#85 - Edward Jones Is Moneyball-ing Legal Risk

Artificial intelligence should inform advisor intelligence. You can't replace that. The human beings being part of the process. Enable then protect as you said, in that order. What does that mean? This is my advice to any new GC.

Hello everyone and welcome to Pearls on Gloves Off. I'm your host, Mariel Carroll, chief operating officer at Goodwin. Today I'm joined by Keir Gums, chief legal officer at Edward Jones, the largest US Financial services firm in number of financial advisors, consistently ranked, a best place to work and serving more than 8 million clients across North America. At Edward Jones, Kir oversees the firm's legal compliance and enterprise risk management functions, guiding how the organization navigates complex regulatory, ethical and operational challenges. KIR brings over 24 years of experience to this role, having held senior positions at some of the most respected institutions in law and business. Before joining Edward Jones, he was chief Legal Officer at Broadridge Financial Solutions, deputy general counsel at Uber, a longtime partner at Covington, and even served six years at the sec. He's one of the rare leaders who's truly seen the legal world from every angle. I found a kindred spirit in Kier because in this episode we talk about what it means to be a transformational leader and why that attracted him to this role. He wasn't looking for a place to just run things with business as usual in mind. So we talk about how to run legal differently. From rethinking your balance of internal and external resources to building a shared services model that connects legal compliance and risk to challenging the traditional law firm model, which he believes can't survive in its current form, we dive into how he's creating a culture of innovation inside Edward Jones, why, he tells his team, enable first and protect second and his thoughts on AI and technology's role in reshaping what legal can deliver. If you've ever wondered what the next era of truly transformational in house leadership looks like, you're going to love this one.

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Kir, it's wonderful to have you here. Thanks for being on the podcast today.

Thank you for having me. I'm looking forward to it.

Well, I love your background. It's really unique and I know you've been at Edward Jones for what, a little over a year now?

Two years. Two years as of last Monday. So Time flies.

And your title is chief legal officer. Maybe start with telling us what that means, because I know that's different in a lot of organizations.

Yeah, no, thank you. So here the chief legal officer title basically means I'm responsible for three groups. The legal team, our compliance organization, and our risk organization. The legal part, very traditional legal team. We have about 162 or so folks on that team. Our compliance team is pretty big because we're a financial, you know, financial services firm. And so there we have about 750 or so members of the compliance team. And then our risk team is about another hundred or so people. And within risk, we've got product review, we've got our enterprise risk management, and we also have our internal audit team as part of that.

Got it. And did you have all those roles when you showed up, or did you start as a GC and inherit that had that.

That. That's a very good question, Mary. I. I started as a general counsel, just responsible for legal and compliance. And then over the last year or so, we've been engaged in a transformation here at the organization. We moved a couple of functions around, and I had the good fortune of inheriting our enterprise risk team as part of that most recent reorganization.

Awesome. Awesome. And your background is also very unique. You've been in private sector, public sector, private practice, all the things. How did that all prepare you for this big role?

You know, I'm very grateful for where I am. I think Edward Jones is a great organization. We have an excellent culture, great ethos of focusing on the impact we're having on communities. I have a great leadership team that I'm a part of. I inherited a great team. And so let me just first chalk up and acknowledge really, really grateful for where I am and the opportunities that I've had. It is a very unusual path, I would say. I came out of law school in 99, and when people were coming out of law school, most people went to go to law firms because that's where the money was. The law firms, the pay that they were giving first year lawyers was escalating dramatically at that point in time. And I strangely made the choice not to go to a law firm and instead went to the sec. And I started at the SEC in a very weird time because we have the dot com boom. And I was looking jealously at my classmates for making literally three times what I was making, making the same student loan payments. And then, of course, the dot com failures happened, and I was really happy to be at the scc. I stayed there for another few years. I was basically there until 2005, and then I finally went to a law firm. I went to Covington and Burling in D.C. as an associate and after about five years or so made partner there in their corporate and securities practice. And to be honest, Mary, never expected to leave. I loved Covington. I still love Covington. I've had some really amazing experiences, some great colleagues while I was there. But one of the clients that I had was this unusual technology company. It's a household name now. It was Uber. Uber had just come out of an internal investigation around culture and some allegations of misbehavior by its senior executives. And my team at Covington worked on the investigation, came out with some recommendations, and at the end of it, I had the opportunity to go there and help see some of those recommendations become actualized and implemented. So I went to Uber. I was there for about three years, worked on some really fun things which we can come back to. And then I had an opportunity to go be. And I was deputy general counsel and deputy corporate secretary by year three. And I had a great opportunity with one of my prior clients, a company by the name of Broadridge Financial, where they are longtime general counsel retired. Broadridge was and remains almost like a family to me. They were among the first clients that I had in private practice. I knew their leadership team, anyway, had the opportunity to go be general counsel. I did that for a little over two years. And then Edward Jones came knocking. And I think this is it, Mary. This is, you know, such a great organization. Great role, great job, great leadership team, great purpose and impact. And I've been here for about two years and it's been fantastic.

