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The Value and Peril of Flat Fee Billing

theworld

I know a thing or two about the virtues of flat fee billing, have done my legal work on the scale while working for a couple of third party administration (TPA) firms. Plan documents, plan amendments, and plan terminations were done for a flat fee that clients knew ahead of time about the true legal cost and not have a sticker shock worry when they got my bill.

 

That was a lot different when I worked for law firms for about 3 years. They billed by the hour and I think that billing by the hour is the power to destroy. Law firms feel the need to bill by the hour to pay their huge overhead. Since associates and low tier partners are judged by the hours they bill, that leads to unnecessary billing where associates and partners charge for far more work than they actually did. I certainly know that after hiring attorneys to sue a client of mine that skipped out on a $40,000 bill.

 

I like flat fee billing because it gives clients that certainty about how much their legal cost will be, rather than worried that the bill at the end is multiple times what they thought it would be.

 

I know many advisory and third party administration (TPA) implementing or exploring flat fee billing, but I think their businesses are different from my law practice in terms of flat fee billing. Advisors and TPAs have different liability concerns than I do, especially with larger plans. I don’t think there is anything wrong with offering flat fee billing, my only concern is that a provider goes in with a low flat fee that hurts their margins and underlying business by implementing a fee that is too low for the services they offered.

 

Flat fee billing is an attractive sales point, I just think that providers should avoid setting the bar for a flat fee too low

 

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