Good People, Good Estate Planning Outcomes
KRIS FLAMMANG
Are you a recovering CPA or are you still in good standing?
JAMIE HARGROVE
It’s funny, I never wanted to be a CPA and I never wanted to be a lawyer, and here I am a CPA lawyer. But the two did go hand in hand. I'm a numbers kind of guy, of course and I still love to get a good spreadsheet, but I'm a visual guy too.
KRIS FLAMMANG
You can use both the right and left parts of your brain. You have a pretty interesting history of how you came to be where you are now. Take us through that.
JAMIE HARGROVE
After about five years as a tax lawyer, I decided I wasn’t going to do that anymore because there’s an expectation that you know everything there is to know about tax and law, which I didn’t. I really liked estate planning, so that was the direction I went.
In 1990 I started a practice with two other partners, one of whom later because mayor of Lexington, KY. I did a lot of presentations and had a lot of speaking engagements on estate planning, and the practice grew.
Then I became a partner in a very large firm, with about 600 lawyers. After several years I left to head up the estate and trust practice for a firm that wasn’t as big but still very large, with about 160 people.
They treated me well, but I am a bit of an entrepreneur, so about 10 years ago I created my own practice again. My former partner who by then was former mayor of Lexington rejoined me for a year and helped us expand into 23 states, with about 30 estate planning lawyers.
We ended up investing about a million dollars into building online cloud-based technology, which was noticed by the American Bar Association, and we got an award for the best online delivery of legal services of any law firm of any discipline in the country.
Ultimately, I was able to spin out a technology company, but still keep my focus in law in the estate planning world.
KRIS FLAMMANG
Now that you’ve done this for so long, if you could go back in time and give your younger self some advice, what’s the most important thing you would say? What do you know now that you wish you knew then?
JAMIE HARGROVE
The main thing is to associate with good people. I've been blessed with associations with not just really smart people, but really good people. When I left firms, I was treated as well as I was when I joined them. If you are going to do it on your own, there’s good and bad and ugly to partnerships and associations with larger organizations. But if you're going to associate, just spend lots of time really determining who you want to associate with. In my case, it was lots of time and prayer, and I don’t think I had any missteps on that. People were not only good partners, but they also wanted to promote my practice and me.
Then the other thing would be marketing. People need to know that you're there, and know what you do. Letting people know what you do and helping to educate them, will help you become a resource for them.
KRIS FLAMMANG
You might be the smartest and most compassionate person, but if they don't know you're around, that doesn’t do you any good. You talked about being in being in partnership with people and finding the right people. Is there an easy way to explain why a business succession plan is so important to the owners and future owners of a business? What does it accomplish?
JAMIE HARGROVE
I should start with why it doesn’t exist. It is amazing to me that people who are successful in business have spent very little time focusing on what’s going to happen if they don’t show up one day. If they become disabled or die, who’s going to step up to the plate? It’s a pretty simple question to ask. If you own a donut shop and you’re the baker, if you don’t show up, someone needs to do that. It's amazing how many business owners just don't have a good grasp of that.
KRIS FLAMMANG
When they do go through that process and have a succession plan in place, what does it ultimately accomplish? What's the goal of doing it?
JAMIE HARGROVE
The goal is to be able to continue the business. For example, there are cases where the succession plan is, “When I die, my wife or husband is going to put the business on the market and we’re going to sell it.” Others have a buy-sell agreement with a key person. A buy-sell agreement is one piece of the entire succession plan, with the idea of making sure your employees are protected. If the business doesn’t continue, and it employs a lot of people, you're putting them at risk. So not only are you putting your family at risk, you're putting your employees at risk, and they’ve probably helped make you successful.
KRIS FLAMMANG
Along those same lines, people hear about asset protection and estate planning, and might wonder, “Are those the same? Are they different? Are they similar? How do they fit into each other?” Can you give us some clarity on that?