That's great. And I know when we chatted earlier, we sort of found that we had very interesting. What drew us to our current roles was kind of the same. You know, I always say I was not interested in running the organization or scaling even, but was very interested in transformation. And it sounds like that is the same conversation that you had when you took the role at Edward Jones. You know, what about transformation? Why, you know, sort of why now? Why are they interested in it?

That's a great question. Well, I love transformation. And to your point, I shared during my interview process with our managing partner, Penny Pennington, who's fantastic. At some point in the conversation, we were talking about the role and what her expectations were and what good looked like. And what I shared with her is that if she was looking for someone who was going to come in and basically just do the Same thing that everyone before me had done, that I was probably not the right person for that role, because I am all about transforming, making organizations more impactful, more powerful, faster, all of those sorts of things, which I think was music to her ears, because we, Edward Jones, are in the midst of our own transformation as an organization. This is the completion of our first year of being a financial planning firm, which is a big transition as an organization. We've got new products and services that we've never had before as an organization. And we're growing dramatically. We're growing in places and into areas of practice that Edward Jones had never really done before. And for the legal team, for the legal and compliance team, I first have to give great credit to my predecessors. They did an amazing job building us to where we are. And as we look towards the future, we need to transform. So to your question, that's what I'm here to do. It's been amazing. Like I said, I inherited a great team, and it's really about taking a great team. And we want to be a championship team in this new era, right? This new era of Edward Jones supporting the field and serving clients.

And I definitely want to get into some of the work that you're doing to transform Edward Jones. But just out of curiosity, what made you so interested in transformation? Was that something that you had always been interested in? Was that something you'd been involved in your past roles or, you know, is that just a personality trait?

So the personality trait, I might have to ask my wife what she says about that. I think she probably wish I would transform my habits a little bit more, but we'll leave that aside for the time being. I definitely am interested. I've always been interested in how great organizations change and shift. I mean, I'm a lawyer, obviously, but I love studying business. I love studying how businesses survive. I love studying how businesses fail. And so it's always been an area of interest for me. You know, I think about some of the great business stories in this country, the transformation of steel and railroads and different industries, and I've always been fascinated by what are the things that let some businesses succeed in transformation and what. How do other businesses fail? And going back to my area of specialty, I love governance. And I'm a firm believer that governance and the systems that you create for decision making and leadership really can enhance a company's ability to successfully transform. Or if you have bad governance failures, the company itself can fail. And there's tons of examples of that, of companies having failed because they had Bad governance or having failed because they weren't able to see the next thing. The example I love to share, and it's something that is always in the back of my head, is Kodak. So we all know the story of Kodak. Great organization, great company, great history. Right around cameras and photography. Kodak was the first company to develop the digital camera technology. The first one. And yet when the company saw it, saw that opportunity, at that time, chemicals was such a huge part of their business, they decided, we're not going to emphasize and invest in this digital camera technology because it's going to undermine our chemicals business. And we all know the rest of the story as it relates to Kodak. What are those pivot points for other organizations as they see opportunity? They have a fork in the road. They can go left and embrace it, or they can go right and keep doing what they've been doing. I very much want to be part of that, of an organization choosing the left, innovating, developing, growing, so that organization can go to last for another a hundred years.

Yeah, Codec is a classic example of a big organization that was extremely successful, had the opportunity to disrupt itself, but chose to go with the business model that was tried and true. And then we said, you know, know what happened. I mean, I think there is no better time to be in legal than right now because of what is happening in our space. There is so much disruption from all angles. And I guess for someone who is a kindred spirit and likes change and transformation, this is the best time to be doing what we're doing. What are you seeing from your seat in terms of, like, what's happening in our industry so much?

