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 3rd 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.
Best in the market ahead.
The Mad Clientist