Big New Spark in Using AFAs — 5 Reasons Why

After crashing in the last 6 months of 2021 — AFAs are coiling up for a comeback.

December 2021 showed 48% of clients using AFAs, down from 70% just 6 months earlier. Fast forward to today — BTI’s brand-new research with top legal decision makers reveals 55% of clients are now using AFAs. This reverses a trend and signals what’s ahead.

The BTI research shows clients overwhelmingly prefer 2 types of AFAs:

• • Fixed fee by phase
  • Fixed fee for a matter

Client preference for these 2 alternative fees outweighs others by a ratio of 4 to 1. Law firms mastering these 2 approaches have an advantage.

5 reasons clients are re-adopting alternative fees:

• • Client need for budget predictability is reaching new heights
  • Law firms are more skilled as pricing and LPM professionals are now part of the law firm mainstream — helping drive a streamlined AFA process for clients and the firm
  • Caseloads are growing faster than budgets for the 3^rd year in a row — AFAs can help bring them into balance
  • In-house counsel turnover spread the AFA experience and knowledge across the client base — and they are being adopted by clients who previously didn’t use AFAs
  • AFAs reduce the amount of time and effort required to manage an outside law firm

Benefits beyond certainty

Certainty is just the beginning. Clients uniformly report outside counsel using AFAs:

• • Bring increased focus on their goals
  • Develop a well-defined defined strategy
  • Use a customized strategy
  • Field a more cohesive team
  • Articulate a clear strategy at the start
  • Deliver more timely and useful updates

In short, clients enjoy a higher level of comfort with outside counsel under AFAs — even in an already strong relationship.

A small number of savvy law firms have started offering AFAs in every single proposal. Clients may not bite — but they are impressed these firms offer an alternative. More clients are open to exploring.

Clients adopting AFAs believe they are getting the best total cost for the matter — which is rarely at the lowest rate. Certainty brings extraordinary value —a low rate per-hour matter can be expensive.

AFAs will quickly go back to the 70% client adoption level — the economics and other benefits are too compelling to ignore. We recommend law firms:

• • Develop the most simple and clear explanation of their AFAs — use a professional editor and copywriter to create drafts and client-friendly messages. Clients don’t have time to learn complete approaches
  • Offer an AFA to all clients above a certain dollar threshold — your offer will increase engagement with these clients
  • Pitch the AFA before clients ask — this will place you ahead of the curve and position you for new work before clients make a hiring decision
  • Train for the AFA pitch — clients will ask new and different questions. Your confident and thorough answers have outsized influence on their decision to use an AFA with your firm — and the proposing attorney

Think of the AFA reboot as a path to a large stream of new work instead of a stand-alone pitch. Clients have more work to give outside counsel than ever. Budget certainty is a potent differentiator — bring it front and center and make it shine.