So obviously we can't have a conversation about transformation and not talk about AI. I'm going to come back to that, but that's the obvious one. Let me go to a couple other things, and one of them speaks directly to you and your experience, which is the professionalization of legal operations. Like, if you went back 20 years in the way that legal divisions worked at leading companies, it was thought, we're just a function, we're not creating value, we're not an innovator, et cetera. The legal operations function, you know, if it existed, it wasn't what it is today in terms of this mature value driver, value creator, not just for the legal division, but also for the organization as a whole. That's, to me, one major facet of transformation. When I think about our team and technology, my goal is for the Edward Jones legal team to be known for a couple of things. Number one, outstanding support for the organization. Right. You think about customer service. Right. Who are my clients? I have a couple of clients. Obviously, as a firm, we have the clients that enter into Edward Jones offices, you know, around the country, 16,000 of them. Right. But more directly, on a day to day basis, my clients are the financial advisors that we're trying to support as they're building practices, advising clients. It's other organizations within the firm. Certainly my leadership team is a client to me. My leader, Penny, is a client to me, but also each of the functions, each of the business segments. So I want to be excellent, I want to be outstanding at client service for all of those constituencies, starting with our clients outside of the firm, our financial advisors, our functions, et cetera. That's point one. Number two, I want us to be the most innovative legal division in all of financial services. Not a small thing. Right. Lots of firms out there, lots of big, very successful legal organizations. But you know, I take the approach of, how can we be better every day? How could we be earning the trust of this organization every day? And technology is one of those areas where I think there's a lot of opportunity for innovation, not just for us, but for the rest of the organization. And then the last piece, and this ties a little bit to my experience at Uber. So I love the book Moneyball. If you've ever read the book Moneyball. One of the things, and I'm an Oakland A's fan, so it has a double meaning for me. One of the things I love about Moneyball is what Billy Bean did, is he came into the organization, he said there are all of these traditional metrics that people use to evaluate players and team health, et cetera. I'm going to throw them out the window and I'm going to look really closely at what are the things that actually matter. And then I'm going to make decisions based on those things that actually matter. And in a very similar way, when I think about the legal division, what I want us to be doing is, is to be sifting through all of the noise that's out there, you know, regulatory change, fear, et cetera, and say, what are the things that really matter to help us drive this business forward so we can be helpful to the rest of the organization? And so that innovation and that desire to be constantly. How can we be the best version of ourselves in service of our organization and in service of clients that, that I want people to be thinking about. And then the last part of that is, AI right, we can't have this conversation. And I want to. I'd love to hear what you're seeing in terms of AI but it's certainly an area where, as an organization, we are making an outsized bet in artificial intelligence. By the way, we have two types of AI. We have advisor intelligence, and we have artificial intelligence. The artificial intelligence should inform advisor intelligence. You can't replace that, the human beings being part of the process. Similarly, for the legal division, how can we best use artificial intelligence so we can do the best job we can for the organization? Faster, better information, better decision making, better risk analysis. Right. That's part of our job, is risk analysis. All of that. Using AI to help us move forward and spending a lot of time thinking about that.

Now, I love this so much because if, you know, you come into an organization, a large organization, I know you have a legal ops function there, you likely have technology and inherited quite a large team. So it's been two years. How did you go in? Where do you start? You know, how did you figure out the lay of the land? Land and where to start bringing sort of an innovative mindset to things?

