Retirement and the Solo Practice – A Gold Mine for a Young Lawyer

This post was written by Bob Minto and has been reprinted with permission. Link to original article.

Robert W. Minto, Jr. has served as President and CEO and Director of ALPS Corporation since 1987. He also serves as President and CEO of Attorneys Liability Protection Society, Inc., A Risk Retention Group; Peak Investment Management Ltd; ALPS Risk & Insurance Services Inc.; and Foundation Services Corporation, all subsidiaries of ALPS Corporation. Mr. Minto also serves as President and CEO of Lawyers Reinsurance Company (Vermont). Mr. Minto received his B.A. degree in Business Administration from the University of Washington in 1969 and his J.D. from the University Of Montana School Of Law in 1973. He served as an Associate (1973-1977), a Principal (1978-1991) and Of Counsel (1991-2000) with the law firm of Worden Thane & Haines in Missoula, Montana. Mr. Minto has been a member of the State Bar of Montana and the American Bar Association since 1973. He serves on the State Bar of Montana Lawyers Fund for Client Protection; the State Bar of Montana Law Practice Management Committee; and the Montana Justice Foundation. He also serves on the Board of Governors of Property Casualty Insurers Association of America (PCI).

Last week I turned sixty-five and realized that I am not far off being eligible for Social Security and Medicare. The problem is I don’t feel old enough to be eligible for either, and I have no desire to retire. Sixty-five used to be the milestone that people kept in mind as the date when they got the gold watch and started drawing their retirement from their employers defined benefit pension. Very few of those exist anymore and most of them have been turned over to the Pension Benefit Guarantee Corporation (PBGC) as part of a corporate chapter 11 bankruptcy filing. Now for many of us it’s just another birthday with no meaning greater than any other. This thought string got me thinking about lawyers and retirement generally.

The world has changed a lot over the past forty years, and the legal profession is no exception. When I joined my first firm I didn’t buy in, I just made a commitment to participate in the buy-out of senior partners when they retired. It was neat, clean and easy. I didn’t get hit coming in when I didn’t have a lot of money and had a young family to care for. I had some years to get my practice better established and my financial situation a bit better situated before the first senior partner retired. It worked well and the buy-out represented little more than his share of the receivables as of the retirement date and it actually worked out that paid monthly over a period of years, I came out net ahead as the receivables covered the early payments. In talking with firms today, they have different mentalities (varied) which include buy-in, no buy-in, no plan, and a whole bunch more options that I don’t understand. Today, firms seem to be more worried about lawyers leaving early and who owns the clients and how do we deal with defections. These are indeed different times. Retirements in mid- to large firms generally go pretty smoothly, with little or no buy-out, but a well-funded 401(k) plan to make the golden years comfortable.

As the old saying goes “old lawyers never die they just lose their appeal.” I am beginning to think “die” should be replaced with “retire,” at least as far as for those in solo practice or small firms of 1, 2 and 3 person(s). Where economics remain tough and available, retirement plans consist of IRAs and not 401(k) plans. Sure you can incorporate a solo practice and set one up, but if you do you have to fund for employees and the headaches become much more difficult with safe harbor rules and the like. Besides, if you fully fund it every year you will be taking it out of your own pocket and somehow that seems harder to do than when you take it out of the firm’s collective pocket.

So how do solos and small firms manage the transition? I find that mostly they ignore it until they have to deal with it and then it usually means breaking things up. The lifelong practice of bringing younger lawyers into a practice so you could turn over clients seems to be waning as fewer and fewer young lawyers want to take on solo practices and many of them have so much debt going in that they can’t support themselves and make the debt payments. I know of several cases of small town practices just closing because the lawyer at age 75-80 decided he or she needed to give it up. They can’t even give their practice away.

