How to Pay for a Lawyer with Dan Garrison

eorge grombacher 0:02
Dan garrison is a former practicing attorney. He’s a serial entrepreneur. He is the founder and CEO of open wallet. They’re a company making attorneys affordable and accessible to everyone. Welcome to the show, Dan,

Dan Garrison 0:14
thanks. I appreciate being here.

george grombacher 0:16
Yeah, excited to have you on. Tell us a little about your personal lives, more about your work. Why you do what you do?

Dan Garrison 0:23
Sure. So I’m a 58 year old recovering attorney, is where I usually start that conversation. Been married 36 years. I don’t know how I’ve managed to pull that off, but have four grown kids, two grandkids, when I’m not trying to make attorneys affordable and accessible, I spend a lot of time on the golf course. I ski, wake surf, try to try to get outside as much as I possibly can.

george grombacher 0:52
Appreciate that. So I was, I was prepping for our conversation this morning. I saw making attorneys available and accessible to everyone. And I thought to myself, is that a good thing?

Dan Garrison 1:07
Well, you know, the truth is, a lot of folks don’t have a choice about how they interface with the legal system, you know. So for example, you know, the story that I use in talking about my company is about a family with a 17 year old kid who gets pulled over for a DUI, and they need an attorney to help them. They don’t know anything about the justice system, and they also have no idea what the cost is or what kinds of terms are available, and so they go find an attorney who tells them, I can help you. And they feel a good connection, but it’s going to be $5,000 and over half of American families don’t have cash reserves to pay in $1,000 unforeseen expense. And lot of them are subprime, you know, thin credit files. They can’t access traditional consumer credit. And so that $5,000 might as well be $5 million to them. And so you know, we’re dealing with a lot of folks who don’t have any choice but to interface with the justice system. They need an attorney for a divorce, a bankruptcy, DUI defense, their immigration status is getting challenged. And so that’s really what we’re dealing with here. And you know, as a recovering attorney, trust me when I tell you I know every attorney joke in the world, and most folks would prefer not to ever have to deal with an attorney, but life throws you curve balls where you know you really just don’t have a choice about that. Yeah,

george grombacher 2:30
I appreciate that. All All kidding aside. When you need it, you you know it’s like anything else. You find yourself in a position where you need something and you don’t know anything about it, you don’t necessarily have any resources or the money to afford the thing you know nothing about. And I imagine that that’s a very uncomfortable feeling.

Dan Garrison 2:49
Yeah, it is. And what a lot of folks don’t know, but they sometimes have a bad sense of, is that outcomes in these kinds of cases are driven almost to a disturbing level by whether you have an attorney or not. So there are some systems like the bankruptcy system, for instance, where if you have an attorney and you file a Chapter Seven, you have about a 99% chance of success. In other words, you’re going to get to your finish line and get a discharge of your debts and get a fresh start in your life without an attorney. That drops to 70% which still sounds like a high number, but when you think about the idea that 30% of the people in dire financial straits who try and access a bankruptcy without an attorney fail in something that’s almost almost 100% likelihood, if they have an attorney, that’s kind of a stark difference, you know, yeah,

george grombacher 3:45
for sure. So what kind of law were you practicing? Sort of walk me through how you came to founding open wallet. Sure.

Dan Garrison 3:53
Yeah. So for about 25 years, I was a corporate restructuring attorney, which means, basically, I dealt with sick companies. CHAPTER 11, reorganizations, workouts, turnarounds, that sort of thing. So I wasn’t really in this world of consumer law, but late in my career, I decided to start a small Consumer Bankruptcy arm of my business, and hired the talented young guy to run that for me, and became apparent to me pretty quickly that there was a big access to justice gap. And as I dug in a little bit deeper on that, realized that it kind of pervaded every area of consumer law, other than contingency stuff. So you know, if you get hurt, or you know a loved one dies, you know, through some sort of negligence, or, you know, you’re one of these people that can respond to an ad on late night TV that, you know you use talcum powder, you know you were Camp Lejeune, you know, in 80s, drinking tainted water or something like that. Then everybody wants to help you, because they want to take a stake in the outcome of your. Case. And so that space is very, very cluttered and very, very competitive, but there is no one, I mean quite literally, no one out there that’s trying to provide a financial solution to the affordability crisis that people have over basic consumer services like divorces and bankruptcies and criminal defense and things like that.

george grombacher 5:22
So you recognize this. You’re looking at the landscape, and you say, You know what? This is something that that I think that there’s an opportunity to address, that needs to be addressed, that would be good to be addressed.

