How to Ask for a Retainer and Set the Right Amount
Tips to help you get the most out of your retainer agreements.
Whether you call it a retainer, prepaid fees or a deposit, the underlying purpose remains the same: ensuring payment of your fees. It’s an awkward subject of discussion with your clients, simply because the unspoken assumption is that you are worried that you might not get paid, even if you do good work for your clients. As every experienced lawyer knows all too well, there are abundant reasons why clients don’t pay their bills, ranging from a simple lack of funds to a genuine disappointment in the work done by the lawyer. But rest assured, most clients—even the unsophisticated ones—are aware of this dynamic, and they expect to pay a retainer. That makes asking for a retainer much easier as you rarely will have to explain in detail your justification for the request.
When Is a Retainer Necessary?
Except where a credit card is given for payment—which is the subject of an upcoming post—my general rule is that a retainer is always necessary. It’s only in an exceptional situation when I don’t ask for an upfront payment, and you should abide by this same principle. For me, there are three categories of clients I exempt from the retainer requirement:
- clients who are personal friends or relatives, where asking for a retainer shouldn’t be necessary and would be downright insulting;
- long-standing clients who have a history of prompt and full payment; and
- clients hiring me to do fairly small matters, where the consequence of nonpayment is small enough that it’s not worth the trouble of asking for or setting up a retainer.
Depending on the nature of the legal work that you do, there are likely to be other exceptions. These would include, for example, situations where the payment is coming from another source, such as an insurance policy or another party in the matter, or perhaps from an employer who is reimbursing the fees. You also may have clients such as an insurance company that simply does not pay retainers, but are totally reliable when it comes to getting paid in full.
How Do You Set the Retainer Amount?
For everyone else, some kind of retainer or deposit arrangement is a prudent approach. When it comes to setting the amount, that depends on whether the task is a fairly limited one such as the drafting of an agreement, or an ongoing representation such as protracted negotiation or litigation. For the defined task, I ask for an upfront payment that reflects the likely cost of the entire task. I carefully explain to my clients that in my practice all prepaid fees, whatever they are called, are refundable if not expended on my services. I explain that any unused fees will be promptly returned, and that I will bill them for any additional fees in excess of the prepaid amount. For ongoing representation where the amount of fees is less predictable, I typically set the retainer amount at my estimate of the first two or three months of work. The working assumption is that by then we’ll know each other much better, and I will have a clear sense of how my clients are going to perform with regard to the payment of my fees.
Trust and Confidence Issues
There are two other crucial dimensions of the request for a retainer, and the importance of these secondary factors should not be minimized. The first is that asking for retainer is an indirect way of getting to know your client’s financial situation and their attitudes towards money. You will hear their reaction to your request, and they will tell you if they can’t afford to pay a retainer. If they are asking you to take on a fairly substantial amount of work or you are setting out on a negotiation or litigation path that could be expensive, hearing your client’s reaction to your retainer request can provide some pretty valuable information. It may seem obvious, but if your client can’t afford to pay a $2,500 retainer you have to wonder whether they can afford to cover the likely total fees. Indeed, you should use the retainer discussion as an entry point to explore what your client can afford to pay and how they are going to manage the payment of your fees over the long haul.
The other element is more nebulous, and that’s the matter of trust. The unspoken premise of a retainer request is that the lawyer doesn’t trust the client when it comes to payment, but bear in mind, the client is supposed to trust the lawyer when it comes to performing legal services. If anyone asks me about this issue, I remind them that failing to return a client’s deposit can lead directly to my disbarment, and so the client should feel fully protected by the rules of professional responsibility. But even this sort of assurance does not negate the core truth here, which is that they will have parted with their money before the work has been performed.
Having served many hundreds of clients for more than 30 years, I feel confident that their trust in me is well placed, yet the retainer remains a sensitive situation. For this reason, you need to project a healthy degree of self-confidence, both in the competency of your work and the integrity of your professional practice. And you will need to be prepared to encounter some resistance from some of your clients, who might worry that you will take their money and not do the work—or not do it properly. But so long as you are able to convey an image of competence and integrity, both ingredients will be in place.
Asking for a retainer should be the norm in your client retention practice, and and you should be unafraid to do it.
Frederick Hertz, an attorney and mediator based in Oakland, has managed his practice for more than 25 years.
"The Art of Getting Paid" is a one-year series of blog posts that provides a comprehensive training to lawyers on how to get paid.
We welcome your questions and comments – and of course, your suggestions on how to master this insufficiently respected aspect of practicing law.