Done well, a client onboarding system ‘filters in’ the clients you want, and ‘filters out’ those you should avoid, while also completing the compliance process, writes Calum MacLean, a professions risk manager at Miller. In this article he explains how to achieve this outcome without creating unnecessary extra work at the same time. (19 May 2025)
While claims often are the result of multiple factors, they usually involve some element of poor communication, misunderstandings, and unrealistic client expectations.
Claims also result from taking on clients and matters which should have been declined, or undertaken by a different team with different controls. Successful law firms become successful by focusing on work that they are good at, rather than being a ‘Jack of all trades and master of none’.
An effective onboarding system is based on a well thought-out business strategy. What are your team’s areas of expertise? What types of work are you aiming to grow? What types of client are the most profitable and/or generate cash?
Risk is an important factor in any business strategy. The competitive pressures law firms face in this more ‘global’ marketplace often encourage firms to take risks and chase the fees. Yet, look a little deeper and apparently lucrative revenue streams can seem less appealing – as many of the solicitors who followed the overseas-investor-led buyer-funded-development bubble, for example, discovered to their cost.
Categorise types of work, by risk too
By properly categorising your work at the enquiry stage, you can identify those matters that you do and do not want to take on. Or, out another way, you can decide the risks that you are willing to take.
Set out clear parameters for the matters that are in your firm’s ‘sweet spot’, those that require senior management sign-off before being taken on, and those that are to be avoided. It’s almost impossible to design effective risk assessment forms and processes if you have not first properly considered what your ‘red lines’ are regarding work that you will and won’t take on.
Factors that can impact on your rating of work types include:
- Area of practice, for example conveyancing or immigration law.
- Sectors, such as retail or education.
- Value. This is not so much about fees (though if the fee-generation potential is particularly low, you may wish to consider whether it is in fact loss-making), as about transaction value and potential claims quantum. Is there an upper limit that might be outside your professional indemnity insurance cover?
- Matter complexity. For example, probate involving complex financial assets or complex trust mechanisms.
- Client factors. Are there client types (or locations) that you don’t want to take on?
Taking all these factors into account, use a traffic light system for incoming enquiries
- Green: Ideal
- Amber: OK
- Red: Avoid
Provide enough detail in your guidance that your employees can easily identify which category an enquiry falls within. Give them training and make the guidance extremely accessible – don’t hide it away in long-winded policy documents.
For example, the green category for conveyancing might include houses of price £X to £Y, with no complications.
The amber category might include complexities such as gifted deposits, high value property sales or purchases, Building Safety Act related issues, or Law Society ‘red flag’ indicators being present.
And the red category might include (depending on your firm’s chosen risk profile) high risk or complexity such as: buyer funded development, overseas buyer/seller, involvement of crypto-assets in the purchase.
Your enquiry form(s) should reflect your ideal clients. So the process will make it easy for your ideal client to instruct you, answering the list of questions that suit this type of work. Whereas non-ideal clients may raise other issues and may need to provide further information.
By having a clear picture of the risk involved in each matter that your firm takes on, you are also able to demonstrate to your insurer (and regulator) that you have robust risk control. That, in turn, can make PII easier, faster and less expensive to obtain.
More than this, it should provide a central record of these cases. This is useful for management oversight and auditing purposes.
The other half of the claims equation
Unhappy clients make claims. That unhappiness often starts off with clients feeling that they are not being treated well on a personal level.
Slow response, or a lack of courtesy, or empathy, or interest, or humanity, can all start a client relationship off on a bad footing. So too can a feeling that the fee-earner is really only interested in the fees to be earned.
The problem can then mushroom if they feel they are not receiving a proper service on a professional level.
So a good onboarding system can only get you so far. As we all know, you also need the right team and the right culture.
Client screening and assessing
When onboarding a new client, there are a number of mandatory compliance checks to carry out:
- Client identity (and sanctions)
- Know Your Client and Know Your Business
- Conflicts of interest
- Anti Money Laundering
But the mandatory compliance only helps to identify certain types of risk. To minimise future problems, you need to identify other risks.
Risk increases if:
- The age and profile of the apparent client does not ‘fit’ with the transaction. For example, a 32-year-old office worker selling a £700,000 house that she has apparently owned for 10 years.
- The client faces a language barrier. For example, if a client struggles to communicate, or understand what you are saying to them, or requires an interpreter, this makes them a ‘vulnerable client’ in a sense – and you vulnerable to ‘failure to advise’ allegations.
