Some fintech startups are innovating so quickly that it's hard for outside counsel to keep up.

Ben Alden, general counsel for personal finance startup Betterment in New York, has hired many firms that he ultimately parted ways with before finding the right outside counsel who understood the company, which offers automated investing, or “robo-advising.”

“It's hard to get someone who's billing $1,000 an hour up to speed in a cost-effective way,” Alden says. “We would spend a lot of time [and money] to train outside counsel on our specific industry.”

The main issue Alden had was that he found “not all lawyers were familiar with, or interested in, the intersection of technology and the rules and regulations that govern us as an investment adviser and broker-dealer.” He says it took someone who was going to think “deeply and creatively” about what it means to be a “robo-adviser in a world where many of the relevant laws were written for human advisers.”

That's when Alden decided to try out four or five different firms and rely on references from others. Betterment works with one lawyer at Schulte Roth & Zabel for expertise on broker-dealer law. Morgan, Lewis & Bockius was identified in October as doing work for Betterment. Alden declined to name other firms the company uses.

Alden's search for outside lawyers made him realize he'd rather be adding in-house lawyers to his department.

“[Firms] bill you to explain the background and how this is cutting edge. I think on the one hand you love hearing from law firms, 'Wow I've never seen that one before. That's interesting. Let me think about it.' Because it means you're working on really great legal issues but the flip of that is we try to build our team so that we can handle those questions ourselves,” he says.

“We want to bring as much of the interesting work in-house as possible because we are so tightly engrained with the business as a legal team,” Alden says.

Derek Meisner, general counsel and chief compliance officer at Boston-based Quantopian, shares Alden's frustration over finding the right outside counsel. That search is especially challenging, he says, for a startup such as his that crowdsources ideas from “community members” globally who compete to create investment algorithms the company will potentially fund and license.

“I think it's a fallacy that any one law firm can adequately service the needs of a fintech firm,” Meisner says. “At any point in time, a firm may have the need for IP counsel, employment counsel, litigation counsel, financial services counsel. And the notion that one firm possesses sufficient expertise in those areas, particularly from people [who are trying to] develop institutional knowledge of the client, is very rare.”

To be the most cost-effective, Meisner's strategy is to find a “very good senior associate” within the firm who is well respected, responsive and can handle the work with little supervision from a partner.

Additionally, he says there should be a “certain grace period if you're getting preliminary advice for outside counsel to ascertain whether you should hire that lawyer.” He says that initial advice is usually free, but “once retention is made, you're on the clock by and large.”

Meisner has chosen lawyers from Ropes & Gray, Morgan Lewis and Sidley Austin, among others. But the bottom line is: “If external counsel doesn't understand what you do, the advice itself carries a much greater risk of being impractical,” he says.

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Some fintech startups are innovating so quickly that it's hard for outside counsel to keep up.

Ben Alden, general counsel for personal finance startup Betterment in New York, has hired many firms that he ultimately parted ways with before finding the right outside counsel who understood the company, which offers automated investing, or “robo-advising.”

“It's hard to get someone who's billing $1,000 an hour up to speed in a cost-effective way,” Alden says. “We would spend a lot of time [and money] to train outside counsel on our specific industry.”

The main issue Alden had was that he found “not all lawyers were familiar with, or interested in, the intersection of technology and the rules and regulations that govern us as an investment adviser and broker-dealer.” He says it took someone who was going to think “deeply and creatively” about what it means to be a “robo-adviser in a world where many of the relevant laws were written for human advisers.”

That's when Alden decided to try out four or five different firms and rely on references from others. Betterment works with one lawyer at Schulte Roth & Zabel for expertise on broker-dealer law. Morgan, Lewis & Bockius was identified in October as doing work for Betterment. Alden declined to name other firms the company uses.

Alden's search for outside lawyers made him realize he'd rather be adding in-house lawyers to his department.

“[Firms] bill you to explain the background and how this is cutting edge. I think on the one hand you love hearing from law firms, 'Wow I've never seen that one before. That's interesting. Let me think about it.' Because it means you're working on really great legal issues but the flip of that is we try to build our team so that we can handle those questions ourselves,” he says.

“We want to bring as much of the interesting work in-house as possible because we are so tightly engrained with the business as a legal team,” Alden says.

Derek Meisner, general counsel and chief compliance officer at Boston-based Quantopian, shares Alden's frustration over finding the right outside counsel. That search is especially challenging, he says, for a startup such as his that crowdsources ideas from “community members” globally who compete to create investment algorithms the company will potentially fund and license.

“I think it's a fallacy that any one law firm can adequately service the needs of a fintech firm,” Meisner says. “At any point in time, a firm may have the need for IP counsel, employment counsel, litigation counsel, financial services counsel. And the notion that one firm possesses sufficient expertise in those areas, particularly from people [who are trying to] develop institutional knowledge of the client, is very rare.”

To be the most cost-effective, Meisner's strategy is to find a “very good senior associate” within the firm who is well respected, responsive and can handle the work with little supervision from a partner.

Additionally, he says there should be a “certain grace period if you're getting preliminary advice for outside counsel to ascertain whether you should hire that lawyer.” He says that initial advice is usually free, but “once retention is made, you're on the clock by and large.”