Today you just don’t find good mentoring going on in many firms. The partners don’t have time to spend (waste) teaching a new lawyer all the things about practice that they don’t teach in law school. In a small practice with a retiring attorney you have a gold mine, a virtual mother lode if you will. They aren’t trying to build a practice, their economic needs will be considerably smaller and they will want a place to come to the office and have coffee for a number of years so they will be around when you have questions or need help or even to fill in so that you can take a vacation.

I can go on for hours about the benefit of taking over an existing practice, in a city or a small town, but I think you get the picture. It’s about getting started on the right foot, learning the ropes from a pro and not having to take everything that comes in the door to survive.

Why do I care about transitioning practices rather than closing them? I have a lot of reasons, but mostly it’s about continuity for clients, and finding a way for older lawyers to slow down and still remain useful in their own eyes (big one here) and able to make a huge contribution to the future of the profession. I know a lawyer right now in his eighties that still comes to the office (all alone) every day that outsources his clerical work and handles non-court matters for his clients. He enjoys the clients, but he wasn’t a good planner and still needs the money to supplement his social security and Medicare. His practice (I know it very well) could easily produce enough to support a young lawyer and a secretary if he didn’t refer the court matters out of the office and he could probably work less and have just about the same income if he had a younger lawyer helping him with the office administrative stuff. In addition I can’t think of a better mentor for a young lawyer than this particular gentleman.

My point of this particular ramble I am not really sure, but I guess I want to bring focus to an ever growing issue. \

Being a Baby Boomer, I have an army of brothers and sisters at the bar that will be facing practice transition in the next ten years and I see it as an opportunity for law schools and law students to make a difference. The law schools could start focusing on pairing graduating students with these opportunities rather than settling to post them on an employment board in the student lounge. They can develop mentoring guidelines and suggestions that give order to the transition and give a little thought to how they might assist older lawyers frame or posture their practices to make them more attractive to a young lawyer in the coming years. The local and State Bars might look at what they can do to help make the generational connections work better and promote the advantages of small firm practice.

I don’t know where the practice is heading; I wish I did, but I can tell you it will change. The signs from the large firms indicate a struggle to make the economics work, and the signs from the small firms indicate insufficient structure to make them attractive to new lawyers. We probably should have been thinking about this a few years ago, but we didn’t so now we get to crunch and try to catch up with solutions.

All opinions, advice, and experiences of guest bloggers/columnists are those of the author and do not necessarily reflect the opinions, practices or experiences of Solo Practice University®.

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2 comments on “Retirement and the Solo Practice – A Gold Mine for a Young Lawyer

  • Bob,

    Thanks so much for highlighting such an important issue/opportunity for young lawyers. When I first started thinking about going solo, I reviewed listings and tried to find an opportunity to purchase an established practice. I did find listings, mainly in local bar classifieds and on Ed Poll’s classifieds: http://www.lawbiz.com/for_sale.html.

    However, I could not afford the 6 figure payments. I think most young lawyers are mainly scared off by the numbers.The young lawyers I have seen successfully transition into ownership of an established solo practice typically already knew the older lawyer who was looking to wind down.

    Instead of the myriad of Legal Zoom-like startups, I would love to see a company successfully find a way to match young lawyers with retiring solos so at least conversations can begin to take place and this option could at least be explored.

    Great post! I hope to see more comments and discussion about this.

  • Rachel Rodgers has a good point about a need to for a place to market practices to new lawyers.

    I suspect that most of the law firms do not receive offers for their asking prices or anywhere near it. But, many will end up training and grooming new lawyers for the possibility of a buy out over time based upon the earning of the practice.

    My oldest daughter had a number of offers after law school. But, ultimately she chose a small boutique law firm that represented financial institutions in regard to commercial real estate loans, modifications, refis and foreclosures. That is what she wanted to do. The pay was a little less than at Big Law, but she thought she would like the work environment. There are four lawyers and about 11 staff at the firm. But, the main selling point is that the two partners are in their 60s and want to retire in a few years. They wanted someone on board who would take over and buy them out over time once they do.

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