Dan Garrison 5:32
Yeah. So I’ll share some stats with you. I mean, that were mind blowing to me once I recognized the problem and started kind of digging in to quantify things. It’s estimated that 100 million Americans need some sort of legal help and can’t afford it. And, you know, at the average, you know, fee level that we’re talking about for the services that we get involved with helping folks to access, it’s like a $300 billion market opportunity. And as I said earlier, you know, it’s something like 61% according to the Bureau of Labor Statistics, of American families don’t have $1,000 in reserve, and they frankly, expect to be offered some sort of financial accommodation when they go to an attorney, because, not knowing any better, because most of them have never even met an attorney before, let alone tried to hire one. They live their life, you know, financing significant purchases on some sort of credit, a payment plan, rent to own, whatever you know the case may be, and although a lot of folks you know are concerned about the cost of that kind of credit to consumers, and that’s a very real concern, by the way, it remains the only way that households like that can make significant purchases. So they’re kind of shocked when they find out that a lot of attorneys, most attorneys, don’t offer any sort of a payment plan. They expect to be paid upfront before they do the work, and about 63% of the attorneys that provide these services are solo and small firm practitioners, and they don’t have the capital or the bandwidth, the know how to be able to offer a payment plan to people they got to pay their bills to, you know, pay the rent, pay for their legal assistant. And so there’s just this huge disconnect in the market, and the more, the more I got to understand the nature of that problem, the more compelling I found the business opportunity to be.

george grombacher 7:49
And so that is, in fact, a very, very compelling argument that you’ve just made. There’s a definitive need. We don’t need to let perfect be the enemy of the good. If there were perfect scenario, then nobody would need this at all. But here, here we are, and we’d rather deliver the service to people than not at all. So how does it actually work? How did you how did you figure it out?

Dan Garrison 8:11
So the big challenge, and the reason that there, well, there’s multiple reasons why there aren’t folks in this space, by the way. You know, I already kind of contrasted it with personal injury, wrongful death, mass tort space, where there’s a lot of folks pumping money into that, the difference is, there, there’s a compelling upside. You know, they take a share of something that’s likely to be fairly large. They’re larger ticket, you know, prices. In other words, they do their diligence on a case. And, you know, there’s a large enough economic opportunity there to justify it, and they’re relying on the outcome of the case to pay the fee. In other words, the defendant, essentially, through a settlement or a judgment, is going to pay the legal fee and and pay the award. So the differences in the space that I dabble in is that ticket prices are very small. We deal with fees between 1070 $500 a piece. The folks that have to pay the fees are almost by definition, subprime. They fall into this bucket of folks who don’t have cash reserves, they don’t have a credit card that they could put, you know, a 345, $1,000 fee on, and so they’re not very attractive. And then there’s, you know, just this, I think, aversion to getting involved in this niche area where folks just feel a little uncomfortable dealing with the law and lawyers and the legal system and everything else. And so there just hasn’t been anybody in there. Now the challenge that that creates is that you are dealing with folks who are kind of by definition, subprime. And so what we did is we came up with a novel approach to that that involves a form of business lending. You. So instead of loaning the $5,000 to the consumer, we work through the law firm, offer them a line of credit. And we sort of define our credit box with these installment payment plans. They’re 1218, and 24, month installment payment plans. And we say to the lawyers, look, if you have somebody that comes in your office that makes a minimum amount of income, which is really our only kind of screening requirement, is income. If they have a certain amount of income, and you offer them one of these payment plans, you can borrow against the payment plan, and you’ll have cash up front to run your practice so that you can provide the services. And then we’ll take a lien against that payment plan, and we’ll take over managing it for you. So we create sort of this closed ecosystem where they offer the payment plans that are acceptable to us. They get cash up front, we manage the payment plans, and then every dollar that we collect on them goes to retire $1 of the law firm’s debt on their line of credit. So in a perfect system, the client pays the bill. The attorney owes nothing. They’ve gotten cash up front. They’ve gotten an incremental client they wouldn’t have otherwise had, and the consumer has gotten the legal help that they need to navigate through the system and hopefully gotten, you know, a much better outcome than they would have otherwise. So it’s what we call the win, win, win. The law firm gets a win by getting that extra client they wouldn’t have had. The consumer gets the legal help, and we get to run a business that represents a good economic opportunity, but also is kind of a feel good play, because we’re part of the solution to this societal problem,

george grombacher 11:48
always looking for win, wins. And this definitely sounds like, sounds like it is exactly that. So who is, who is the lien against?

