Highest Rates Clients Pay Hit a Wall

The top hourly rate paid for an attorney just hit a wall.

And, this market-topping rate is exposing a few cracks in the wall, if not the very foundation itself. Clients identify $2,000 as the top rate they pay for outside counsel—identical to 2016. This means the 8% annual growth for the top rate paid for the last 10 years is over.*

Not Meeting Clients’ Heady Highest Rate Expectations

First, the bad news—the inability to deliver at the top rates isn’t just a client disappointment—it’s a deal breaker. There is only one reason clients say these otherwise excellent attorneys aren’t worth it—they don’t meet clients’ lofty expectations. Top legal decision makers tell us:

“At this rate I expect my attorney to walk on water, not get their feet wet, and be thinking only about me while they do it. I only needed to hear ‘you’re next on my list’ once and I knew it was over,” says one CLO at a large global consumer products company.

“I expect this attorney to be thinking about things I haven’t ever thought of and bring the strategies to deal with them before I bring it up,” says another top-level client.

“This attorney is excellent but is a step or 2 from amazing. So we will be parting ways when this is over,” indicates a top legal decision maker at a large financial institution, with some level of resignation in his voice.

When You Are Worth More Than the Top of the Market

But, there is some good news—just about half of the clients paying these top rates think this hourly fee is worthwhile. The half who report receiving the highest value at the highest rates talk about 4 key attributes:

  • Total command of the situation—a deep and penetrating understanding of goals and what needs to be done to get there
  • The top rate earner is backed by a team where every single person is equally impressive—not a weak link to be seen or heard
  • Seemingly never having to ask questions—attorneys at the top end of the market always look ahead, make sure their clients are in the know, and are 2 steps ahead of client questions
  • Timely invoices with updates and explanations of what it’s for and what the next invoice might look like

In the words of a top executive at a global pharmaceutical company, “Our lead attorney has such command of our complicated deal, but he was backed by one of the most impressive collaborative teams. I felt the top rate was worth it to have this team working on this deal. The cost of the top attorney was low despite the high rate.”

Or this description from a CLO at a Fortune 100 company: “This was high stakes, very high. I had updates every morning and he always kept me in a position to field calls from my CEO. You just knew he knew what was needed when and it all just went so smoothly.”

Top Rates Change the Client Expectation Game

Clients always have high expectations, but the rules of the game change at the super-premium end of the market. Clients ratchet what they expect to new unseen heights, and meeting these ever-increasing expectations may be the hardest part of delivering value.

There is no turning back. If you don’t deliver on client expectations at the top of the market—reasonable or not—the relationship is likely toast. But, the most client-savvy attorneys in the world know how to manage client expectations, however high and unreasonable, and end up with the top rates, top value, and the top clients.

MBR

*Based on in-depth BTI research conducted on a rolling basis between February 2016 and April 2017. BTI conducted more than 340 independent, individual interviews with CLOs and General Counsel at Fortune 1000 companies and large organizations.

6 Tactics for Talking Rates with Clients

The only question you can be sure every client is going to ask prior to hiring you is: How much will this cost? The more you prolong addressing costs the more it becomes the elephant in the room. And it leaves everyone wondering who’s going to force the issue first.

Take control of the conversation as quickly as possible in order to discuss your fees on your terms. In this month’s BTI Client Relationship Lab we’ll give you 6 tactics for proactively steering fee conversations to the points you want to make, instead of having to react to a series of rapid-fire questions about rate sheets.

You can view the video by clicking the image below, or on YouTube directly here: https://youtu.be/Lc8gVCvpqX0

With this series we’ll be taking an in-depth look at a wide range of client relationship best practices. We’ll be releasing Client Relationship Lab webisodes on our blog every month—subscribe today (in the box at the upper right of your screen) and be sure you don't miss a single one.

Is $5,000 an Hour Next?

The bull market in high-end work makes hourly rates defy gravity.

The dramatic increase in clients’ need for complex and bet-the-company work is bad for clients but downright awesome for law firm rates. The highest rate in the market now commands 2.9 times the average rate clients pay. Clients* give BTI 6 reasons they pay law firms top rates:

  • Attorneys bringing deep understanding of the business risk
  • Penetrating command of the solution or path to a solution
  • Unmatched commitment to help
  • Clearly grasping the magnitude of the enterprise level risk at hand
  • Easily anticipating the needs and obstacles from the start
  • Eagerness to discuss strategies and actions before being hired

These 6 insights translate into a top hourly rate of $2,000 an hour in 2015, up from $1,600 last year—a 25% one-year increase. Global GCs pay these rates for:

  • Bet-the-company IP work
  • Enterprise level M&A related litigation
  • Large-scale government investigation
  • Defense against high-profile activist hedge funds

59% of corporate counsel at large companies now pay at least one law firm $1,000 per hour as their top hourly rate paid—compared to only 39% last year. Again, top legal decision makers credit the increase in the most complex legal work.

The average of the entire spectrum of highest rates paid across all large companies is $982 per hour—up from $909 in 2013, after all discounts. We estimate the highest rate paid by middle market clients—between $50 million and $750 million in revenue—is $862 per hour, primarily for M&A related work.

The top legal decision makers tell BTI how these law firms meet the 6 key criteria above. In virtually every instance where clients are paying top of the market rates—the decision maker knew exactly which law firm they would hire if an ultra-high risk matter came up. These clients had deep experience with these firms and knew what they could deliver.

Law firms position themselves for the high-end work by talking business implications, sharing strategies, and maintaining an active ongoing dialogue with their clients—well before a high-end problem ever rears its ugly head.

MBR

*Based on BTI research conducted between March 2015 and September 2015. BTI conducted more than 300 independent, individual interviews with CLOs and General Counsel at Fortune 1000 companies and large organizations.

Highest Rates Clients Pay Jump to $1600, Top Rates up 8%

Clients pay $1,600 an hour after any discount as the highest rate in the market—a new all-time high for the top rate. And, this is not an isolated rate—more than a few clients report paying $1,600 per hour.

4 Figure Hourly Rates Officially Part of the Legal Landscape

38% corporate counsel report paying a top rate of $1,000 an hour or higher. The 4 figure HRP is clearly embedded in the legal landscape. The largest 30 law firms, including the Magic Circle firms, lay claim to 54% of clients paying the highest rates.

Clients say new and extreme risks make the top rates worth paying. Think monster transactions, global complexity, large scale FCPA and similar enterprise-level risk. 

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