Well, let me just start with. Anytime you come into an organization, you have to start with humility. And so I am. I have to say this up front. I am humbled. I am humbled. I'm humbled by the history that is Edward Jones. I'm humbled by the ethos that is this organization. And I'm especially humbled by each of my predecessors that sat in this seat. I have tremendous respect for the things that were done to build this organization into where it is. And so for me, that is the first point. I came in with deep humility and said, I just want to learn. I want to learn this organization. Edward Jones as a whole. I wanted to learn the legal and compliance organization. I wanted to understand my team, and I wanted to understand our clients, right? All of our clients, our internal firm stakeholders, and our clients outside the firm. And so we use this term a lot here. It can be a little cliche, I will acknowledge, but it's a learning journey. I spent my first year on a learning journey. I wanted to understand as much as I could about each facet of this organization. The legal team, how we came to be, who we were, the members of my team directly, the members of the rest of the organization and our business, this tremendous business that we have the opportunity to be a part of. That's where I started. And so what does that mean? So I met with, in my first year, I would say, probably five to 600 members of my team in individual one on ones or small coffee groups. And so literally I said to my, you know, ea, I know this sounds crazy, but I'd like you to send out an email to invite every person in this team to meet with me. And some of them were one on one, some of them were two, some were three on ones, et cetera. I met with functional group. So I met with our, you know, complaints team, I folks in field supervision, et cetera. And my objective in all of those meetings was twofold. Number one, who are the people, right? Like I am nothing but the team that I am leading, right? These people leading this organization from legal compliance and risk are the ones doing the work. And I need to understand who they are, what motivates them, et cetera. Second part is, you know, what is the work like, what is the actual work? How are we do things, right? To get back to the original question, those meetings, those 500 sessions that I did, 500 plus, that's on top of the meetings with other internal stakeholders at the firm, my peers, et cetera, their teams. It was so valuable and I really tried my best and this is my advice to any new gc. I really tried my best not to come in and say, I know everything, I'm going to change everything, I'm going to transform it all tomorrow. I really wanted to come in from the perspective of how can I learn? How can I learn as much as I can to put myself into a position so I can engage in some transformation. Setting that aside, I also came saying I do have a point of view around culture. Here's what my expectations are around culture and it's some of the things that I was just sharing. And so over that kind of push and pull, me pulling information about the organization and me pushing, here's what I'm looking for, here's what I'm expecting out of the organization. Those were the things that came together in my first couple of years that really helped me.

The culture perspective. I mean, you've worked in some pretty different cultures from the SEC to a company like Uber to a company like Broadridge. You know, what pieces have you taken from each of those? And like, how do you describe the culture that you try to convey?

Now I'll start with my favorite book and I've read this probably two or three times and I go back to it periodically. The book called the Culture Code. I don't know if any of your anyone you spoke to ever mentioned it. The Culture Code is an amazing, amazing book about how organizations build strong, cohesive, productive cultures. And so. And it talks about a number of successful companies. Like I said, I like to study business. It talks about the culture at firms like Google is one of them, and Facebook and all of these places where how do they build the organizations that they build? You know what I did, which is very weird, Mary. I came in and I said, I love this book, the Culture Code. I gave a copy to each of my direct reports. And then we did a couple of off sites and in the off sites we pulled out chapters from that book and just said, here are the things that I want for us as an organization. Just two quick stories from that that I love. The coach for the San Antonio Spurs, Gregg Popovich, there was a whole study about him and the way that he coaches his teams and the way that he built the spurs team. And what I shared with my team is I wanted my team to have the same feeling of cohesion that team did leading to their multiple NBA championships. And what were the parts of that? One part is you have to have a personal connection. Everybody has different approaches. My approach to leadership is I need to be connected to people. I need to understand what makes them tick, what things motivate them, what things demotivate them. Using those things to help us as a team come together, focused on a common purpose. And so and the thing that he said that I love, he's like, holds him tight. That's what he said. I hold him tight. Meaning he has these really strong close relationships with members of his team or had cause he's retiring and that allowed him to coach them more. And the second part was coach until you're sick of coaching. Right. And so like my commitment is I want to build a strong relationship with people and coach all the time. Coach in real time. I don't like to wait until year end performance reviews. If we're on a call and you say something crazy, I'm sending you a teams in real time or as soon as the call is over, it's like, that was great, by the way. Wish you hadn't said this or I wish you had said that or that was really great that you said this other thing. That was a big piece of it, the culture code and all the lessons in there. And then the second one, frankly comes from my time working with Uber because what I saw at Uber a couple of lessons. But I'd say the macro lesson is that culture can absolutely destroy value or it can build value. And so the lesson I learned is if you're not paying Attention to the culture that you're creating. If you're not really, like, intentional and thoughtful, both in conceiving of what that culture can be and articulating it and reinforcing it, again, you're not destined for success. And that's what you saw from lots of corporate failures. I don't want that to be the case for my team or for this firm. Those are probably the two biggest ones.

That's awesome. I also remember the last time we spoke, you mentioned your philosophy for legal is enable first, protect.