Dan Garrison 11:56
Well, so we take a lien against the receivables. So it’s basically that expectation that the client’s going to pay their bill is a receivable that we have a collateral interest in, and so we manage it. And that’s another way in which we offer, I think, you know, a unique service too, is that we have the economy of scale of bringing great technology to bear on managing that account with a human touch, very real human touch. We talk about ourselves as being a relationship based payment management company, but we also can credit report. And you know, that’s a wonderful kind of carrot and stick for the consumer in making their payments to the law firm. And so what we do is a combination of that financing that provides the financial solution, and then the payment management side of it, side of it, or the asset management side of it, where we’re basically managing a large portfolio nationwide of relatively small Consumer payment plans,

george grombacher 13:01
it’s making sense to me so far. So what happens when, when client doesn’t pay their bill?

Dan Garrison 13:07
So we build a hedge into the financing. So every transaction that you know, the attorney has, we hold back a small portion of the financing on that, and we pool it in what we call a hold back account, and we set the level of that based on our expectation of what the default, you know, scenario is going to look like. And it’s dynamic, so we can adjust it as we go. So we’re very data driven. We’re watching the performance of the assets, and we are constantly gaining intelligence around, you know, how particular demographics of people in particular parts of the company that are consuming particular kinds of legal services are likely to perform, and then we look at the historical, you know, experience with a particular law firm, and the combination of those things helps us to anticipate the level of default that we’re going to experience. And so we try and hedge that so that there isn’t any kind of pour over exposure to the law firm, but it is a recourse loan to the law firm, and so ultimately, if the consumers, you know, default at a higher rate than it’s than expected, and we can’t adjust it because maybe the law firm stops using our program, or something like that, the law firm does stand behind the debt as well. But, I mean, for them, I can, I can tell you lot of anec data around this, where we’ve had law firms that have done hundreds of 1000s of dollars worth of incremental business that they otherwise wouldn’t have, and, yeah, they’ve had to, you know, write back a check for, you know, $10,000 or something like that. And while we try and avoid that situation at all cost, when it happens, you’ve still got a pretty positive discussion that you have with them, which is, Hey, you did a couple $100,000 worth of business you wouldn’t have had. And hey, I’m sorry you’ve got a little bit of exposure left on this. But if I told you the beginning of the day that you land all. These clients, you know, and have to write a modest check back. Would it have seemed a good business proposition to you? And, you know, not surprisingly, they say, Well, yeah, I still would have done that.

george grombacher 15:11
Really makes sense. The term anecdata is one I’ve never heard before, but I really like a lot, so thank you for that.

Dan Garrison 15:16
Yeah, sure. I mean, you hear, you hear enough stories, you know, or you see enough situations, and the human brain just naturally starts to draw conclusions from it. But I try to be careful to distinguish that from actual statistical knowledge, which we we rely on a lot to

george grombacher 15:32
Sure. All right, so who? Who are the the governing bodies you go through the Department of Banking, there’s obviously legal stuff.

Dan Garrison 15:44
So interestingly, because it’s a form of business lending, there’s not a lot of licensing across the country to be a business lender. And I think it’s because, by and large, state legislatures figure that businesses, and particularly here, law firms, can probably take care of themselves. So there’s a couple of states out of the 50 that require a license to be a business lender. Most states require you to be licensed. However, as a they call it a collection agency. I sort of take a little bit of, you know, a stand on that, because we’re not a collection agency, per se, but they define that as any business that collects, you know, receivables on behalf of another person. And so we are licensed across the country for the payment management side of the business, and those processes are usually pretty simple. They’re annual renewable licenses where you have to make ownership and some limited financial disclosures and and there’s a central clearinghouse, essentially for that type of licensure which came out of the mortgage industry. Actually, it’s the NMLS, the National Mortgage Licensing Service, that now most of the states have latched on to, to sort of Proctor all of their business licensing interesting.

