Investors today need more than information; they need insight. Can BigLaw monetize insight beyond dispensing advice?
Information drives winning investment strategies but traditional Wall Street information advantages are evaporating. The Internet has diminished the impact of huge budgets to buy information. Reg FD provides equal access to corporate insiders, eliminating the old inside edge. And wide-spread algorithmic trading and hedge fund growth makes it much harder to develop winning proprietary trading strategies. So the Street needs new approaches.
The premium now is on unique information and using the right information at just the right time. Let’s call it the transition from information to insight and action. Two recent articles illustrate this. Seeking an Edge, Big Investors Turn to Network of Informants (Wall Street Journal, 11/27/06) explains how Gerson Lehrman Group has set up a network of experts – from truck drivers to doctors – who provide investors with industry tidbits. No one tidbit may be significant, but investors put together a mosaic that tells a story and drives decisions.
From Reuters, Automatic Trading Linked to News Events (New York Times, 12/11/06) explains that Reuters has begun “selling two trading services that allow subscribers to set up automatic trading orders based on the news [to] give subscribers the ability to mine past and present Reuters news articles in real time and automatically buy, sell or hold a stock based on market-moving events.” Reuters is not offering new information, it’s just making its existing info more actionable.
So, can law firms sell insight to investors? Of course, other organizations are interested in insight as well. BigLaw regularly collects and digests volumes of information to deliver traditional legal advice. Perhaps using technology similar to Reuters, law firms could find a way to monetize their insights beyond one-off advice. The most likely way to do this is via some type of online service. Of course, like other legal online services (directory, articles), the profit might not be in the subscription revenue. Rather, it could be in deepening the client relationship and generating additional fee-paying matters.