JAMIE HARGROVE
I find that almost every client has an interest in asset protection, and sometimes that asset protection for themselves can create some restrictions that entrepreneurs and business owners should consider. When they realize some of the barriers that you set up, maybe that's not what they want after all. But what if I asked that client, “When you're gone, and you've left your estate to your son or daughter, do you have any concerns at all about having that estate eventually end up in the hands of a son-in-law or daughter-in-law?" If I don’t bring that up, they may never mention it. No one wants to talk badly about their child’s spouse.
But this is the answer I get in virtually every situation. They often look over at the door to make sure no one is coming in, and then tell me, “We love our daughter-in-law and our son-in-law…but we don’t want our estate to go to them." No one does, it’s universal. Wouldn’t you want to protect your estate in the event of a death or divorce?
Here’s something interesting. I did four separate prenuptial agreements for a client. She was 72 when I did the first one, and almost 90 by the time I did the fourth one. The point is, the son-in-law or daughter-in-law you have today may not be married to your kids when they die. It may not be the result of divorce. Your child could outlive their spouse and then remarry. That could bring in step-children. There are the kinds of step-kids people raise as their own because they’ve been in the home since an early age…but there are also the ones who are 30 or 40 when they enter the life of someone who remarries in their 60s or 70s. If that happened to your child after you’re gone, wouldn’t you want to put some type of asset protection in place?
KRIS FLAMMANG
What do you really like right now about your business? Is it the expansion, the associates you have, what do you like best?
JAMIE HARGROVE
I like helping people just like you do. If I can help five people instead of four, that’s great. If I can help 50 instead of five, that’s even better. With the national practice, I'm able to help a lot more people. But also, going back to what I said earlier about associating with good people, I have such good partners that I’ve been blessed to associate with in each of these offices across the country. They're great planning lawyers, and many times they have a CPA or an LLM in tax background. They’re also bringing in some additional expertise that I don't have. For example, I have a new partner in Nashville who’s a CPA lawyer, but also focuses on real estate law. Our specialty is dealing with the very high net worth, the very complex plans, and when you get into those, having additional partners that bring in that extra expertise is a significant benefit. When I was with the big firm, with 160 lawyers, I could just walk down the hall or go up a floor to find an expert in virtually any area I wanted. That’s what I’ve now been able to create.
KRIS FLAMMANG
By having the ability to collaborate and leverage other people, and doing that through partnerships or collaborating with other professionals, you can provide more services or expand without adding staff, which is a big deal. What are the areas of your practice right now that you get the most enjoyment from?
JAMIE HARGROVE
I love the very complex estate plans. We have a large longstanding staff of paralegals and in-house CPAs that do what we call plan implementation. I'm able to delegate a lot of elements of those plans. But what I don't delegate is all the front end, the architectural kind of planning, which is what I love to do. I mentioned spreadsheets earlier. We customize those for each client because everybody's different. I found customized software that seems to do it all. I'm a visual guy. I end up doing a lot of that on my end, just so we can make sure that the architecture and the vision plan is mine. I have a really good team of people that carry that out.
The other area, which is a new one for me, is elder law. I acquired an elder law practice a few years ago, and have a phenomenal partner who does elder care life plans, including things like Medicaid and end of life planning. We have planners that deal with things like which facilities are best, and monitoring your care of your loved ones, and so forth. I have clients who have been with me for many years, and as they’re aging, they need to address these issues, and they appreciate having a solution. When you can do something for a client that takes a burden off them, and they thank you as they’re going out the door, that’s what it's all about.
KRIS FLAMMANG
They trust you. You've listened to them, and you've solved the puzzle, and given them the confidence that they’re in a good place. On the flip side of that, what do you think is the biggest misconception people have about your line of work or your industry?
