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Investing in the long term

Cite as: March 2014 88 (03) LIJ, p.4

A shift to value billing is good for everyone.

By Geoff Bowyer, LIV President

One of the biggest issues for lawyers has to be the continual battle to justify their fees to clients who can’t shake the feeling that they are being charged too much.

In my practice it continues to be a challenge and I think it remains one of the biggest frustrations of our profession.

While much of the problem lies in perception rather than reality, there is also a large measure of fear involved. Our clients fear that they are potentially facing the fabled and bottomless money pit immortalised in all those lawyer jokes, and there’s our own irrational fear of talking about money with our clients.

As lawyers we are not well trained in talking about money, while at the same time all too well aware of the pop culture perception that we charge too much.

Undoubtedly, we need to be delivering value to our clients to justify charging the fees we set. But, equally, we could begin alleviating much of this tension by gradually shifting to fixed fees for some areas of practice. I know there is a degree of nervousness about this among practitioners, but in reality such a move would advantage our clients and practices as long as we understand the many variables that can create cost fluctuations and then determine a realistic scale of fees to reflect this.

In many practice areas, there is real potential to introduce a system with predetermined costs that gives clients a level of certainty in what a case will cost them and confidence in what they are paying for. This will shift their focus from questioning why they are being charged for a lawyer reading a letter or sending an email on an itemised time-based bill to the bigger picture.

In doing so, our clients will begin to regard engaging a lawyer in much the same way they see other major projects, like building a house, where a critical path for delivery is set and the individual stages are stated upfront, with allocations of fixed and variable costs for the duration of the project.

Clients would feel no compunction about following up every stage of their building project and, equally, a builder would not be backwards in speaking openly and often about payments. Not only is it expected in that instance, it is essential.

I was interested to read about the experience of a family law firm in the United States that made the move to fixed fees through analysing their files and the corresponding billing records over a five-year period.

They found that most of their cases were resolved without litigation and the fees in these matters were generally quite consistent. Not surprisingly, where there were children or superannuation plans involved, the fees would move up the scale, and where there was a business involved or a spouse who was financially dependent on the other, the fee was higher again.

When their cases did go to court, they found a similar pattern indicating that the more issues there were at play, the longer the case and the higher the fee. By compiling that data, they were able to determine the average cost for various cases depending on these variables and whether litigation was likely to be involved or not.

That allowed them to create a schedule of fees that accurately reflected the work required for a variety of contingencies and they are now able to quote a fair and realistic fee to their clients upfront. Can you imagine how much better that is not only for their client relationships, but also their financial certainty.

Admittedly, developing that knowledge requires time and resources. Obviously, for smaller firms or those newer to practice, it’s a much more difficult task to reliably assess realistic fixed fees. However, for many experienced solicitors working in areas such as family law, property or estate law, that information is already there as a result of years of practice. In response to the increasing interest in fixed fees, in its potential benefits, the LIV is currently designing a program to assist lawyers develop the skills needed to undertake value billing.

Fixed fees are a huge shift for the profession and I can appreciate the trepidation with which many members would view the move from time based billing. However, while in the short term it may require an investment of time as well as a degree of trial and error, in the long term it will deliver greater certainty for both our clients and our practices.

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