With financial pressures brought about by the pandemic, as well as political and economic uncertainty, clients are pushing for more fee transparency from lawyers. Clients want their lawyers to provide detailed accounts of the work they have performed, and the costs associated with that work. They want to understand how lawyers are calculating the fee they are being charged, and they want predictability and flexibility so that they can plan the best way to pay their legal fees. If the law firm provides cost estimates, clients expect that overruns will be the exception, not the rule. And the one thing that clients hate more than anything is receiving a “surprise bill” that they were not expecting. But lawyers don’t seem to be getting the message.
Concerns about legal fees and how they are charged begin before the client ever contacts a lawyer’s office. Many potential clients will do research on the web to find a lawyer or to research a lawyer to whom they have been referred, seeking answers to their questions, including questions about fees. And yet, few lawyers provide information on their websites about their billing practices, their fees or how those fees are calculated. Recently, after reviewing several lawyer websites, one individual observed, “Putting myself in the shoes of a potential client, I found it hard to trust these law firms. They claimed on their sites that they are transparent, but their websites were anything but, particularly when it came to how they charged their clients.”
Rules About Advertising Fee and Service Information
Many lawyers balk at advertising their fees on their websites. Some don’t want their competitors to know what they charge. Others fear scaring away potential clients or are concerned about running afoul of the Rules of Professional Conduct, which may place special restrictions on lawyers who do advertise their fees on their website. For example, in New York, the Rules of Professional Conduct require that lawyers who include information about their fees in advertisements (lawyer websites are considered advertisements) make written statements available to the public clearly describing:
- the scope of each advertised service;
- hourly rates; and
- fixed fees for specified legal and nonlegal services, as well as the scope of each service advertised for a fixed fee.
In the United Kingdom, many lawyers do not have the option to avoid providing this type of fee information. In 2018, the Solicitors Regulation Authority introduced transparency rules requiring lawyers practicing in certain areas of the law to display price and service information on their websites and to include total cost of each advertised service. Where it is impossible to determine the total cost, the average cost or range of costs must be published, along with the assumptions made in establishing the range of fees. The basis for fees, including hourly rates or fixed fees, as well as a description of likely disbursements and the costs associated with them, must also be included. If the lawyer’s fees are conditioned on or to be paid from an award the client would receive, the lawyer is required to indicate the circumstances under which the client would have to pay the lawyer’s fees, including payments made from the award the client receives.
All of the above information must be accessible, written in plain English so it is easy for clients to understand, and be placed in a prominent position on the firm’s website or made available upon request.
Although U.S. jurisdictions do not yet require lawyers to publish fee and service information, they do require lawyers to outline the scope of services in their engagement agreement, and to provide clients with some information about the fee to be charged and the manner in which the fee will be calculated. Isn’t it reasonable to expect lawyers to have on hand a description of the services they provide, the scope of services covered by flat or fixed fees they charge their clients, and to provide clients with an estimate of total fees a client can expect to pay in a matter and the cost of likely disbursements?
Making this information available to clients as early in the process as possible—even before the initial consultation—is good business. It can help you win clients. Providing information in your marketing materials (including your website) about how you work, your billing process and your fees can go a long way toward making clients comfortable before they even walk in the door or pick up the phone to contact your office. Continuing to discuss fees with clients throughout the client’s engagement can reduce or eliminate complaints from clients who claim they were surprised by a bill or didn’t understand how legal fees would be charged.
Improving Predictability of Fees
Lawyers claim that since legal matters are often unpredictable, projecting fees and providing predictable pricing is not possible. But the problem isn’t necessarily the unpredictability of legal matters. It may be that law firms have not traditionally undertaken the necessary work to be able to accurately estimate total costs at the beginning of each matter, to provide an accurate range of fees or to communicate their pricing strategy to clients. Indeed, many firms have not developed a pricing strategy at all. They haven’t analyzed the write-offs, write-downs or discounts that were given to clients and the reasons why they were given, nor have they analyzed the elements that add value to a client’s matter that might warrant higher fees. Without a well-thought-out pricing strategy, it is no wonder that lawyers have difficulty communicating with their clients about fees.
To improve transparency, take the time to conduct a postmortem at the end of each matter, including a thorough review from a pricing perspective. Was the client given a fee estimate or total cost for the work? How did that estimate compare with the fees charged? Were the fees charged appropriate for the work performed? Was the client advised of pricing changes or unexpected issues as they arose? How satisfied was the client with the fees charged and billing methods? Survey clients to find out whether pricing met the client’s expectations and whether fee information was communicated properly throughout the engagement. Adjust billing and communications practices based on this information.
Aggregate, review and analyze historical data from similar matters in the same practice area to ascertain reasonable averages or price ranges and establish lists of variables or factors that could affect the fee. Search for insights about what areas can be predicted and what factors might cause a legal matter to get off course or require additional resources.
Make Billing More Transparent
The rules cited above provide a good starting point for law firms that want to improve their communications with clients about their fees. Explain how your fees are calculated: hourly, on contingency based on the client’s recovery in the case, or as a flat or fixed fee. Tell the client why the firm uses that method of calculating its fees and what the advantages are for the client. Outline billing practices, including pricing plans, payment methods, terms and other expectations.
Articulate the scope of services to be provided, the value of those services to the client and the client’s objectives. Describe how the fee to be charged relates to the value the client will receive. Even if the total cost cannot be predicted, can it be priced in stages? Provide estimates or ranges of fees and describe the various factors that might increase (or decrease) the total cost of the client’s matter, such as the difficulty of obtaining documents or information; the complexity of issues that could arise; the necessity of additional expenses, such as hiring outside experts or conducting detailed investigations; or an impending statute of limitations. Firms that conduct regular postmortems and data analysis will be in a much better position to provide clients with this information.
Commit to discussing these factors, as well as any additional fees to be charged for work that must be done in connection with these factors, with the client as soon as they arise. Always encourage clients to contact your office with questions or to discuss their individual situation.