JAMIE HARGROVE
Probably the biggest misconception would be the thought that you have to give up control and access to assets. I have a new client that I’ve actually known for many years, since our kids went to school together. He has done phenomenally well. He’s worth hundreds of millions of dollars. But he doesn’t have a will. I asked him why, being so successful, he waited until this late in life to begin estate planning. His answer was, "I didn't want to give up control, but now that you’ve explained how the planning can work, I know I could do the planning and keep control."
KRIS FLAMMANG
Like so many things, the status quo just becomes comfortable. Change is hard until someone shows them, “Yes, you can do that.” I want to go back into your past for a minute. Do you remember your first experience with money?
JAMIE HARGROVE
I sold excess vegetables on a little card table by the side of a road. I grew up in a very rural area, but we lived on a busy highway. I’d sell cucumbers and squash and tomatoes. That led to two acres of crops. One was “you pick them”, and we picked the other one and sold the crops alongside that busy highway. Then later when I went to college, I kept track of everything I spent because I was paying my own way. I could tell you the cost everything almost down to a nickel.
That was my first experience of making money and then budgeting to make sure what I made was going to last me and get me through those four years of college.
KRIS FLAMMANG
Did you have any experiences personally or in business that made you keenly aware of the positive or the negative impact of wealth?
JAMIE HARGROVE
I learned that every decision we make is about an allocation of time. As we make decisions, we're deciding whether to free up time or cause the need for more time. That hit home quickly after I got out of law school. I had invested in real estate, and had two fourplexes. At the time, a number of Japanese companies had sent people in to build the Toyota manufacturing plant. Their executives would pay exorbitant prices for rent for a three-to-five-year period. I was ready to make a killing on real estate. But my wife asked me, “Do you want the real estate or do you want me?” I think you can guess which one I chose.
Today I own my house, and that’s the only piece of real estate I’ve owned in 37 years. I think business and life is about a lot of decisions and we can only squeeze so much into it. We have to decide what our priorities are, both in work and our world outside of work, and make sure there is that balance that lets us do what we really want to do.
KRIS FLAMMANG
I like that. So, looking at work and life, what would you say is your biggest accomplishment, either personally or professionally or both?
JAMIE HARGROVE
I have four wonderful kids, and you and I have something in common about parenting. We’ve both gone to another part of the world and adopted a baby. My wife and I found our daughter in China more than 21 years ago after having three sons. I wanted to make a difference in somebody's life, but she’s made a bigger difference in ours. If there’s any accomplishment I’m proud of, it’s getting these four kids up and on their feet. They’ve done the rest on their own, but I guess we played our small role in that.
KRIS FLAMMANG
If you weren't doing what you're doing now, what do you think you would be doing instead? When you were young, did you have a different career path you thought you’d be pursuing?
JAMIE HARGROVE
When I got out of undergraduate school, I thought I would go to law school, but not be a lawyer. I wanted to do something in business. So, I've been fortunate to build a law practice and treat it as a business, and now have all these other really good opportunities. I had to wait to do something at the magnitude and the level I'm doing today. I thought I would have done it quicker.
KRIS FLAMMANG
Not a lot of people can say they really are living the life they thought they would want to live, or doing what they really wanted to do. Outside of your practice, your business, is there something that you are really passionate about personally?
JAMIE HARGROVE
Definitely my faith. I’m a born-again Christian. I certainly respect other faiths, but I’m very passionate about sharing my faith. Our church is a big part of our life. My wife is a gifted leader, so she speaks at conferences and spends several hours a day in Bible study and memorization. She is an inspiration to a lot of others and to me. That's our world outside the workplace, seeing how we can help people through our faith journey.
KRIS FLAMMANG
I appreciate you sharing that. Earlier, I asked you what areas of your practice you liked best. Now let me ask you what you consider the most exciting part of your business right now. From a business standpoint, what are you most excited about? What do you see as the biggest opportunity for you?
