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Cutting Edge of Legal Innovation

By Mark Green

Since opening in February 2011, Jamie Hargrove, pictured, and his partner Roger Madden have grown their Lexington and Louisville-based estate planning specialty practice from 18 to 50 employees and opened offices in 20 states by developing Net Law, an online client intake tool.

Lexington-based law firm Hargrove Madden does not use the term “electronic legal record,” but an eLaw innovation that won the year-old specialty practice the American Bar Association’s prestigious eLawyer Award earlier this year might be considered exactly that.

The novel digital tool Hargrove Madden, an estate planning practice, has developed is known simply as Net Law. It saves time and cuts cost by automating a client-information-intake process that can be tedious and frustrating – with benefits for subsequent interactions with wealth managers as well.

It’s an advance likely to push a reluctant legal services field another several steps down the path of disruptive change that is remaking so many areas of commerce today.

“No one has done what we’ve done the way we’re doing it,” said Jamie Hargrove, who practiced as a CPA before becoming a tax lawyer. Since 1985 he’s been an estate planning specialist.

Working with software programmers in five countries, Hargrove Madden has taken client intake for estate planning online. Clients can log in at their convenience 24/7. Net Law employs a decision-tree process to gather all the information pertinent to an individual estate planning client, who can bypass the reams of questions that don’t apply.

Results collect in a digital file that, after legal review and approval, then plays nice with the software platforms financial planners and wealth managers use. The real magic happens when a planner opens a new file on the client – voila! – the Net Law results automatically populate into all the appropriate information fields. The electronic process bridges the gaps in the estate planning process between lawyer and financial planner.

“What we are trying to do is bring the right and the left hand together,” Hargrove said.

Paper-based collection requires having all clients answer questions covering every potential situation on a generic 30-page background document; perhaps five of those pages might truly be applicable to any individual. The results then have to be copied and physically delivered to planners and wealth managers, whose staffs enter the data into their system. Or worse, clients have to slog through a new but duplicative questionnaire for their financial adviser.

Beyond the information collection, Hargrove Madden’s software generates summaries of assets and flow charts.

“It can apply a whole-asset protection model for Delaware trust planning,” Hargrove said. Net Law can prepare appropriate information for an insurance trust, an A-B living will, a special needs trust, a generation-skipping trust, a life insurance trust and most of the many other segments of estate planning.

“It is a much more efficient model to ultimately deliver a financial product to clients,” he said.

After clients access the online multimedia questionnaire at hargrovemadden.com/onlinepractice, a Hargrove Madden attorney licensed in their state does perform quality assurance checks to ensure compliances with local laws.

Overcoming multiple barriers

Others have considered taking various legal service functions digital and online, but a combination of technical, professional and financial hurdles usually prevents that pursuit, Hargrove explained.

First is the significant cost of creating complicated and nuanced software from scratch. Hargrove Madden has between $500,000 and $1 million invested in the ongoing process; its partners and members spent months refining templates.

Plenty of large firms have the money, but they face the second hurdle: a strong financial disincentive. Online services cost clients about half what traditional in-office methods do, Hargrove said. Digitally automating a legal service to benefit one practice specialty will reduce billable hours in other areas of a firm. Permanently. Undertaking creation of a digital law tool is a nearly guaranteed formula for intrafirm squabbling – or worse – in a larger partnership with multiple practice specialties.

That is why Hargrove and Roger Madden opted to take their estate planning unit, which had operated comfortably as one of 18 practice groups at the 140-attorney Stoll Keenon Ogden firm in its Lexington office, and strike out on their own. SKO management entertained a pitch to pursue the digital tool within the firm, but opted against it. Acknowledging that leaving was a gamble, Hargrove said he has always had an entrepreneurial streak.

Meanwhile, a third big hurdle to surmount is effective communication and efficient interaction between techie programmers and lawyers. Both groups include smart people, Hargrove said, but their respective knowledge is within their own professional realm. From each direction, the learning curve is high and the time required to bridge it is costly.

“It was frustrating to sit down with your tech people because they do not understand what you are talking about” regarding legal functions, he said. The firm went through “six months of pain and suffering with U.S.-based programmers.”

Progress came when the firm realized it had someone with a foot in and understanding of both realms: Alex Hargrove, Jamie’s Hargrove’s son, who had just graduated law school at Washington & Lee University. Like most of his generation, Alex Hargrove grew up immersed in and comfortable working with all things digital and computerized.

“He could communicate with these (tech) people,” Hargrove said. “He grew up in the family business, and he’s got the technical aptitude.”

Beyond bridging the communications gap, Alex was able to outsource the software development process, following the example of Lexington-area firms that built successful relationships with software programming groups in India and the Philippines. The cost savings were dramatic, Hargrove said, citing as an example the task of creating a pair of web graphics in Net Law that a local programmer priced at $500 but a Filipino vendor with a good work record did for $30.

Business development has a high profile

Hargrove Madden came into existence Feb. 8, 2011, launching with 18 employees in Lexington and Louisville. In less than 18 months it had grown to 50 employees and offices in 20 states. It deals with clients and business entities in all 50 states and plans many more offices.

Its nontraditional vision of legal practice extends to hiring as well. Rather than the model of recruiting fresh law school grads expecting to spend their first 15 practice years in the office maximizing billable hours, Hargrove and Madden decided to make marketing and business development a key piece of their attorneys’ jobs. To recruit, train and manage such personnel, they hired Jim Walters, who had 30 years experience building client development teams with Kinkos and Harshaw Trane.

The attorneys Walters recruits have experience and some understanding of today’s diminished, post-financial-crisis business circumstances. Law schools do not teach students about legal business conditions, Hargrove said, and new grads tend to have a pie-in-the-sky outlook, foreseeing good times and great compensation.

Since 2008, however, many larger firms have been downsizing. The lingering moribund business climate – it continues still today – factored into the choice to make business development part of the job from day one. It means significant training is involved, Hargrove said, because attorneys typically do not shift professional energy toward business development activity until they are 10, 15 or more years into their career.

“You don’t go get another lawyer. You get someone who knows how to market,” Hargrove said of the choice to hire Walters as national director of business development.

The firm’s goal is “a lawyer who can market themselves day one.”

Permanent change remaking legal services

What Hargrove Madden is doing likely will not be appreciated by traditional legal service operators. Automating functions mean fewer billable hours and lower fees. And should the ambitious Kentucky firm or others take the Net Law model to other practice specialty areas, the pressure on traditional labor-intensive legal services will only intensify.

Hargrove’s view is that permanent change already is in the works in law as in so many areas of commerce.

Non-law companies such as LegalZoom are leading the charge, but the process is being driven by the consumer, by businesses wringing costs from operations today as a matter of survival. When Hargrove speaks regularly to bar groups, he cites the 2010 book “The End of Lawyers? Rethinking the Nature of Legal Services” by Richard Suskind and its description of the change under way in the industry.

Traditional “law firms are not going to return to their heyday,” Hargrove said. Costs for services and functions that do not require a trained lawyer’s expertise, knowledge, creativity and wisdom are being driven down by shifting work to paraprofessionals or automating it. “It’s really the end of traditional lawyers.”

Hargrove Madden rolls some of the savings it achieves with Net Law into lower costs for other legal services it provides. And it continues to refine and improve its digital tool, which the ABA already has recognized as the leading e-law innovation in the United States in the past year.

“What we have online today will look a lot better in 12 months,” Hargrove said. “It’s already better than anything else now.”

Mark Green is editorial director of The Lane Report. He can be reached at [email protected]