s say you’re savvy so you (like an insurance company) state that the subscription only applies from the date of purchase, so any charges brought before that require a traditional retainer. Similar to the way an insurance company will not let you purchase car insurance for a crash after the crash occurs.
People contemplating crime
Congratulations, you’re now the consigliere to impoverished crime (the mob already has attorneys they pay retainers to). You’re going to get a million phone calls requesting legal advice from individuals who are contemplating crime and want to know how to get away with it. Half of them aren’t going to be smart enough to ask the questions in a non-incriminating manner, so you get to deal with the ethics of that.
The other half are committing crimes in your or others' communities, and regardless of your ability to discuss criminal law in hypotheticals, you’re aiding and abetting that from a moral standpoint. There goes your ability to clear your conscience (unless you lacked one to begin with), and likely your ability to sleep soundly at night.
Even worse, when they’re caught, you get to litigate their trial for $10/month.
Wills and Trusts
This area of law has already started transitioned to using a flat fee. If you’re using subscription pricing for a will you’re attempting to undercut a market of active attorneys. Professionals who have already sliced the pricing down to its barest margin and automated as much of it as they can.
Furthermore, what incentive would the client have to pay more than a one-time fee for a will, and then the occasional fee to update? It’s unlikely to be cheaper to maintain a subscription over the years.
Let’s say they want to actively update the will? Great, now you’ve got to handle the signing ceremonies for petty grandparents who want to cut others out of the will on a whim, then add them back in. The time-drain there won’t justify the cost of the subscription for you as an attorney.
This is the area of law that is most likely to attempt the shift to a subscription-based model. The idea is to undercut in-house counsel.
How does one achieve this? Simple, take the average salary of in-house counsel, then underbid it by 20-30% as a subscription for the company as a whole to do their contracts/compliance work. Here’s the problem, let’s say you did your research and realized that this company has three attorneys as in-house counsel, so you underbid their salaries in order to get all of that companies legal work.
Now you’ve taken on three jobs for 70-80% of the price. How do you achieve a profit margin doing this? Probably hiring one new attorney fresh out of law school who you can work 100+ hours a week and pay 50% of the wages of the three attorneys you just put out of a job.
You’ve destroyed three jobs to create one slave.
This is a race to the bottom for the industry. In doing this, you’re erasing in-house counsel jobs to overwork other attorneys, and in doing so, you’re pushing the legal industry further and further down financially. You’re underbidding and underselling the profession.
This may realize short-term gains, but what happens when the next subscription-based law firm launches and then underbids you, and so on and so forth. It ends at the point of burnout for all involved. If anyone is going to initiate a race to the bottom, don’t participate. They are willing to destroy an industry in the name of short-term gains. They may label this as progress, but it’s just a race to the bottom.
Contracts/Real Estate Law
This area of law differs from corporate law in the sense that you’re trying to do this strictly for individuals and small businesses. This is where Rocket Lawyer and Legal Zoom made their play for an SBLS business.
Rocket Lawyer and Legal Zoom offer subscriptions in exchange for templates of contracts in a variety of areas, but mainly in real estate. At the outset this sounds appealing, as you can begin estate planning without waiting for the legal help you would require in most areas.
Unfortunately, the average consumer is grabbing barebones templates or templates filled with boilerplate text that may or may not apply to their particular jurisdiction. Even worse, they have no idea how to ensure enforcement should a breach occur, nor how to execute these contracts correctly in the first place.
It’s basically paying a little extra money for the illusion of legal knowledge without the substance of it.
There is no one-size-fits-all contract, regardless of what others may advertise, and what you choose to include or not will have future consequences, both for yourself and your business. Contact an experienced attorney near you today if you have legal needs.
Personal Injury Law
The contingency fee area of law is personal injury. While you could potentially make this work by selling thousands of potential clients on picking this up, let’s examine what you’re actually selling them:
insurance against their insurance companies.
You’re trying to sell these people on the concept that even though they likely pay hundreds of dollars in insurance premiums, they should pay you an additional nominal fee just in case they get into a crash and that same insurance company decides not to pay them a fair amount.
This means you also get to answer a ton of questions about what would be considered “fair” for a hypothetical injury that has yet to occur. All of this when the insurance companies spend billions each year on rehabilitating their image with commercials and advertisements on every medium.
Smart individuals would be into this idea, but you’d have to find enough of them to make up your user base, and in the meantime, any cases that come from the current users will have to be litigated for $10/month instead of the usual ⅓ contingency fee.
In this area, it is possible to use a subscription-based legal service (SBLS) but it seems incredibly unlikely given that your entire hypothetical business model revolves around selling insurance against insurance companies.
There isn’t a path into subscription-based legal services that makes sense at this time. Each area has its fair share of issues, differing though they may be, and while funding a law firm with an insurance-like approach is an intriguing notion, there are clear issues that cannot be avoided.
It remains for the good of our profession to maintain the retainers, contingencies, and fixed-price contracts instead of recurring subscription fees. This ensures that attorneys are compensated adequately for their time and expertise. If you have any questions, feel free to drop us an email or give us a call today.