Yes. So many examples of that. I can use the Uber example and people might debate, you know, what no one can disagree with is the legal and regulatory strategies that they created paved the path for the successful organization that exists right now. That is just a fact. Whether you like it or dislike it, that is a fact. Disruption is hard and it's uncomfortable, but if you're thoughtful in how you're disrupting and restructuring, you can create tons of new opportunity for an organization. And so, like, that's one. But there are so many, so many other examples of that. So enable, then protect, as you said, in that order. What does that mean? It means I'm sitting right here with my business partner, side by side, to understand what are your priorities, what are your strategies, so I could put my legal hat on. And how can I help you achieve those? It's going out in the field. All of us spend time going out, spending time in our branches. Right. Sitting down with financial advisors and client support team members say, okay, I sit in the home office. I sit with legal compliance and risk. How can we help you? How can we help you build a business and serve clients better? Right. That is super, super critical. Of course we have to protect the firm. We can't do any of these things if we don't have the right supervisory controls and policies and all of that. But you really have to be thinking about both of those things. Right. The safest thing we can do is operate in four walls with no connection to the Internet and not go anywhere. But that is an incredibly unsuccessful and boring business to operate. And so we have to have some risk that you're taking on. But that's the enablement. There has to be calculated risks to make sure that you're also protecting the firm.

That's right. And then I know you believe in doing it all efficiently. So you got to Edward Jones, you got to meet a ton of people. You kind of established the culture and the mindset that you wanted to have there. And then what kind of things have you done to sort of transform?

Yeah, I'm a tinkerer. So I am constantly thinking about different changes that we've made. We've made some changes with our leadership team. We've made some organizational changes. I spent a lot of time with teams trying to understand the work that they're in and figuring out where are the places where I need to lean in and where the places I need to lead out. What I'm really grateful about is I have a great senior leadership team. They've got a lot of the day to day stuff. They don't need me in their business every single day. So it's more of how can I support them as we're supporting the business and the function. So what does that mean with like specific. Our leadership cadence here? We have enterprise leadership team meetings every Tuesday. And then there's a smaller, a different organization within Edward Jones, our operating committee that typically meets every Wednesday or so. I sit on the elt. Our chief compliance officer sits in operating committee. We're communicating almost daily about, here's what we heard, here's what you heard, what is the team working on, how can we help them, et cetera. So a lot of it is that kind of day to day engagement. I'd say the thing that, that I'm most excited about going towards the future that ties to both this enablement protection and efficiency is around risk. So you mentioned earlier there have been some changes to my organization. I'm now responsible for enterprise risk. We've got a great chief risk officer. Part of that team is our enterprise risk management team. And this goes back to my Moneyball thing. Right. So you ask people, when they think about the law, they say, oh, I'm afraid of litigation. Okay, yes, we're all afraid of litigation. You can get sued for anything. That actually is not helping advance a conversation. Are there particular things that we're doing that create greater litigation risk than others? Can you quantify those? How big is the risk? And then what can we do to manage that risk? And when you have a mature risk framework that uses a common language around risk levels and risk acceptance and accountability, the enablement. Right. But it makes it a much more efficient conversation. If, if me and the business person can align that this is a level three risk and a level three risk can be accepted by the business under these circumstances, then it's a really fast conversation. Is it a level three risk, Level two risk, Level four, what level is it? Right. You get to a decision and then you can move forward more quickly. And that's where as an organization, we're growing generally, but that's certainly a place where I'm leaning in a lot more and expect to lean more in in the future.

Yeah. And I know you've also been very conscious of the changes in the legal ecosystem and the resources that you have, and I believe you set up a shared services function. Right.

You pay very good attention, by the way.

I'd love to hear more about this.

Yeah. One of the things that came out of our most recent reorganization, so obviously we acquired a new team, the Enterprise Risk team, which we're very happy to have. But what I realized last year is between the legal division and the compliance division and now Risk. I was having the same conversation three different times. There's a new change coming from our enterprise leadership team. And I have a meeting with the legal team. I have almost the same meeting with the compliance team, and I'd be having the same meeting with Risk. Similarly, from a technology perspective, there are so many opportunities for legal and compliance to piggyback on each other and or risk to be piggybacking on them from the perspective of looking across the landscape. Right. So when you're working on a product or solution, typically people are very vertically oriented. I'm looking at my problem, my solution right now and aren't often looking at saying, well, can this thing be used elsewhere in the organization? Is there a theme here? Is there a common denominator that maybe if I saw this thing using this tool, and it'll help all of these other functions, that the organization move more quickly? So our shared services function has a couple of pieces to it. The biggest part is our lcr, Legal Compliance and Risk, Shared Technology Services. And that's that looking across the landscape, partnering between Legal Compliance and Risk to find common solutions to make us more efficient as an organization. It's, of course, things like communication. So I don't want to have to say the same thing three different times. It's thinking about things like our budget. So we had three different people, four different people doing budgets. And I'm like, well, it all rolls up to me. Can I just have one person whose job is to look across the three teams? Then you think about admin support, you think about project management. There's lots of opportunities when you have a good shared function, shared services function to drive a lot more efficiency. And that's what we've built. We're still in the phase of it got rolled out and we're tinkering and continuing to work on it. But I am excited about what I think it means for the collaboration across those three teams and efficiency for the organization.

