How to Make Better Client Referrals
Tips and tricks that will boost your referral fees and expand your network.
Successful legal practices are built on skill, intelligence, great client service and a variety of revenue streams. One lesser-appreciated stream is case referral fees. Referring cases to other attorneys can be a profitable addition to your practice because fees typically hover around 30 percent of any award. Of course, fees may be higher or lower depending on your locale.
In spite of the potential for profitability, working with referral fees can be confusing. Many solo-practitioners and even full-service firms are not quite certain about handling referral fees, particularly when it comes to what is legal, ethical, or allowable. Additionally, you might have questions about how to securely transfer a client’s information to the referred law firm — something made infinitely easier with the right legal case management software.
When Should You Refer?
The most common reason to refer a case to another attorney is simple: you’re just too busy to give it proper attention. Maybe your caseload is fully packed (a nice problem to have) and you just can’t juggle more work. But you don’t have to lose the client entirely. Handing them off to another lawyer can still earn you a piece of the judgment.
In addition to being too busy, the three most common reasons for referring cases are:
- Lack of experience in the subject matter: No attorney knows everything. It is possible to be the king-of-the-hill in the realm of personal injury claims, and still be a babe-in-the-woods when it comes to tax law. Not being skilled in a practice area doesn’t mean you have to outright reject a client — refer them to an attorney whose practice includes that particular specialty and collect your referral fee.
- Lack of Jurisdiction: If not admitted to practice in a neighboring state or court, referring the case to another lawyer with jurisdiction is a profitable alternative.
- Up-front costs: Complicated cases like medical malpractice and car accidents often require extensive investigations and the hiring of experts. These associated costs can easily exceed the resources of a solo-practitioner or small firm. Referring the case to a larger firm with greater resources can still earn you a referral fee.
How Should You Refer?
Although referral fees can be profitable, a lack of understanding and a desire to stay out of trouble can cause many attorneys to avoid them. Fortunately, the American Bar Association (ABA) provides guidance with its Model Rules of Professional Conduct.
Rule 5.4 (a) allows an attorney to share fees with another attorney. And while Rule 7.2(b) says an attorney cannot give anything of value to someone for recommending their services, there are exceptions. According to Rule 1.5 (e), attorney referral fees are permissible if:
- The division of the fee is in proportion to the amount of work done by each attorney, or each attorney assumes joint-responsibility for representing the client.
- The client must agree in writing to the fee arrangement and accept the amount each attorney will receive.
- The fee must be reasonable — it cannot be greater than the amount to hire the attorney. The fee is part of the regular fee for hiring the attorney, not in addition to it.
- The referred attorney must be competent, possessing the skills and experience to handle the case appropriately.
You might think this is overkill, but the ABA rules prevent attorneys from earning easy referral fees without doing some of the work or bearing a portion of the responsibility. It’s only fair.
A word of caution: while many states closely follow the ABA rules for fee referral agreements; individual states often have additional requirements. Make certain you read up on your state’s rules before entering into any agreement.
What Should You Write Down?
Because both attorneys in a referral fee arrangement are jointly responsible for the handling of the case, it is important to be fully aware of the requirements of the matter and any potential for problems. Referral fee agreements should always be in writing, and should include the following:
- Clear expectations – Clients trust their lawyers and hate surprises. So, be sure there is no doubt as to each attorney’s responsibility for the case. If only one attorney will be handling the case, the agreement should clearly state so. A client should never wonder who is doing what.
- The fee percentage is written in the document – Again, make sure there are no surprises here. Both lawyers and the client must acknowledge and agree to the fee in writing. Remember the fee can’t be outrageous or “in addition to the normal cost of representation.” If you are not sure what to charge, ask other attorneys in your region what they receive for a referral. Tools like Filevine’s Referral Network are a great resource for these kinds of questions.
What Else Should I Consider?
Other best practices to follow when referring a case are to:
- Prioritize law firms who use the same tools — If your team and the referred law firm use the same legal case management software, the referral process can be massively simplified. For example, Filevine allows law firms to add attorneys from other legal teams to individual matters, with secure and limited access. In this way, the referred attorney can easily access everything they’d need to evaluate the case. This includes your stated referral fee, your scope of responsibility in the case, the client’s relevant information, and anything else that could be needed.
- Refer only to trusted attorneys – Whenever possible, refer cases only to lawyers you know will serve the client well. If you’ve dealt with another attorney previously and respect their abilities, they are probably a good option for a referral. If considering a lawyer with whom you have no experience, ask others about their work and reputation beforehand. Moreover, do not be shy when doing so — you’re the one on the line for any egregious mistakes a referred attorney may make.
- Always pay the referral fee – if you’ve been the recipient of a referral, never, ever run out on paying the fee. Law is a close-knit industry and word will get around that you are not to be trusted. You can also easily find yourself sued by the referring attorney when you dodge a fee.
- Ask for help – If this is your first referral fee agreement, ask other lawyers in your network for advice. Maybe grab a blank copy of one of their agreements. It can save you a lot of time and trouble.
Attorneys thinking about earning a fee referral should also consider the following questions and answers:
- How often should I refer cases? Obviously, you don’t want to refer cases to another lawyer just because you are uncertain about the law regarding any issues involved. A little research can quickly bring you up to speed and if after such research, you still feel inadequate to do the job, refer away.
- How should I handle a referral? Ask questions of the client to make certain you understand their issues well enough to explain them to another attorney. Keep adequate notes within your legal case management software that can help the referred law firm fully understand and evaluate the case. Treat a referral professionally by making certain the referred lawyer is competent and likely to accept the case. A quick call or email asking the other attorney if they are interested and able to accept the case is easy to do. Every attorney I’ve ever known was always looking for clients and being part of a strong professional network is a great way to give and receive referrals. Attorneys don’t mind picking up the phone for someone they know. So, build up your network by attending conferences, meeting other attorneys and learning about their practice areas.
- How should I transition a client to another attorney? Always have your client’s best interests at heart. Make them feel good, and help the referral process move as smoothly as possible. My practice is to thank clients for their interest in me and explain why I feel another attorney can better help them. They appreciate the candor, and some have even returned to me for other work in the future. Once the client knows I can refer them, I offer to reach out to the other attorney on their behalf. It only takes a minute! Clients love it and so does the referred attorney! Facilitating a smooth transition for the client is even easier when the referred lawyer uses the same legal case management software as your firm.
The Filevine Referral Network
Again, a network of attorneys built specifically to help with referrals is a great resource. Being familiar with the practices of other attorneys enables you to explain why they can be more helpful to the client. Additionally, you will already know which attorneys accept referrals and accompanying fees.
While there are a number of referral platforms online, most charge a fee to use. Don’t waste your money! A simpler route is to join Filevine’s Referral Network. This is a free and easy way to expand your referral reach to a wider pool of excellent lawyers and firms.
You’ll probably never get rich on referral fees alone, but they can be a profitable addition to any practice. They don’t require much more of you than being familiar with fellow attorneys and showing consideration for your client. And what lawyer would turn down the opportunity to expand their network, attract more cases, and help more people?