For the first 20 years of my practice when I worked at an AmLaw 100 and then an AmLaw 200 firm, the idea of asking clients for a lot of retainers was not something that I saw happen all that frequently. Certainly at the big law firm where I was a partner, if we were bringing on a new client and they wanted us to engage in a litigation matter, it was common for us to take a 50,000 or 100,000 retainer. But it wasn’t the case that the firm felt like every client needs retainer money in the retainer account and we’re going to stop our work in the event that we run out of retainer money. It just wasn’t done. And so I had some exposure to the idea of taking retainers, but it wasn’t something that I did very often at all. I mean, when I brought in new work at the large law firm, I only went for a retainer if I was forced to.

And I think that at the larger law firm, it was the approach that most of the time we were going to just hope that we made a good decision on the clients that we accept and that we’re not going to insist on hanging on to retainer money. And because I work for a lot of the same kinds of very large corporate clients right now, and I desire to not look different than the larger firm lawyers that I compete with. At the beginning of my practice, I was extremely reluctant to ask all my clients for retainer money, even though the dogma out there is, if you run your own law firm, you got to have retainer money. And if you run out of retainer money, you put your pencil down. I took a risk and I said that I’m not going to do it all the time.

And it’s worked out okay for me. I am very happy to say that 99% of the invoices that I have sent out have been paid to the tune of me collecting 99 cents on the dollar of everything I’ve invoiced. So I’ve been fortunate to have a lot of clients that I didn’t need or take retainer money on. However, I absolutely hang onto retainer money for certain kinds of clients, for certain kinds of matters. And in particular, if I’m going to do any substantial amount of litigation for a client, I’m going to hang on to 50 grand and I’m not going to drain it down necessarily every month. I might hang onto that until the end of the engagement, because it’s not uncommon for me to run up 30 or $40,000 bills for an intense month of motion practice and hearings and depositions. And if I was to take a 30 or $40,000 hit with someone who just decided not to pay me, it would be devastating.

And so the clients that I do general counsel work for, the clients that I deal with dispute resolution for at a lower level where we’re not getting into intense litigation arbitration. If we’re just doing mediation, I generally don’t go for a retainer. But a new client that I don’t know that is going to ask me to do something substantial, you betcha. I am absolutely taking retainer money. And that’s not the only reason that I think it’s really important for everybody to have an IOLTA account, even if you don’t anticipate taking retainer money. The first time one of your clients accidentally double pays you an invoice and you get a message from your bookkeeper, you notice in your bank account, it’s like, wow, that invoice got paid last month and now it got paid again. If you don’t have an IOLTA account that you can move that money into, then you necessarily have client funds inside your own account and you are necessarily running a risk that you don’t need to take.

So I think everybody should set up an IOLTA account, even if you don’t plan on taking retainers. If you’re a big firm lawyer and you’re like, “I don’t want to bug my clients about retainers.” I still think probably one in 25, you’re going to ask for a retainer. That’s been my experience, but there are other reasons for having retainer accounts set up and making sure that if you’re inadvertently in possession of client funds, you can get it over there into the retainer account and be above board. And so I can’t think of any reason why somebody who’s setting up a new law firm would not have a retainer account. And if this is new to you, there are a lot of rules about retainer accounts and how you have to track the money, and it is absolutely beyond the scope of this video. But I would say that yes, you should have a retainer account and you should spend an hour or two understanding what you need to do to make sure that you are keeping track of it in the right way before you put any client money in there if the state that you operate in is anything like the states that I operate in.