Yeah, that sounds very familiar. I'm thinking about a lot of the same things and the ability to move at speed. Right. Because I think it's the communication silos, the operational silos that emerge just as a part of like growth and scale and 100%, 100%.

And I think about leading organizations, they're looking, they're constantly looking for these kinds of synergies between teams. I think it would have been a mistake not to look for those same opportunities with my team. So I'm hopeful, I'm hopeful that we can find the efficiencies that we want. I'm hopeful that bringing those resources together can result in a better product for the rest of the organization. And there's one other piece of it I mentioned, client service. So I love NPS scores, Net promoter scores. I love them and I love real time feedback, but I love Net promoter scores because sometimes functions get into this habit of like, I'm legal, I'm focusing on legal and like, I'm not thinking about the client service part of my job. But it is part of your job to be responsive, by the way, does not mean that the business person gets the answer they want. But what it does mean is they're going to get a really thoughtful partner who's creative, who's timely and responsive. And so if so it's no longer a no, it's a yes if or yes, but. Or, you know, like it's how can we get to yes, how can we get to you? Because at the end of the day, we're all here in service of the organization. I want our firm to be the first in client outcomes. Right. I want us to be the best in terms of client experiences. I want us to be the best in financial advisor experiences. There's none of that is irreconcilable with legal and compliance being great service providers. We need to be great service providers to achieve all of those things.

That's right. I love the comment that you have about how can we get to yes. And I feel like I say that all the time because there's a thousand reasons why anything can go wrong. But like, what are we going to do? What are the steps are we going to take in order to get to yes, absolutely.

Absolutely. It's a privilege to be in a place where a partner at a firm is working on something, you know, like, could be our new high net worth segment. They're working on something and they're like I, we've never done this before here. And so how can we figure out how to do it? I'm like, yes, let's work on that together. Let's collaborate, let's be creative. Because none of this is rocket science. We can figure it out. We just have to be committed to figuring out in partnership.

That's right. Okay, let's talk about firms for a second. Because you had said that you see right now as a bit of a breaking point for law firms when it comes to the economic model and getting that rate increase letter, the fee hikes every year is unsustainable. What do you think about that?

You know, I think it is unsustainable. I don't know where it ends, honestly, in terms of law firms. I mean, I go back to when I was still at Covington. I was at Covington burling for about 14 years. And I think my final, just before I went to Uber, I think my billing rate was like $750 an hour. I shudder to think what my rate would be if it was now, but I bet it'd be at least 50% to 100% more than that at any firm, not just coming in. Any firm. Why is that? Because that is the rate. That's the rate of the market. Right. That's what law firms are charging. And to your point, it is really hard to defend just off the top 3 to 5% rate increase every single year, you know, inside a company. So I've got constituencies, my finance team, my CFO that I am responsible to. And nowhere else in the firm is someone accepting rates from an outside vendor that are automatically going up 3 to 5% every single year. And it's really hard to justify. And so what I've seen here and what I've seen it the last couple of places I've been is there's, I think there's been more of a migration. We used to think when I was at Covington, and I'm sure many of the big law firms feel this way. We're top 100. The Fortune 500 want to use us because we're the best and they would never use some of these smaller shops. And what I've seen in the last two or three years is that really shifting from an in house perspective that we're giving more work to smaller firms, small boutique shops, regional firms, firms where lawyers have maybe broken off from the Cooleys, the Gibsons, the State and Dents to form their own shops that are charging substantially lower rates. And so I don't know what the end looks like. But I am certain the transition we'll see over the next few years is some of that work that had previously gone to the larger firms starting to migrate to smaller firms because it honestly is increasingly difficult to justify the increases. By the way, I love my big law firms. They do a wonderful job and something has to change because it becomes really difficult to defend those changes every year.

Yeah, I think I've been saying the same thing for the last 20 years and been on the client side and had just tried to absorb those letters and make sense of them. We were also, when I was on the client side trying to move stuff to different types of firms. How do you think about that? What kind of work goes to the smaller or specialized firms and what stays with big law?

