New research shows wide variation in client account costs, with most firms reporting low impact
Managing general client accounts carries measurable administrative costs for law firms, but new research suggests those costs are often lower and more variable than commonly assumed across the sector.
Independent research commissioned by the Ministry of Justice and conducted by Pye Tait Consulting provides a detailed snapshot of how firms in England and Wales experience the operational burden of holding client money. The study examines both the scale and composition of costs associated with administering general client accounts.
According to the findings, the mean annual cost of administering a general client account is £5,351.30. However, the report highlights a significant disparity between this average figure and what firms typically experience. The median annual cost reported by firms is £775, while the most frequently cited cost is £0, indicating that a substantial number of firms do not identify any discrete annual cost at all.
The research explains that this variation reflects differences in firm size, transaction volumes and internal accounting approaches. In particular, the inclusion of salary allocations and time cost estimates can inflate reported averages. The use of median and modal figures helps to reduce the influence of outliers and provides a clearer picture of typical experience across the market.
Firms identified several recurring categories of expenditure linked to client account administration. The most commonly cited costs include accountancy and bookkeeping, financial administration, auditing, bank charges and account reconciliation. These activities are generally absorbed within existing operational structures rather than treated as standalone or separately billed functions.
The study also examines how firms organise client account management in practice. It finds that 94 percent of firms manage their client accounts in-house. Only a small minority outsource this function to specialist third-party providers. Firms that do outsource cite reasons such as cost efficiency, access to specialist expertise and time savings, though the research makes clear that outsourcing remains the exception rather than the norm.
Differences emerge when firm size is taken into account. While the median cost of administration is broadly similar across size bands, the mean cost is higher among medium and large firms than among micro and small firms. This reflects higher transaction volumes and more complex account management requirements within larger organisations. Medium and large firms are also more likely to identify bank charges and reconciliation activities as notable cost drivers.
The report does not seek to assess whether administrative costs justify the retention of interest income from client accounts. Instead, it documents how firms currently quantify and experience these costs. By setting out both average and typical figures, the research provides a factual baseline for understanding the operational realities of client account administration across England and Wales.