Predominant billing arrangements for private client lawyers

Barriers

While the case for making the transition to value-based project fees is compelling, many private client lawyers are understandably cautious. For wealthy clients and private client lawyers alike, there are two major barriers that may be keeping them from seeing the benefits of value-based project fees:

• Failing to understand the cost structure of delivering high-quality legal advice. To quote a price from the beginning and make money requires a strong understanding of a law practice’s cost structure and a clear idea of the talent and resource requirements demanded by the engagement. The key to developing a value-based project fees structure is to think in terms of margins and the bottom line, not the top line—the fees. This is not actually all that difficult.
• Failing to translate the benefits of their advice into value for the wealthy client. Wealthy clients need to understand the value they receive for the fees they are charged. Presently, relatively few private client lawyers understand how to systematically explain the value they are delivering.

Alternative fee structures

As common as time + expenses legal billing may be, the wealthy appear to be becoming progressively critical of that practice. In our experience, they’re complaining that the fees ultimately are too high and that billings based on time spent entail an implicit conflict of interest. The general feeling is that private client lawyers who should be working on their behalf are subtly pressured to maximize rather than minimize the time spent.

A major disadvantage to using time-based billing is that the approach sets a ceiling for what lawyers can earn. There is only so much you can charge for an hour of time. And as there are only so many hours in a year and there is a high, but limited, ability to leverage junior partners and associates, there is only so much you can bill.

A key factor in these alternative compensation arrangements is that they transfer profit-generation risk from high-net-worth clients to the private client lawyers. This risk transfer tends to make many private client lawyers anxious, not surprisingly. Consequently, they choose not to adopt value-based project or retainer fees. For many of them, this might very well be shortsighted.

By adroitly combining alternative fee structures with an intense commitment to effectively communicating legal solutions, the potential outcome is greater revenue for private client lawyers, consistently. These two alternative compensation models provide the opportunity for premium pricing, which can translate into substantially greater revenues.

Although time + expenses billing can be less productive than other types of compensation arrangements, it’s still the norm among private client lawyers. Overall, AES Nation research found that slightly more than three-quarters of the private client lawyers surveyed predominantly use the time + expenses approach (see Exhibit 2).

Alternative fee structures can potentially circumvent the dislike many of the wealthy have for time + expenses billing, while breaking through the revenue ceiling it imposes on private client lawyers. Specifically, value-based project fees and retainer fees are much more appealing to many of the wealthy. When well thought out, effectively systematized and properly communicated, value-based project fees and retainer fees may result in significant revenue increases for private client lawyers.

Source: Russ Alan Prince and John Bowen, Jr., Excelling in Turbulent Times, AES Nation, 2017.
N = 359 private client lawyers.

Only about a fifth of the private client lawyers are using mainly a value-based project fees approach, while very few are employing principally retainer arrangements.

Important: Notice that time + expenses billing is heavily weighted to private client lawyers annually earning $600,000 or less. Note, too, that more of the top-earning private client lawyers are using value-based project fees as opposed to time + expenses billing.

This is very likely a function of the wealth of the high-net-worth clients, as evidenced by the preferred approach single-family offices use to pay for private client legal services. In an AES Nation survey of 199 single-family offices that are all regularly using the services of private client lawyers, 84.9% of them strongly prefer paying value-based project fees for legal expertise.

The upshot: Value-based project fees open a set of attractive new possibilities for private client lawyers. Specifically, they enable core compensation metrics, which can then be employed to design value-based fee models that may generate higher earnings because of premium pricing—if the private client lawyers effectively communicate the value of the legal services they deliver.

Value-based project fees

For value-based project fees to be the preferred compensation model, there should be an underlying premise: Private client lawyers are not being compensated for their time as much as they are for their expertise and experience. The criterion for being paid well is results achieved, not hours worked. This requires private client lawyers to effectively communicate with their wealthy clients. This in turn creates high levels of appreciation for their efforts and a solid belief in the projected outcomes.

High-net-worth clients will pay well for the legal results they seek, in our experience. The key point here is that the legal strategies produce the desired outcomes. Wealthy clients are willing to pay for value so long as they can believe they are, in fact, getting value.

You stand to gain several benefits by using value-based project fees:

• A matter of expertise. Value-based project fees can provide appropriate and sometimes disproportionate compensation to you for delivering high-caliber expertise. The contention is that you should be compensated not for the time you spend on a matter, but for the results you provide your wealthy clients. It is as close to a results-oriented compensation structure as possible when it comes to many types of legal services.
• Wealthy client-centered. Because of how they are structured, value-based project fees enable you to focus tightly on delivering legal strategies to your wealthy clients, not on billing. Critically, the fee structure enables you to avoid the tendency to spend time inefficiently. It is quite the opposite, in fact, because value-based project fees promote efficiency.
• Wealthy clients equate certain costs with value. To charge value-based project fees, you must explain and justify them by effectively communicating with your high-net-worth clients. When you create this basis of shared understanding, value-based project fees can potentially lead to higher client satisfaction and greater revenues.
• Prompts action. We see that with value-based project fees, wealthy clients are more positively disposed to implement their private client lawyer’s recommendations.

When using value-based project fees, you must clearly communicate the benefits to your wealthy clients in advance. This communication should include a checklist of defined activities that you will undertake, along with a list of the deliverables and results you will provide.

Conclusion

High-net-worth clients, by and large, do not like the time + expenses compensation system currently employed by most private client lawyers. They may resent the bills they receive, and they sometimes distrust the advice they get to the extent that they will not implement their private client lawyers’ recommendations. They may feel that their private client lawyers do not understand them or what they are trying to achieve. As a result, many private client lawyers see their compensation levels falling.

The good news: Win-win solutions are emerging. Value-based project fees have the potential to amply reward you as you provide high-quality legal strategies to your wealthy clients. There is no question that value-based project fees have considerable promise for high-net-worth clients and their private client lawyers.

ACKNOWLEDGMENT: This report was published by the VFO Inner Circle, a global financial concierge group working with affluent individuals and families, and is distributed with its permission. Copyright 2025 by AES Nation, LLC.