- The client is ‘vulnerable’ in some other way – for example if they have memory issues, or are recently bereaved, or are highly inexperienced and naive.
- They are financially constrained and/or there a risk that they may not be able/willing to pay your fee. Financial pressures affect their behaviour and their potential for making a claim. They may be inclined to seek to recoup costs, particularly if they over-run from the original estimate. Equally, if they can’t afford your time to do a proper job they may try to cut corners – but then complain if the outcome isn’t the one they needed.
- You are unclear about what they want you to do and the rationale behind their instructions.
- They are providing instructions through a third party. Some foreign clients may instruct you via an agent, perhaps in relation to the purchase of an investment property. What authority does the agent have? What instructions have actually been signed off by the ultimate client? What advice has been given?
- Indications that they could be a difficult client. E.g. Stressed clients can be extremely sensitive to perceived lapses in service and are more likely to make a claim. The stress could stem from financial pressures, personal difficulties, or simply a lack of familiarity with the legal process.
Designed well, your risk assessment can prompt the requirement to re-AML check an existing client where the previous AML check is ‘out of date’. The specifics of the matter will determine what checks are appropriate – whether the client is new or established. Your risk assessment criteria need not be too narrowly AML focused either. PII claims risks extend well beyond AML issues, and need to be picked up, insofar as practicable, in your risk assessment.
"Taking the time to achieve a full set of information up front to make an informed decision saves time in the long run. It can be difficult to extricate yourself from a client relationship if you discover a problem later on."
James Kerr, vice president (Europe), Travelers
Matter screening and assessing
Risk increases if:
- There are impending time-limits or unrealistic deadlines. For example, the service of a break notice on a commercial lease, where the deadline is in a matter of days. It may seem straightforward, but often the details of service are not as clear as they might at first seem.
- The matter is unusual or potentially complex. For example, restrictive covenants on an onward sale of land.
- The matter is contentious. For example, an onerous ground rent for a leasehold property being acquired.
- Your firm lacks suitably skilled fee-earners with capacity to take on the work.
- Completion is uncertain (for example, a house sale in a housing chain), and your firm’s fees will come directly out of the proceeds of the transaction.
- The instruction is part of a series of connected instructions – where the risk assessment may fail to pick up the potential quantum of any claim against the firm accurately.
Checklists are extremely useful for uncovering potential issues at the outset. For example, when buying a commercial premises, questions might include:
- What are the key objectives and negotiation points?
- Is there more than one potential buyer?
- Who occupies the premises now? And who will afterwards?
- What searches are needed?
- What certificates and safety reports are needed?
- How is the purchase being funded? Is this lined up?
Are you only doing the work you say you are doing?
Does your firm wide Risk Assessment and your ‘risk appetite’ match up with the work you actually undertake in practice?
Take Building Safety Act matters as an example: In this post-Grenfell era, the Act has brought in a slew of provisions that put conveyancers in a difficult position.
While many of the worst problems appear to have been mitigated, many firms choose not to take on affected matters, or will only do so in certain circumstances. Yet many of these same firms don’t have processes in place to identify whether a transaction involves a relevant building until they have already been instructed.
Ensure that your risk assessment and work acceptance processes filter out work of a type that you definitely do not want to be taking on. Ask specific questions (eg about whether the building could potentially be five-plus storeys, or higher than 11 metres) along with some brief guidance on how you would expect clients to answer those questions meaningfully.
Retainer letter
Each time a client asks you/your firm to do something, you must identify the work to be done, any limitations on the work, and guide the client on fees. Ideally, your risk assessment will help you define the scope accurately, and complete your engagement letter more easily and meaningfully.
- Who is the client? (Individual, partnership, company or multiple parties).
- Who is the person dealing with the matter and the person responsible for overall supervision.
- What are the clients' aims/objectives.
- What are you going to do for them?
- Are there stages of work?
- What is excluded: tax advice for example. This is often critical for managing the risk.
- How will you take things forward? What are the next steps.
- What the timescale and costs are estimated to be (and what may impact on these)?
- Service levels (you will reply within 24 hours, or three working days?).
- How to communicate. Email, phone, face-to-face?
- Respective responsibilities of the firm and the client.
- Data protection (their rights, person responsible) and other detail mandated by the SRA regulations and guidance.
Manage the client's expectations. Unrealistic timescales (for response times and for actual completion) are a common bone of contention.
Test any assumptions, made by the lawyer and by the client. For example, does the client actually own 100% of the house they are wanting to sell?