JAMIE HARGROVE
It clearly is the expansion. We’re rapidly expanding. We've gotten an opportunity with the country's largest injury law firm, and we have a couple hundred probate cases that have been handed to us in 35 states. This is pushing us into additional states that we have not been in to this point.
We’re using new technology with that. My company, NetLaw, is a do-it-yourself platform. We've sold tens of thousands of estate plans. Do-it-yourself estate plans in all 50 states. But you can't go on the Netlaw.com website and get a will or a trust or any documents, we market strictly through financial services companies who can then give their clients a choice, "Do you want to go to the Jamie Hargrove in your community and have an estate plan done the traditional way with the yellow pad and the pencil, or do you want to do it yourself?”
And now that the law firm is soon to be a 50-state practice, it is going to be an add-on to that platform. So, you still get the efficiency of a do-it-yourself online platform, but also get the lawyers review, sign-off discussion, etc. That’s pretty exciting. Generally, all the do-it-yourself estate planning platforms out there use networks of attorneys, and unfortunately that doesn't work so well. What we’ve done is have a service center model, so we get those clients into the model with paralegals and legal assistance to see what their questions are. How can we help them? Because those folks are customer service oriented, they can usually answer 70% to 80% of the questions immediately, without having to go through the timetable and the cost of the lawyer. Then, when we see what’s left, now we have the lawyer focused on just the things that the lawyer can really help with. It cuts down the cost, and we can deliver that service much more efficiently. It creates the opportunity for what I think is a very different delivery of legal services. That’s a pretty exciting opportunity.
KRIS FLAMMANG
You need wisdom in that situation, you can't do that with a completely internet-based model where you don't have a human involved. Is that how you are addressing commoditization in your industry? Do you think this is the best way you’re approaching that?
JAMIE HARGROVE
That really is the solution. It has to have that services component attached with the lawyer. Think about the real estate industry. When I got out of law school in 1983, a residential real estate closing lawyer did about 80% of the closings. Now there are only 13 states that even require a lawyer to be at a closing. For those reading this, if you recently purchased a home, you probably didn’t even talk to a lawyer, and if you did, it was probably after all your questions had been addressed by non-lawyers. And people are happy with that. When they go to a closing, no one is complaining, "Man, I wish I'd had more time with a lawyer."
The problem in the legal industry is we think everybody wants to talk to a lawyer. No, they just want their legal questions answered. But what's interesting is most of their questions aren't legal questions. So, what we're doing is parsing out the questions that aren’t legal questions and letting non-lawyers address those. Use systems and processes and technology to help address those. Then, when we do need the lawyer, let's let the lawyer be engaged.
KRIS FLAMMANG
What do you see as a big challenge in your business, or an obstacle you think your firm needs to overcome?
JAMIE HARGROVE
The biggest obstacle in any business is capital. One of the reasons we spun NetLaw into a separate company was you can't raise money very easily in a law firm. Capital is an issue when you do rapid growth expansion for anybody. If you're going to grow, you better have some capital to be able to grow with.
KRIS FLAMMANG
You want to be able to have access to that when you need it. Looking back, is there a question you think I should have asked, or do you want to expand on anything you said earlier?
JAMIE HARGROVE
If you had asked me what is missing in the law business, I would say it’s what you and your team are doing. Law becomes a bit more transactional. You need a will and after you get it, you’re done. You don’t need that lawyer anymore. But what people really need is relationships. Lawyers aren’t always very good at that, and the transactional nature of our industry isn’t conducive to that. The way you’re doing it, having that regular engagement with your clients, makes it helpful for us to have someone like you on our team. Because we’re not engaged on a regular basis. We’re not there to see what’s happening and what changes have happened. You might see that they’re getting ready to acquire a business, or whether they’ve funded the trust, or any issue that would require us, and then we can bring the troops together.
KRIS FLAMMANG
I think having a comprehensive team of professionals can be really effective so things don't slip through the cracks. Thank you for what you do as part of that team, and for the valuable information you shared today.