Building Trust through Alternative Fee Arrangements

Trust ought to be the bedrock of the client-attorney relationship: if a client does not trust their attorney, the relationship is doomed to failure. The financial arrangement between the client and attorney rests at the center of the relationship and is the one of the main determinants of whether a client trusts their attorney.

So, why is it that the vast majority of attorneys insist on basing their financial relationship with their clients on the billable hour, a structure that is designed to undermine the trust between client and lawyer?

The billable hour places all of the control of the financial aspects of the client relationship in the hands of the attorney. In most billable hour relationships, the client has no idea of the cost of the endeavor that they have begun. They are, in a sense, along for the ride and awaiting each month the bitter pill represented by the bill for last month's work. The billable hour approach leaves clients feeling vulnerable and even abused; attorneys are not accountable for efficiency or performance.

To see this in context, ask if there in any other product or service that you might be in which the provider says simply, "I have no idea what this will cost. But when I am done, I will send you a bill for however much time I have spent based upon a rate for my time which I have unilaterally determined."

With each new billable hour engagement, we lose the opportunity to find a better way, a path forward to a greater level of trustworthiness.

The solution lies in our ability to implement alternative fee arrangements or "AFA's". There are many forms of AFA: flat fees, success fees, percentage fees, stage payment fees, capped fees, hybrid fees among others. Each offers different shades of nuance that allow the attorney and client to reach shared expectations for their financial relationship. Many of these arrangements have the unique benefit of aligning the interests of the client and the attorney as a team, instead of placing the two protaganists at odds as done in billable hour relationships.

So, why, then are AFA's not more prevalent? In many instances, we resist change because our status quo protects an agenda. Why would we give up the financial reins by changing the billable hour format? Why create accountability to clients or to ourselves? Why take the financial risks inherent in many of these formats when we can protect ourselves through billable hour relationships?

Clients and markets, alternative service providers, and unbundling may well force the implementation of AFA's. In the meantime, in many cases, it is simply the fear of the unknown, the unwillingness to take a risk to try implementing an AFA.

That makes this week's comprehensive review of AFA's by LegalTrek an important contribution to lawyers becoming more trustworthy. A compendium of short essays presented in an e-book format, "25 Secrets to Success with Alternative Fee Arrangements" is a must-read for lawyers who want to prepare themselves for the future.

"25 Secrets" includes an overview of AFA's, as well as essays from a variety of different perspectives: from big law to small firms, transactional practice success stories and family law practitioners who have lowered fees and raised revenues. This quick read will demystify the AFA world and provide you the encouragement to experiment with these compelling tools.

Implementing AFA's will help restore balance and fairness to the client-attorney relationship...and that will help build trust...and prepare us for the future when trust will matter more than it does today...and reset the our collective professional compass towards the aspirational values of our profession.

We look forward to incorporating "25 Secrets" into our Lawyer's Compass Workshop tools and bibliography!