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Pre-Paid Legal Remains a Good Investment
Demand for high-priced legal services may be down, but consumers are still purchasing plans from Pre-Paid Legal Services Inc. According to the Pre-Paid Web site, a plan costs about $26 per month and gives members access to professional legal counsel for "traditional legal problems" and routine matters such as advice on buying a home or car, dealing with an insurance company or responding to identity theft.
Because consumers continue to have a need for basic legal services, Pre-Paid Legal Services, which is a publicly traded company, remains a pretty good investment according to Rich Duprey at the Motley Fool. Duprey reports that "since hitting its 52-week low back in April, Pre-Paid's stock has
rebounded by more than 50%." Duprey points out that many of Pre-Paid Legal's customers are "prone to be intimidated by lawyers" and a prepaid service reassures them that they can obtain assistance in the face of trouble.
Still, despite the size of Pre-Paid Legal's customer base -- it has 1.4 million active members -- many investors are skeptical about the company. That's because Pre-Paid Legal markets its services through "multilevel marketing" techniques, which are frequently associated with scam operations. In addition, Pre-Paid Legal's membership base has eroded, down by 10.8 percent in the latest quarter. And membership also fluctuates wildly. Last year, Pre-Paid Legal had huge customer churn, losing over half a million members, then replacing all but 23,000.
Pre-Paid Legal may not be a sure thing. But I'd be more likely to place money on the future success of its model than BigLaw these days, that's for sure.
Posted by Carolyn Elefant on June 2, 2009 at 05:20 PM | Permalink
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