george grombacher 16:59
So from conception to now, it’s not into the world, and people are actually using the service, and it’s working exactly like you thought. What are, what are some of the surprises,

Dan Garrison 17:13
you know there, you know, you say it’s working exactly the way you thought. There was a process of learning and refining this over a period of years. So I’ll tell you, for instance, you know, we had a one size fits all approach for that hold back feature that I mentioned, which was the hedge against default. And it took, you know, doing many millions of dollars worth of this business and watching the results. Because, you know, by definition, it takes between 12 and 24 months or more to work through each one of these receivables that that we finance. And so there was a lot of hard earned knowledge, you know, that’s accumulated over the course of the last six and a half years about how to do this well. And while I think we always did a pretty good job, I can tell you we are just worlds better at this now than we were when we started. And a lot of it is that data driven approach you know that I was mentioning. And I’m sure you’ve seen this in your own business life, and as you talk to other business leaders, but you have to start with sort of a theory or concept about what you think might be happening, and then you have to figure out, you know, what data points you might be able to grab onto that will either prove or disprove or refine that, so that you, you know, can, can hone in On the truth, because that’s what we care about, is the truth, right? Not your theories. Your theories are a starting point. And so we’ve got, you know, a raft of very robust reports that, you know, cycle weekly and monthly on the portfolio, where we slice and dice, you know, these assets and the consumers and the law firms in countless different ways, and do correlational analysis to try and figure out what’s going on, all of which is designed to try and drive actionable results. You want those results to tell you something that you can make a decision around, take a course of action around that sort of thing, and so that has been a hard fought and long process for us to get where where we are now. And it hasn’t stopped by any means. I mean, we’re still trying to refine that understanding daily, and also to trying to refine our understanding about how some of those patterns might change through economic cycles and changes that are happening out there in the macro economy.

george grombacher 19:50
So appreciate that probably

Dan Garrison 19:51
never stop.

george grombacher 19:53
No, no, I imagine you probably will not. Do you think that a non attorney? Pulled this off,

Dan Garrison 20:02
that’s an interesting question. I don’t think a non attorney would have tried. I think that’s the advantage that I had. And I started this with another attorney, initially, who also had some exposure to the consumer market and saw the need. And so I think it was important that we were attorneys, because we understood the market probably a little bit better, and we weren’t put off by the idea of working with law firms and working in the legal industry. But I’ll tell you the other thing that I guess I was a little bit surprised by, too, is that it mattered to the law firms that we work with that we were attorneys. It added some credibility and some sort of been there, done that, you know, stripes, you know, down the sleeve of experience and and, you know, both of us had run our own firm. So I started out in big law I was a large law firm partner for a long time, but I sort of ended my career running my own kind of boutique firm. And so I was very familiar with the challenges of, how am I going to make payroll if I don’t collect this fee? And you know, trying to strike that balance of I want to have enough staff, and you know, enough resources to provide great services, but I’ve also got to run a very economical business here if I’m going to make a success out of this. And so I think that speaks to, you know, the firms that we work with now, and I’ve certainly tried to lean into thought leadership. So I speak nationally on these topics, and I’ve published and and I do webinars and things like that to kind of get the word out. And we try, you know, beyond sort of the self serving commercial that you would expect about the upside of what we do, I try to leverage, you know, my law firm experience into a value add to them about how to run a successful practice. I, in fact, I teach Law School. I teach business topics to law students as well. And so I’ve kind of made that a broader mission in my life, to make attorneys better business people. Makes

george grombacher 22:16
all the sense in the world. I like it well. Dan, thank you so much for coming on. Where can people learn more about you? And open wallet, oh,

Dan Garrison 22:24
you can always find me on LinkedIn. So Daniel Garrison, you know, CEO and founder of open wallet, and then we’ve got our website, which is really sort of geared towards the attorneys who might consume our services. And it is open wallet, lend.com and then anybody’s welcome to reach out to me directly, if they’re curious about what we do, or, more broadly, you know, the the finance and and technology aspects of what we do. I’m kind of an inveterate nerd. I’m happy to talk about these topics, you know, till somebody’s ears fall off like it.

