If you graduated law school after 2007 (or were practicing during the ’07 – ’09 crash), you probably know that the legal industry experienced some growing pains with a glut of lawyers and too few legal jobs. It took a few years for the incoming classes to realize the bad news but eventually the highest performing undergraduate students started abandoning law school. You’d be hard pressed to find a lawyer that doesn’t feel a little precarious about his or her job. Even partners aren’t safe.
Throw in the fact that many lawyers leave their first job within the first 2-3 years and I’d haphazard a guess that most lawyers in private practice wonder if they’ll be practicing law in 20-30 years.
But are legal jobs any less stable than other jobs in the modern economy?
I’ll admit to not having any data to back this up but I think legal jobs might be more stable than we think. Let’s see if I can convince you.
Here’s a few reasons why having a JD may give your career longevity:
- Exclusive Club. There may be a glut of lawyers but being a lawyer is still a protected position with multiple hurdles to get into the “club”. The higher barrier to entry means that you will always have a limited number of people competing for a limited number of jobs (of course if there are no jobs, this point becomes moot but demand for legal services isn’t going to disappear overnight).
- Easier entry/exit from profession. In many fields if you’re gone for 3-5 years, you’re going to have a heck of a time getting back into the field. My understanding is that medicine and technology are two prime examples where missing 5 years can be truly problematic. If the last time you developed in an iOS app was in 2012, you were building something for the iPhone 4S. I’m not convinced that the law evolves as fast. Sure, you need to keep up with your field and the latest developments but it seems probable that a lawyer who misses 5 years can find a way back into the profession if they want.
- Insulation Against Ageism. An older lawyer is often viewed as a wiser lawyer. I wonder about tech engineers making $300,000 in SF. Will they still be able to get those jobs in their 40s and 50s? That seems less of a problem in the legal field. You may not stay in a Biglaw career (or whatever you’re doing now) but you’re likely to be respected as a 50-year-old practitioner.
Compare these advantages to other career paths. Middle managers for large corporations suffer from ageism all the time. For many people who leave a job (whether voluntary or not) in their 40s or 50s, it can be a challenge to find something equivalent. This is in part because with lower barriers to entry, there are way more 20 and 30-somethings looking for a new job in a non-legal career than their are junior lawyers.
I think we all know that it’s not easy for most laborers in the market today but I’d say that there are still some institutional advantages of being a lawyer that make your career choice more secure than other options. Motivated and resourceful lawyers should be able to find jobs going forward.
If our jobs are safe and stable relative to tech entrepreneurs or the vast majority of corporate America, how does that impact our investment decisions?
For one, I think it means we can take on a little more risk. By a “little” risk I’m not talking about buying Bitcoin. I’m suggesting that if we assume that long-term equity returns going forward will only be a couple points above inflation, it means we can get comfortable with a higher equity-to-bond ratio knowing that our career provides a modest amount of income stability going forward. It means that if the stock market doesn’t perform according to our expectations, we can simply work a little longer and delay retirement (which is not necessarily an option to many people).
If we take on this additional risk, it also means that we need to be laser-focused on a few additional factors.
- Savings Rate. If you’re taking on slightly more risk in the market, we can hope those returns will materialize but we can control how much we save. Higher savings rates can effectively guarantee that you’ll “win” by reaching your retirement and other savings goals.
- Lowering Fees. Eliminating asset-based fees, lowering mutual fund fees and making sure to squeeze out every last penny from our investments is another worthy area of focus to make sure your portfolio is performing as efficiently as possible.
- Managing Taxes. Increasing tax efficiency by prioritizing retirement accounts and taking advantage of the tax code is another way to boost your returns through smart money management.
- Managing Long Term Debt. Being careful with your long term debt will also pay dividends over the course of your investing career. This means refinancing law school loans where it makes sense, paying down debt rather than keeping it outstanding and buying the right amount of house.
Despite the hardship in the legal industry, I think many of us will be fortunate to be practicing law throughout our careers (or, at the very least, will have the option to do so). This additional income stability, while not nearly as “stable” as we all thought when signing up to law school, still provides enduring advantages over alternative career paths. We should use this to our advantage by taking on equity risk while still focusing on smart portfolio decisions (saving, lowering fees, managing taxes and debt). This should be a winning strategy for most lawyers.
Joshua Holt is a former private equity M&A lawyer and the creator of Biglaw Investor. Josh couldn’t find a place where lawyers were talking about money, so he created it himself. He spends 10 minutes a month on Empower keeping track of his money and is currently looking for additional lenders to add to Biglaw Investor’s JD Mortgage service which connects readers with lenders offering special mortgages for high-income professionals.