Identify any key deadlines. For example, the two-year time-limit on a deed of variation to reduce an IHT liability.
The output from your risk assessment should help you ascertain which fee-earners are suitable to undertake the work.
If your retainer excludes certain types of advice, direct them to appropriate source of that advice. For example, perhaps a chartered accountant for tax advice – but there is no need to recommend anyone.
Where appropriate, address the issue of whether the intended action(s) is likely to be cost-effective. What is the likely financial outcome for the client if they win a case, or lose it, by the time all the fees have been paid?
Have a system for supervising partners to sign off the engagement letters. Then get the client’s agreement in writing to the terms of the retainer. This helps to reveal any errors or omissions.
Proceed with the matter
Clients often change their minds. The scope of the work can increase, or new aspects can come to light. Always confirm any change in writing to the client.
Taken together, the above measures should help ensure that you are only taking on work that you have the expertise and capacity to manage, and that higher risk matters are getting the oversight required to minimise the risks of errors and omissions.
Improving risk management
When taking steps to reduce the risk of having to make a professional negligence claim against your PI insurance, it may be useful to think in terms of these four headings, writes Paul Smith, a solicitor and risk consultant at Travelers:
- People – whether clients or those within the firm providing the service.
- Process – the steps in delivering the retainer, dealing with the matter to completion.
- Systems – that underlie all the work that the firm does – file opening, client due diligence, IT, HR, communications within the business, diaries and file closure.
- Risk management – the extent to which good practice in risk management is followed in the firm.
Start with a thorough ‘onboarding’ process, to identify the client’s legal needs. Take a statement from the client, setting out the facts of the matter. Use headings such as the ones below to provide clarity and structure to these facts. Adopting this project management approach will help you to plan and control the matter (and its profitability) through to completion.
- Purpose – the agreed purpose of the matter and any advice being sought, as this will be central to any liability issues arising later on.
- Scope – the activities to be performed, the resources needed, and the outcome (eg a trust deed, will or codicil).
- Deliverables – specific tangible outcomes that satisfy specific named objectives.
- Assumptions – assumptions that the client can confirm are correct (eg a particular property is owned by X; or a particular document has not been superseded by another document).
- Dependencies – a series of steps to be taken in sequence, including the question of what happens if a step does not take place (what is critical, what is not?).
- Limitations – on the scope of the legal advice, based on the information available and the areas of law to be covered (eg is tax advice covered, or IP law?).
- Unknowns – factors where there is no information, which could affect the outcome.
When progressing a matter, use systems like these to keep control of the various issues:
- Issues log – a straightforward log of things that arise which may have an impact on the project (eg marriage or partnership status, dependants, beneficiaries, tax, valuations).
- Risk control log – any checks or solutions that need to take place (eg changes in dependants/beneficiaries/partnership status will usually require a follow-on action).
- Revision history – changes to the matter and why they were made (eg where new information means that the original plan needs tweaking).
- Change control – a way of preventing mission creep, so that if a matter materially changes the firm can then reset the budget, resources, timings and expectations of the outcome (eg if a seemingly straightforward transaction is revealed to be a complex one).
- Earned value – a cost-benefit analysis carried out during the course of the matter to check that the original commercial logic still stacks up in light of any changes (eg the tax implications of any changes in assets and the intended distribution to beneficiaries or the management in accordance with any trust).
Onboarding risk reduction top ten
- Do not design your onboarding process as an AML tick-box exercise.
- Instead, establish what types of work your firm is seeking – and avoiding.
- Build risk-critical criteria into your onboarding risk assessment.
- Provide clear guidance to your employees, making it easy to complete the risk assessment accurately.
- Train staff on how to assess the various types of risk.
- Embed an escalation process for higher risk matters, to ensure senior sign-off.
- Include ‘second pair of eyes’ sign-off at critical stages in high-risk matters.
- Revisit risk assessments if matters change.
- Review the risk assessments pre-completion.
- Include a review of risk assessments within your audits, to check they are being completed meaningfully and accurately.
Why do law firms choose Travelers?
It’s because Travelers has unmatched expertise and longevity in the legal sector, with a dedicated team of experts in underwriting, claims and risk management.
See also:
• PI insurance for law firms FAQs: Part one (50 FAQs)
• PI insurance for law firms FAQs: Part two (47 FAQs)
• Five highly practical factsheets explaining how to avoid professional negligence claims in residential conveyancing, wills and probate, commercial property, company and commercial, and commercial litigation
