The things that keep fees high (and the things that don't)

I agree that the issue is what clients are paying, not how much partners are earning, though I think Tim Bratton raised some very valid points. Where I break from Tim Bratton is that I do think the amount clients pay is primarily the fault of in-house counsel.

The backside-covering element of using the same large firms over and over again is huge. And though in-house counsel should be collaborating as Tim says, many aren't. Many spend their time acting as a glorified back-covering post-box. The culture in different in-house teams varies immensely and it sounds like Tim's team is one of the better places to work.

Magic Circle Associate -10 Oct 2011 | 11:49

What keeps legal fees so high

Duh - lawyers do. But seriously, I have mentioned numerous times, that very rarely do lawyers talk about or address the level of service they have provided (or not) to their clients but rather how much they have or could bill. Billing is the driver for fees being so high.

Try the service mantra. Just because it's someone else's cash is such a poor excuse. Lawyers should put themselves in their clients' shoes more often, and ask if they would pay £300-£400 per hour by reference to other services or goods in the market. Clients have got wise to this and have and will continue to drive more commercial bargains, rather than feel that they are being held over the proverbial.

Value is never addressed either but perhaps that is for another day. How many lawyers or clients would know how to properly measure this one?

Julian Summerhayes -10 Oct 2011 | 12:04

Although IT and communications technology increasingly allow for a transaction to be offshored, cross-border competition in law remains very limited due to each country having its own legal system and legal regulations.

A move towards a proper international commercial law would likely lead to a dramatic fall in legal charges. At some point this is quite likely to happen, but perhaps not for decades.

As computing power continues to grow exponentially, the possibility also exists for the automation of a great deal of the drafting process and a massive fall in costs. This may in fact happen much sooner than people expect, within 10-20 years.

Of course people would still be needed, but primarily as software writers.

Anon -10 Oct 2011 | 15:28

What is wrong with lawyers charging proper rates? They are highly trained, intelligent professionals at the top of their game. Unless people make (or have the ability to make) proper money within law the profession will struggle to attract and retain the brightest minds. Lawyers seem singled out for a good bashing on a continual basis - surely it must be the accountants turn by now?

Anon -10 Oct 2011 | 16:56

Simples

It really is very simple, and the author rightly makes the point, although needs to emphasise it more; you cannot arbitrarily decide on the value of something. That is the reserve of the market, and to think otherwise is to misunderstand how capitalism works. A lawyer is highly paid because someone is willing to pay that price. The price is determined by a complicated matrix of social and economic factors. It is regressive folly to try and override this system with one person’s opinion of how much something is worth.

Bodgkins -10 Oct 2011 | 17:12

Another excellent comment from Alex. I've really enjoyed some of the recent articles taking on the false prophets of the future of law - you're probably one of the few voices who dares to sensibly question some of the grand predictions made about the demise of the law firm model and what law firms should be doing to survive. Keep it up!

Midlands Lawyer -12 Oct 2011 | 10:01

ACCEPT IT

You cannot generalise law and the practice thereof by solicitors, never. As a client you do not instruct your solicitor to do the 'right thing', you instruct your solicitor to represent you. Look at criminal law - should you perhaps be the one making a mistake then charged and accused by the state, ask yourself what price you will pay for good legal representation. We have seen many prominent figures of society being criminally conficted, so you would agree that it could happen to anyone. (Not a question). Will you choose to represent yourself or utilise the services of a skilled solicitor who studied the legal principles, the legal system, the acts, the constitution etc? Lawyers care to study case law and constantly make the effort to comply with changes and new precedents, no matter the field they are in. They do it for their clients, believe it or not. Which ever expertise you require from a lawyer, we cannot work pro bono for you all.

Elsje Rauch -12 Oct 2011 | 17:23

Don't be confused

Just to focus the mind here. Lawyers are not very highly paid. Law Firms are.

I know a number of lawyers at the more junior end of the spectrum who earn (gross) about 10% of their charge-out rate. The firm (and its support staff and processes and insurance premiums and PARTNERS) take the rest. And that's just working out an hourly rate based on contracted hours (40 per week) worked. Factor in the number of hours lawyers work for free, and you'll see that hourly rate plummet.

Take a straw-poll at most meetings between lawyers, clients and intermediaries and you may well find that the in-house counsel, clients and accountants etc are on a better ticket than the private practice lawyer in the room. Partners are usually accepted from this of course. But then, read the press, how many junior lawyers these days can hope to achieve partnership (salaried let alone equity).

This is an important debate to have, but have it with some perspective. It's the firms and the equity partnership that are overpaid. Not the lawyers who do the work.

Overworked Associate -12 Oct 2011 | 19:22

I'm sorry but...

The most junior lawyers at large commercial law firms get paid well over twice the national average salary. Just because partners are even better paid, doesn't mean associates are not very well remunerated.

Hmmm -13 Oct 2011 | 09:43

You are confused

Bearing in mind that lawyers in large commercial law firms make up a small percentage of the legal market as a whole, and that this article is not about big London firms, but the high cost of legal services, let me spell it out:

London assistant earns £60,000 for working a 40 hour week (contracted hours) = £28 per hour.

The same assistant is charged out at £250 per hour by the firm.

The firm expects the assistant to work on average a 70 hour week (in order to hit a target of 1,800 billable hours a year) for no extra pay meaning the real hourly rate that assistant is paid is £16.50 per hour (the equivalent to working a £34,000 job 40 hours a week but without the social life).

The firm expects to recover 75% of the assistant's billable hours in fees totalling £337,500.

The assistant may get a bonus of up to 25% of salary (discretionary) = £75,000 (which for a 70 hour working week is £20.50 an hour).

These figures don't make sense you say. Why would an assistant work his/her socks off for less in pay and bonuses (and lifestyle) than if he/she stuck to contracted hours? Good question. The reasons vary. But mostly because the partnership (with its eyes on the profits) and the public think that lawyers are on a good ticket and should shut up and stop complaining. Some of us do this because we want to be good lawyers and do right by our clients. Some want to make partner so they can share in the profits of hard work and success (at the expense of family life).

Whatever. My point is, the firms and the partners profit here, not the lawyers who do the work.

PS the example I've used is based on people who work in a top 50 law firm in London. The folk working in the regions for the same firm fare worse in terms of pay and bonus, but the hours demands are similar).

Oh and I'm still paying off the £50,000 of debt I ran up learning and training to become a solicitor...

Overworked Associate -13 Oct 2011 | 11:07

Not confused - just don't agree with you

Right – heard this line before. Associate gets paid the equivalent of £20 an hour. So what?! A lonely tear rolls down my cheek. It’s the beginning of your career and it’s a lot more than the majority of the population earn. Added to which an associate knows that their salary will rapidly increase if they’re any good over the next five years. And associates in the regions do not work the same hours as in London. When you add in lower property costs, it’s a similar deal. I have plenty of sympathy with junior lawyers doing criminal or legal aid work for very moderate earnings. Commercial lawyers, do me a favour.

Hmmm -14 Oct 2011 | 09:39