Revisiting Retainers - Do We Need Them?

Retainers are a regressive, antiquated system, subject to abuse and are not only mostly unnecessary, but also harmful to the client, the attorney, and the firm.??Clients come to divorce attorneys in the most dire circumstances of their lives, often with severe anxiety over money, and the first thing many do is ask them to put out a fat stack of cash.??We believe it’s time for change in our thinking.

A quick search on Google reveals that retainers are diverse, multi-purposed and a traditional fixture of law firm operations.??Purposes for retainers include but are not limited to:

·??????Guaranteeing availability of your lawyer

·??????Establishment of an ongoing business arrangement

·??????Security against attorney fees

·??????Pre-payment of attorney fees

For divorce and other family law clients, the first two purposes mostly don’t apply – a client is unlikely to need you for a series of divorces and most family law lawyers are available when you need them – no need to secure their future engagement.??Most of the time, divorce lawyers ask for retainers for the last two reasons – security and advance payment of attorney fees.

A hypothetical sequence of events in early client retention may be:

·??????Speak with Potential Client (PC).

·??????Assess the PC’s resources (cash on hand, income level, assets, etc.)

·??????Set a retainer as high as you think this PC can afford.

·??????Bill as much as you can, as fast as you can.

·??????Ask for another retainer.

Since we don’t get to sit in on these discussions at other firms, we cannot say for certain this sequence happens.??But our firm has handled over 10,000 family law cases and if it walks like a duck and quacks like a duck, it’s probably a duck.??In any event, it’s certainly a temptation.

This sequence is, of course, immoral, unethical, and harmful for everyone involved, but it’s this last consequence that we want to focus on – “harmful to everyone involved,” specifically, the client, the lawyer, the firm, and the profession.

Client?– It’s no mystery why this is harmful to a client but let’s state the obvious – it’s the client’s money, not the lawyer’s. Trying to move as much money as possible from the client’s bank account to the law firm’s is a horrific abuse of that client’s trust and setting a retainer based on the assets of a client is immoral.??A divorce is no more complicated if someone has a big bank account.??In fact, in our experience, people find things to fight over regardless of their value – dish towels, light bulbs, and the color of the kid’s tennis shoes are just as likely to become fodder in a divorce as the million-dollar bank account.

Lawyer?– Most lawyers are idealistic, and purpose driven and most also want to enjoy a good life while being a lawyer.??But when a lawyer heads down the path of the above sequence, they surrender the first, in favor of the second.??No longer is the lawyer engaged in the advancement of a noble profession of protecting rights and aiding people in need.??Instead, the lawyer morphs into a selfish, greedy, entitled caricature of attorneys so common since the time of Shakespeare.??This decent into greed and away from purpose isn’t good for the soul.

Law Firm?– You would think profit-driven firms would recognize the negative effects of this sequence and change it up, but tradition and unwillingness to try something new, ties them down.??Bottom line is, most clients realize they’re being abused under this paradigm and resent it.??Many clients stop paying their bill.??Cases get extended.??Lawyers get fired.??Account receivables explode.??Law firms miss out on revenue, become adverse to their clients, and slide into defensive mode.??Firms spend precious time and resources hunting down fees - time and resources that could be directed elsewhere.??It’s bad business.

Profession?– Perception is reality, and the perception is lawyers are untrustworthy.??Only 22% of respondents in a recent study found lawyers trustworthy.??34% found them untrustworthy.??Additionally, the US is lower than the global average of 29% who believe lawyers are trustworthy.??Not all our perception woes can be attributed to the traditional retainer paradigm, but it’s certainly gas on the fire and why not???If a client feels they’re being fleeced during the most desperate time in their life, by someone purporting to help them, how do you think they would feel?

At Modern Family Law, we collect 98% of what we bill within two weeks of billing.??Again, we don’t get to sit in on other firm’s finance meetings so maybe this is a bad number!??But if your firm collects under this number we’d like to suggest a re-think of your retainers.

First, don’t touch them.??Put them in the trust account and forget about them.??Bill your clients for your work, twice a month.??Treat a retainer as a security deposit.??Give it back to them at the end of the case.??Only dip into these funds if the client will not pay their last bill.

Second, standardize your retainer.??We use 10-hours of that lawyer’s time for our calculation.??If Bill Gates walks in and wants to hire our most expensive attorney, the presumptive retainer is $4,500 ($450 x 10).??Doesn’t matter what type of case or which state the case is in.

Third, and most importantly, think of a retainer as risk management.??You might have noticed that we used the word “presumptive” above.??If a retainer is a security deposit, and the client has resources, income, and a history of paying their bills on time, why does the firm need a retainer at all???Most likely, we wouldn’t ask for a retainer from Mr. Gates since he’s probably good for it.??There’s not much risk that a client with the ability to pay and a history of honoring their obligations is going to skip out on their bill.??

Being lower or middle class doesn’t mean you won’t pay your bill and being rich doesn’t mean you will.??We can think of a couple billionaires we wouldn’t work for under any circumstances due to their history of skipping out on paying bills.??Honoring your debts is a characteristic that cuts across all socio-economic classes and that alone should be the criterion for setting a retainer under a risk assessment paradigm.

Lawyers have an awful time wrapping their minds around redefining the word “retainer”.??Going from “an advance payment of fees” to “risk management” is often a leap too far for some, but it really is the key.??Once you wrap your mind around that idea you will view the sequence of client retention completely differently.