Arizona Rubber Stamps Trajan Wealth’s Ownership of Law Firm

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The Arizona Supreme Court gave its blessing to Jeff Junior of Trajan Wealth, a registered investment advisor in Scottsdale, Ariz., to co-own an estate law firm, according to a recent announcement. Arizona recently eradicated their rule opposing nonlawyer ownership of law firms.

After years of Trajan Wealth referring clients to estate attorneys, the wealth management firm with nearly $700 million in assets under management can now keep the bulk of a client’s estate planning needs in-house. 

“It’s great to now have the ability to continue such an important aspect of clients’ lives,” Junior said in a statement. “As the first company ever to be approved for this structure, I am confident in saying this will prove to be very beneficial to anyone preparing for their financial future.”

Junior co-owns Trajan Estate with estate attorney Kent Phelps who said this partnership allows Trajan Estate to have a “unique value proposition” and scale using the “intellectual and financial capital of a non-attorney.”

The pair runs Arizona’s first alternative business structure, or “hybrid firm.” And Junior is the first nonlawyer to own a law firm in the state. 

Trajan Wealth and Trajan Estate could not be reached for further comment.

Arizona’s decision to alter the American Bar Association’s Rule 5.4 occurred in August 2020 and is part of a contentious yet possibly growing trend to open law firm ownership, management and, in some instances, fee sharing to nonlawyers. The southwestern state joined Utah and Washington, D.C. in re-regulating legal services in attempt to make these services more affordable to everyday Americans and help law firms find the most suitable business partners. Illinois, California, and New York are also said to be considering similar rule changes.

Bill Singer, attorney and author of the blog, said Arizona’s decision challenges traditions and invites greater competition into the law firm market. Not only will wealth management firms be interested in placing bids, but so will others such as not-for-profits and large accounting firms.

For example, Deloitte, an accounting firm that also provides audit, consulting and advisory services, contracts with New York law firm Epstein Becker and Green to provide labor and employment law services domestically, since the accounting firm itself is legally not able to. Deloitte provides workforce management services in 60 countries except the U.S., leaving a gap in services to customers with global businesses. The rule changes in Utah, D.C., and Arizona allows such companies to acquire complimentary businesses and lower costs, but it also presents a potential ethical issue.

“The lawyer may not be able to do what’s in the client’s best interest [if] it conflicts with the RIA’s recommendations,” Singer said.

When wealth management firms and banks hire lawyers, those lawyers are employees of that institution. So, essentially, their client is the wealth management firm though it may assist in strategizing for retail clients, said Aegis Frumento, a lawyer at Stern Tannenbaum & Bell who previously worked for Morgan Stanley. 

Frumento added that he wonders how Trajan Estate will split its fees with Trajan Wealth. Along with allowing nonlawyer ownership, Arizona’s Supreme Court also allows law firms to share their fees with a nonlawyer. Utah permits the same as long as it’s disclosed to clients.

With wealth management firms and independent law firms partnering together in three states, bar associations across the country are surveilling the changes to see if independent legal advice is still deliverable under nonlawyer ownership. Meanwhile, other RIAs and financial services firms are sure to look at Trajan Wealth as a template, Singer said.

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