george grombacher 22:58
Well, if you enjoyed as much as I did so, Dan, your appreciation. Share today’s show with a friend who also appreciates good ideas. Certainly anybody who is responsible for the operations of a law firm, probably a good person. Go to open wallet, lend.com check out everything that we’ve been talking about today and learn more about Dan at LinkedIn. Daniel Garrison, I’ll certainly link all of those in the notes. Thanks again, Dan, thank you, George, and next time, remember do your part by doing your best. You.

george grombacher 16:00
So if I want my iPhone, and my Tesla and my Bitcoin to work, we need to get the metal out of the ground.

Pierre Leveille 16:07
Absolutely. Without it, we cannot do it.

george grombacher 16:13
Why? Why is there a Why has production been going down.

Pierre Leveille 16:21
Because the large mines that are producing most of the copper in the world, the grades are going down slowly they’re going there, they’re arriving near the end of life. So and of life of mines in general means less production. And in the past, at least 15 years, the exploration expenditure for copper were pretty low, because the price of copper was low. And when the price is low, companies are tending to not invest more so much in exploration, which is what we see today. It’s it’s, it’s not the way to look at it. Because nobody 15 years ago was able to predict that there would be a so massive shortage, or it’s so massive demand coming. But in the past five years, or let’s say since the since 10 years, we have seen that more and more coming. And then the by the time you react start exploring and there’s more money than then ever that is putting in put it in expression at the moment for copper at least. And what we see is that the it takes time, it could take up to 2025 years between the time you find a deposit that it gets in production. So but but the year the time is counted. So it’s it’s very important to so you will see company reopening old mines, what it will push also, which is not bad, it will force to two, it will force to find a it will force to find ways of recalibrating customer, you know the metals, that will be more and more important.

george grombacher 18:07
So finding, okay, so for lack of a better term recycling metals that are just sitting around somewhere extremely important. Yeah. And then going and going back to historic minds that maybe for lack of technology, or just lack of will or reasons, but maybe now because there’s such a demand, there’s an appetite to go back to those.

Pierre Leveille 18:33
Yes, but there will be a lot of failures into that for many reasons. But the ones that will be in that will resume mining it’s just going to be a short term temporary solution. No it’s it’s not going to be you need to find deposit that will that will operate 50 years you know at least it’s 25 to 50 years at least and an old mind that you do in production in general it’s less than 10 years.

george grombacher 19:03
Got it. Oh there we go. Up here. People are ready for your difference making tip What do you have for them

Pierre Leveille 19:14
You mean an investment or

george grombacher 19:17
whatever you’re into, you’ve got so much life experience with raising a family and doing business all over the world and having your kids go to school in Africa so a tip on copper or whatever you’re into.

Pierre Leveille 19:34
But there’s two things I like to see and I was telling my children many times and I always said you know don’t focus on what will bring you specifically money don’t think of Getting Rich. Think of doing what you what you like, what you feel your your your your your, you know you have been born to do so use your most you skills, do what you like, do what you wet well, and good things will happen to you. And I can see them grow in their life. And I can tell you that this is what happens. And sometimes you have setback like I had recently. But if we do things properly, if we do things that we like, and we liked that project, we were very passionate about that project, not only me, all my team, and if we do things properly, if we do things correctly, good things will happen. And we will probably get the project back had to go forward or we will find another big project that will be the launch of a new era. So that’s my most important tip in life. Do what you like, do it with your best scale and do it well and good things will happen.

george grombacher 20:49
Pierre Leveille 21:03
Thank you. I was happy to be with you to today.

george grombacher 21:06
Damn, tell us the websites and where where people can connect and find you.

Pierre Leveille 21:13
The it’s Deep South resources.com. So pretty simple.

george grombacher 21:18
Perfect. Well, if you enjoyed this as much as I did show up here your appreciation and share today’s show with a friend who also appreciate good ideas, go to deep south resources, calm and learn all about what they’re working on and track their progress.

Pierre Leveille 21:32
Thanks. Thanks, have a nice day.

george grombacher 21:36
And until next time, keep fighting the good fight. We’re all in this together.