The fallout from Hurricane Harvey continues to pile up on the financial services industry.
As a result, the average cost of a personal finance lawyer has gone up by more than 10 percent.
That’s not surprising, considering how much of an increase the cost of doing business has gone in recent years.
A new report from financial law firm Deloitte puts that increase in perspective.
For every dollar a firm charges a client, it costs the firm about $2 to $3 more.
And that’s with a standard of practice that’s been rising, Deloise touts in the report.
The reason the average fee for a personal financial lawyer has skyrocketed, the firm writes, is because of the recession.
In the recession, financial services firms lost nearly a quarter of their clients, a quarter that’s now at more than a half-billion.
But in the first quarter of 2018, the total number of new client filings dropped by nearly a third, the biggest decline in two years, according to the firm.
“It’s become more expensive to do business, but it’s not necessarily a bad thing,” said David L. Hays, president of Deloisse, which commissioned the study.
“If you think about it, the costs of doing the job are going down.”
“In fact, the fees we’re charging have actually gone down because of recession,” he said.
“But there are some firms that are doing a lot better.”
In this case, the recession means a significant rise in fees and costs.
The firm analyzed fees for about 3,500 personal finance attorneys nationwide between Jan. 1, 2017 and March 31, 2018.
The cost of legal services for consumers is projected to be $1.2 trillion by 2021, according the firm, and the average costs of those services have increased by more over the past two years.
The rise in costs is mostly because of more people choosing to take on more cases and to settle.
For the first time in five years, the number of cases that have been settled in the past year jumped by more in the third quarter of 2019 than in the second quarter of the same year, according for the firm’s research.
This increase in settlements and the drop in new clients has led to a sharp increase in fees.
For a single lawyer, the amount of a fee for each legal case rose by more $1,800 over the course of that year.
But that doesn’t mean firms are making money from these new cases.
“You have a lot of firms that have to go through all these new clients, so you’re paying the bills, and you’re not making a profit,” said Josh Blum, who leads the firm and is a former head of the federal regulatory compliance division of the Securities and Exchange Commission.
For a firm, the reason fees are so high, Blum said, is that they’re paying lawyers to do work that was previously performed by someone else.
That may include a personal attorney who once represented an individual in a legal matter, or a firm that deals in consumer disputes, said Blum.
That means that the firm is paying lawyers not to be an expert on an issue, but rather to be a consultant, and not to do anything that would have been performed by a more experienced lawyer, he said, adding that the fee is not being paid to the client.
“It costs a lot to be the expert on something that you’re actually doing for the person who’s dealing with you,” Blum added.
That makes it more difficult for a firm to hire an experienced legal professional to represent a client in a pending case, according a report by the U.S. Commission on Civil Rights (CRC) earlier this year.
Hays said the trend in fees is a “problematic dynamic,” and one that has a lot more to do with the recession than the recession itself.
“The recession didn’t really put a dent in the cost structure,” he told Quartz.
“It did make it more expensive, and we’ve seen that in the industry.
It’s been a big change, and there’s been no real improvement in the last five years.”
While the rise in legal fees may have something to do to the downturn, the uptick also reflects the changing nature of personal finance.
According to the research, the median age of lawyers has grown from 34 to 41.
And while the firm analyzed cases from 2015 to 2019, it also found that lawyers who were younger than 55 were significantly more likely to settle than those who were older.
As a result of that trend, the age of a firm’s average fee rose to 27.3 percent in the fourth quarter of 2020 from 26.5 percent in 2019.
It may not be the biggest increase, but at least it’s a decline from where it was in the same quarter last year.
That was the last time the