How can a consumer know what is fair to pay for a piece of legal advice or drafting any more than a lawyer can know how long it will take and how much to charge? Discussions over legal fees have raged for many years and continue to do so. The practice of law and the cost base for providing legal services does not include easily priced raw materials which are then appropriately marked up to produce an anticipated profit. Cost bases for law firms vary wildly with items such as wages, rent and indemnity insurance influencing the amount a lawyer must charge to cover costs. Can it be fair that a firm with low overheads is able to charge less for a piece of work than a firm with higher costs carrying out an identical piece of work?
No such thing as a free lunch
Then there is the question of what it is that clients are actually paying for. Some think it is the lawyer’s intellect, while others believe it to be their time expended on a piece of work. Others will tell you it is the risk of the advice being given and the reliance that a client can place on it and the protection of the lawyer’s insurers that commoditises a client solicitor relationship. Some lawyers will tell potential clients that the first meeting is free. That’s great news for the floating consumer who just wants some basic advice but it all gets wrapped up in the final cost, doesn’t it?
We’ll charge what our clients can afford!
Amongst the many interest groups on Linked in are groups for lawyers sharing the same discipline. In a family law group, a discussion took place between matrimonial lawyers in different parts of the country asking how much was right price to charge for a relatively simple drafting of a Consent Order. Instead of a conversation about cost bases plus profit expectations plus risk arriving at a fixed price for the client, the lawyer in Knightsbridge quoted a price which was justified with the words “our clients would pay X for this”. Her colleague in a different firm in a less affluent area was aghast and could not comprehend charging as much for the same piece of work to her clients. The advice of others in the group included comments such as; “charge what you think you can get away with”. It seems that the lawyers themselves don’t really know what they are worth.
Surely, any seasoned practitioner with experience of routine matter could cast a hypothetical slide rule of what they have charged for similar pieces of work. After all, unless a client has divorced many times how will they know how much to pay for a consent order?
Price power shifting the clients way
One effect of the Legal Services Act and the commoditisation of legal services generally is that power has now shifted to the consumer. Comparison websites like wigster.com and bid4fees exist where consumers or lawyers, depending on the site, can state the amount that they wish to pay or be paid. Brands such as HighStreetLawyer.com and Riverside law as well as consumer facing law firms now promote fixed priced services. Even in the larger commercial firms, tenders for new work are becoming more common with the main factor being costs.
Consumers will no longer put up with hourly fees eating up transaction budgets, except for the most complex litigation. The recession has shifted power to the consumer and allowed them to call the shots on costs. Any lawyer unable to convincingly predict their fees when their competitors are willing to do so is going to find it hard to convince their client to stay with them.
Lawyers, especially those in a competitive consumer facing market, need to identify the cost of delivering their advice, agree on a sensible profit margin and stick to it.
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Flickr Justitia image courtesy of chaouki.
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