It's a great question. Before I got here, I probably would have said erroneously that the bigger bet the firm things always go to the larger firms. That has not been my experience. It has been much more of a case by case kind of analysis. There are some areas. So employment law is one where you have a range of firms that can do the work very well, can do the work very well. And so you're not typically required to use the large law firms necessarily to do some that work. So there, there's a lot of variability, I will say for bet the company M and A, which is not something that we do, that's not something that we would be interested in. But for firms that are engaging in that kind of transactional deal work, I can see an argument for the larger kind of bulge bracket law firms to be the ones that they go to, whereas the smaller deals might be the ones that they would. You know, when I was at Uber we did, I want to say $21 billion of deals in three years between acquisitions, divestitures and capital markets transactions. And we had a range of firms that we used from the Wakels of the world to the Cooleys to the Covingtons to Butler Mendelssohn. I mean there was a whole range of them, but we really looked at it based on what's the size of the deal, what's the specialty of the lawyers that would be doing the deal, and most importantly, what are the economics around choosing this particular firm to do this particular deal. If I was to predict a vision for the future, alternative fee arrangements, a lot more of them from all sorts of firms, not just the small firms, but I think a range different types of fee structures between firms because again, the current structure is not sustainable. But all of those things have been factors and choosing the firms that we allocate work to.

Are you accepting alternative fees or outcome based pricing models?

Accepting or seeking? I am seeking. It's hard because it depends on the kind of work. It depends on the firm. Not every firm, not every project is meant for alternative fee arrangements. But it is something that we're asking for from our firms. You know, we just launched a preferred counsel program this year, which I'm excited about. And that's one of the things that is part of that program is having conversations around what are you all doing with other firms in terms of alternative fee arrangements. And there's. Is there something that might make sense for Edward Jones? Because again, at the end of the day, I'm a steward of the firm's capital. I need to look for the best bargains, the best deals, the best, you know, relationship between enablement, protection and efficiency that I can possibly find in our outside partners.

Yeah, we had good one. We're trying to push it more as well. And I think of course there is still a time and place for the billable hour and still makes sense in a lot of places. But where it doesn't make sense anymore, we are trying to offer different types of outcome based billing. Oftentimes though, we find that the client pushes back and is not that comfortable with it. So there really needs to be education and trust on both sides. Has that been an issue for you or do you just get it?

Well, I don't know if I just get it. I wish I could say that I think it depends. I mean, look, I've been on both sides of it, but having been at Covington, I certainly had all types of alternative fee arrangements. Let's see, I've been secunded twice, which is totally different fee arrangements for each one of them. We've done set fees, we've done set fees with a cap, we've done blended rates. There were tons of things that I've seen out there. And to be honest, I think that it really, it works as well as the in house lawyers monitoring it and the firm people that are managing it. It can be really, really exceptionally good for both parties. Right. If you're really clear about what you need. I remember I had a client we used to bill, let's say for the sake of argument, $400,000 a year for a bucket of work. And at the end of the year they came and said we got to cut our budget, we got to find 30, 40%. Can you cut that in half? And you know, initially it's Like a little, you feel a little wounded. You're like, man, I gave you so much value, why do I have to cut it in half? But you know what we did? We went and we thought about it, we thought about how can we structure the work in a way that would meet the client's needs from a financial perspective and not kill us financially. Right. So we still were getting something out of it. And we structured how we did the work in the mix of associates and partners. We were very transparent. These are the things we that are in, these are the things that are out, et cetera. We got there, we cut our fees basically in half. And the client was happy. And we were happy, we were comfortable. And it takes that kind of really, that thoughtfulness and the partnership and the willingness to think about things in a different way in order to get there. But I do think it's super critical that firms think about that actively. Can I throw one more thing? I was with a GC group about three weeks ago, this goes back to AI and we were talking about, how are you using AI? How are your, how are your outside firms using AI? And one of the firms said something really interesting. He said, you know, with our outside counsel, what I've said to them, and it said the same for my in house lawyers. By the way, I don't want to see a first draft of anything that wasn't first produced by AI. And it took me aback. Wow, that's bold. And I said, well, how's that gone? Have you gotten better work, less work? Are the fees higher, lower? What's it been like? And he said, you know, the quality of the work's been better, it's been faster, and I've been saving a lot of money. And I was like, wow, yeah, I'm not ready to do that yet. So to all my outside counsel, I'm not there quite yet. But I love, I love the push. I love the push that AI could be a thing, a tool that law firms are just going to have to get comfortable with, an expectation. I'll give you one more specific example. We're working with some wonderful firms on a couple of pieces of litigation. One of the firms in connection with the litigation, every time there's like an oral argument, I'm sorry, every time there's a deposition, take it. And then they'll get the transcription and they'll do an AI summary and we get it within, I mean, a couple hours. And the AI summaries have been excellent.

