Is a Retainer Really Necessary?

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One of the first "wants" for lawyers opening a new firm is to get as many clients as possible on retainer basis, solidifying the retainer's stance as the Holy Grail for fee collection.

Retainers set up a fixed-fee-per-time cycle (often monthly) in which client funds deposited in a trust account are drawn on during a year or other designated period. Retainers can be a one-time payment to guarantee the future availability of the lawyer/firm or as a deposit against future services.

Retainers offer attorneys the security of knowing the amount and timing of cash flow into the firm, because the client is not paying by the hour. The disadvantage is that the client may require more services than the retainer amount would equal at an hourly rate.

To the extent allowed by market forces and consistent with rules of ethics, that can be addressed by increasing the retainer amount to cover a substantial portion of the initial phase of the work.

The goal is to stay ahead of the client by having a sufficient amount in the trust fund to bill against until computation of the end tabulation. Send the client monthly statements on the amount withdrawn so there is no question about what is owed for a final billing.

Being on retainer has ethical concerns. Accepting a retainer from a client means that work is promised in exchange for that fee. Failure to perform the work requires a refund of the retainer unless it is split between a non-refundable portion and a trust account deposit to be drawn as the work is performed.

For the latter, specify the event or date that serves as the trigger for allowing funds to be withdrawn from the trust account and placed into the general account. That is essential because when the fee is earned, it must be withdrawn. To do otherwise is to commingle trust and general funds, which is an ethical violation.

Such complexities raise the question of whether retainers are really so essential. Failure to get a retainer from prospective clients should not eliminate the desire to represent them if you have done due diligence on their willingness and ability to pay, and document both in the initial engagement agreement.

Due-diligence investigation is a step that too many lawyers neglect and can be as simple as requesting a credit report from one of the consumer credit agencies or from a business credit reporter, such as Dun & Bradstreet.

Once it is clear that prospective clients can pay, a signed engagement stating the terms and responsibilities for payment attests that they will do so.

Clients who cannot or will not sign a fee agreement or pay a retainer, or who want to start now and pay later, should be viewed as suspect. If the client takes offense at such detailing, respond by saying that the client should find other counsel because the requirement to pay is not negotiable.

For both firm and client, building an ongoing relationship is the goal, whether matters are billed with or without a retainer. A relationship built on trust and loyalty creates confidence that the lawyer will be there when needed, which, after all, is what a retainer affirms.

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