The new client formula for the next normal is in:

Increased Demand > Legal Budgets = Fixed Fees

Learn to love it. Study it. Memorize it. It will be a force to contend with.

Top legal decision makers are staring at increased litigation, compliance, and other demands – all of which cost money. But, they are pretty convinced they will not be seeing budget increases and will have to reallocate – one of the bigger decisions they are making right now. AFAs help drive the reallocation.

BTI research shows clients now save 17.5% with Alternative Fee Arrangements, up from 11% in 2016. This creates $3.8 million in savings from AFAs – and they want more.

This Is Why Your New Matters Will Be Under an AFA

Clients are looking in 3 places to reallocate and manage their spending:

  1. Settlements
  2. Insourcing
  3. Alternative fees

Settlements

The only approach with 2 simultaneous benefits, a settlement stops the legal fees and eliminates risk. Clients expect their law firms to think about settlements without signaling they are ready to fold. They want ideas early in the process and updates on how and why a settlement might change in their favor.

Insourcing

Look for clients to handle more in-house. The largest companies have the biggest staff and are more likely than other clients to try to handle things inside. Law firms can help establish triage criteria to enable clients to quickly decide what to handle themselves. If your associates aren’t 100% busy brushing up on COVID-19 issues or restructuring – this is an ideal secondment activity.

Alternative Fees

The savings and certainty AFAs bring are just too attractive to pass up. Clients are more comfortable than ever with AFAs – and lean towards the law firms and partners who speak fluent AFA. As you approach your client (because it is more powerful when you bring it up), here are your clients preferences:

  1. 64% of clients say they prefer a fixed fee, including a fixed fee for phase of matter
  2. 14% of clients say they prefer capped fees – which is more of a budget control tool

Clients tell us their law firms have a better understanding of the specific goals, nuances, and sensitivities of the matter covered by the fixed fee. They believe law firms spend more time confirming and detailing their understanding – a benefit which clients say is secondary but could easily stand alone.

Clients will be looking to AFAs and their law firms to bring it up. We recommend developing your approach to fixed fees now, so you are ready when the big wave starts to hit.

Our research shows clients point to 62 law firms already proving their AFA skills and leading the pack. We will publish these firms next week and discuss what they are doing to earn this AFA lead in the next normal. Stay tuned.

Be well. Be safe.

MBR

The MAD Clientist

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