Yeah, they really are excellent.

So there's some great Tools out there. I encourage people to use.

Yeah. And all the creativity and like what the use cases are and you gave some great examples. Those just come from getting used to knowing what it can and can't do. Well.

Yes.

With it. So everyone just got to get it into their hands. I'm also curious, how are you thinking about your in house team as a resource and you know, with your outside council, spend management and you know, budgets getting more and more constrained. Are you trying to hire more in house? Are you trying to move more of that work in house? Is that an option?

Great question. So we are, we're in an interesting place, I would say in terms of hiring. So we are. And I'm going to bucket legal compliance and risk. The compliance and risk organizations, particularly compliance, just because of the size of our organization, constantly hiring, bringing people in. As our business grows, which makes sense, right. We hopefully will grow more advisors, more assets. That's just more work for there to be done. For legal. We've been on a little bit of a journey. If you went back 20 years, the legal department at Edward Jones was five people, super, super small. And most of the work was outsourced. Now our business model was very different than it is now, but a lot of the work was outsourced using outside counsel. My predecessors wisely over the last 10, 20 years started moving a lot of that work in house for two reasons. One is you can get a much better roi. Right. You have people who are learning these things about the products, services, delivering advice, and then that's institutional knowledge that you have resident within your organization. Really hard to generate outside. And by the way, every time you want to tap on that knowledge, you got to pay. Right. Like every time you call that partner you've worked with for 20 years, you're paying thousand to $2,000 an hour. Right. So there, there's that component. The other piece of it is internal development. We have a lot of people in this organization who came in as lawyers. They went through different levels within the legal organization and then they become enterprise talent where the firm realizes this person was a really fantastic lawyer. They'd be really great in human capital, they'd be really good in firm planning, et cetera. So that's another feature I think of having people in house in terms of where we are right now. You know, we've got a pretty good sized legal organization. And so I don't expect to be making big changes in terms of growth over the next, you know, five to 10 years. But obviously as the firm goes into new Areas, there will always be the question of buyer build. You know, we're going to be doing more alts. We made the decision alts products to offer to clients. We made the decision we're going to hire someone. So we have that internal experience with that area of law. We'll be making those kinds of decisions with every inflection point of new products, new services, where we may not have someone internally that can cover those areas. And we're having the debate do we hire or do we use outside counsel. But I'd say on the whole, from some parts of the business, like litigation, our arbitration work, we would expect to continue to use outside counsel pretty extensively for a lot of the internal product advisory work, tax work, that sort of thing. My hope and expectation is that we can develop the expertise inside the firm so we don't need to leverage outside resources as much.

Yeah, interesting. I feel like there's been a pendulum swing kind of over time. You know, like you said, it was all outside in, you know, the early days. And then people started realizing there's a benefit to building up their in house teams and so they did that. And then in house teams started getting expensive and there was headcount pressures. And so then came the emergence of, you know, all sorts of alternative service providers and flexible talent and different types of law firms that you could use. And now, of course with AI emerging, it's kind of the big question of where's the pendulum swing now? You know, are we enabling more AI through outside counsel and that we're expecting that to look differently or is it in house teams armed with AI and agents?

Right. Like you hear people talk about, we're going to hire fewer people and build more agents. I love that idea in theory. I want to see that in practice first, at least in the legal compliance context. But there's certainly applications where if we have a technology, I may not need to hire as many heads in the future. You think about manual tasks, you think about things where people are hands on keyboards, doing things that you would hope and expect that in a future day you'd have some technology that can do those things. And so we're certainly paying attention to that.

Excellent. Excellent. Pier. This was such a wonderful conversation. I feel like we could keep going for a while. And I'm excited to see where you take things in your department because I feel like you're just getting started saying.

Well, thank you for this time, it's been a great opportunity and I'm excited to see what you're doing because you're doing a lot of innovation yourself, and so I'd love to hear more about what you're seeing and doing in the legal industry.

Well, let this be one of many conversations then. Thanks so much.

Thank you. Have a great day.