Key takeaways:

• • • New Zealand legal market achieves revenue and profit growth 鈥� A new TRI report on the New Zealand law firm market shows firms rebounding strongly from the pandemic, with firm revenue and profits up impressively.

    • Transactional and counter-cyclical practice demand drives success 鈥� More than half of the legal demand for New Zealand law firms comes from transactional work, which rose of the past year; meanwhile, counter-cyclical practices saw even higher growth rates.

    • Managed expenses and increased partner utilisation boost profit margins 鈥� Despite rising expenses due to technology and knowledge management investments, New Zealand law firms maintained manageable costs and increased equity partner utilisation.

For New Zealand law firms, years of careful investment and strategic pandemic recovery have paid off. Today, strong demand has vaulted firm revenue growth above double digits, leading to profits not seen among New Zealand firms since the early days of the pandemic, according to a new report from the 成人VR视频 Institute (TRI) and data from TRI鈥檚 .

Jump to 鈫�

2026 Report on the State of the New Zealand Legal Market

Demand at New Zealand law firms rose more than 5% last year, following stagnant or decreasing growth rates between 2022 and 2024, according to TRI鈥檚 2026 Report on the State of the New Zealand Legal Market. As a result, overall firm revenue rose by more than 10%, placing it back near pre-pandemic levels. Coupled with managed expense growth, New Zealand law firms saw their first double-digit profit growth since 2021, after declines in demand for transactional practice work scuttled profits in 2022 and 2023.

Overall, more than half of the legal demand for New Zealand law firms comes from transactional work such as corporate general and M&A practices; and indeed, demand for such work rose last year after seeing only modest growth or declines in the the years prior. However, the report shows that even more notable is the rise of demand in counter-cyclical practices such as disputes & litigation, insurance defense, and workplace relations. The growth rate of counter-cyclical demand topped that of transactional demand in the second quarter of last year and continued to separate itself throughout the remainder of the year.

At the same time, firms continued to enjoy steady rate growth, with their worked rate growth over this past year coming close to their average rate growth than was seen from 2022 to 2024.

Interestingly, this represents a different strategy by New Zealand firms, compared to those in the United States or Australia, to capture profits through other means while keeping their rate increases manageable. And indeed, while Australian and US firms have largely seen falling utilisation, New Zealand equity partners averaged more hours worked per month in 2025 than they did the year prior, which helped to drive higher revenues.

Meanwhile, total expenses ticked up slightly last year compared with 2024, with both direct expenses and indirect expenses rising. However, much of this growth in indirect expenses is largely due to increased investments in technology and knowledge management, an increasingly necessary expense in the age of AI.

As a result of the demand rebound and more manageable expenses, New Zealand law firms are seeing their revenues and profits soar.

Overall revenue more than doubled, percentagewise, in 2025, which in turn directly led to sky-high profits in 2025 that were almost triple what they were the year prior. Profit per equity partner also saw similar gains.

Overall, New Zealand law firms on average largely held steady with a profit margin around 43%, while some firms saw profit margins soar above 50%.

As the report shows, all of this represents a very positive financial picture for New Zealand law firms. The return of demand, steady rate growth, and managed expenses has provided firms a solid footing from which to grow further. And if New Zealand law firm leaders can build on those positive metrics, they look poised to take these gains and grow further in 2026.

You can download

a full copy of the 成人VR视频 Institute’s “2026 Report on the State of the New Zealand Legal Market” by filling out the form below:

Key takeaways:

• • • Worked rate momentum is slowing at a crucial time 鈥� Q4鈥檚 7.1% growth in worked rates, while historically strong, is the smallest quarterly increase of 2025, indicating the rate鈥慸riven profit engine may not be endlessly responsive as firms approach 2026.

    • Elasticity at its strongest and most vulnerable 鈥� Since late-2022, worked鈥憆ate growth has translated almost one鈥慺or鈥憃ne into law firm profitability, but even a slight softening in rate momentum now poses outsized risks as client budgets tighten.

    • History shows the system has limits 鈥� The 2021鈥� 鈥�23 period demonstrated that rate growth alone cannot sustain profitability. Today鈥檚 Formula 1鈥憀evel responsiveness boosts gain quickly enough, but it can leave firms more exposed if the market changes direction.

Even as the winds shift, law firms still managed to sail into a strong finish in the fourth quarter of 2025; but beneath that smooth landing, the current was already changing direction. As the 成人VR视频庐 Institute鈥檚 Law Firm Financial Index (LFFI) edged down 2 points to 61 in Q4, a small but notable reversal after a full year of steady gains. The dip was driven largely by cooling demand growth, and while modest in absolute terms, it hints at a broader realignment that may be taking shape just as the industry steps into 2026.

Unsurprisingly considering its role in profitability, much of this shift comes down to worked rates and their relationship to profitability 鈥� a relationship that, in recent years, has been remarkably tight. Yet Q4 showed the first signs that the market may be entering a more complicated phase.

The F1 machine

In the previous decade, the rate-driven profit engine behaved more open, stable, predictable, and generally comfortable 鈥� albeit with one important limitation. It didn鈥檛 offer much acceleration. In fact, most of the higher鈥憊elocity gains only began to appear as the industry approached the pandemic era. Then, when the pandemic hit and the system started to strain, with any acceleration felt weighed down and less responsive as firms navigated uneven pavement and constant adjustments.

Beginning in 2023, the industry shifted again 鈥� this time with the acceleration power of a Formula 1 race car. Rates became extraordinarily efficient in being translated into profitability. In recent quarters, profit rates have seen significant growth, so when firms pressed the accelerator, the needle moved quickly.

However, an F1 car demands precision. The faster it goes, the less margin there is for error. Today, the market is operating in a phase in which rate increases translate to profit gains at incredible speed.

A decade of history reveals a crucial pattern

The chart above broadens the lens to cover more than 10 years of data, bringing an important nuance into focus. The relationship between worked rates and profitability has not always been as linear 鈥� or as reliable 鈥� as it has in the most recent period. From Q1 2015 to Q4 2021, firms were driving at a manageable pace: For every 1% increase in worked rates, there was an approximate 0.7% growth in profit. Indeed, most of the historical data aligns with the intuition that higher rates bring higher profits.

However, between Q4 2021 and Q1 2023, the pattern bends in the opposite direction. Rate growth accelerated sharply, yet profitability declined. At first glance, it appears counterintuitive, but in racing terms, the track conditions had deteriorated sharply, making speed alone not just ineffective but actually risky. This was a period marked by elevated inflation, rapid expense growth, compensation escalations, and operational volatility across many law firms.

The logic was simple: Even aggressive rate increases couldn鈥檛 fully offset the pressure on margins. Moreover, in such a strained environment, attempts to raise worked rates by 1% led to a nearly 0.9% decrease in profits 鈥� almost a complete reversal. As a result, firms were recording some of their highest worked rate growth levels in nearly a decade, yet profitability on a rolling 12鈥憁onth basis dipped into negative territory and remained there for several quarters.

The goal of discussing this period isn鈥檛 to argue that rate increases backfired. They technically didn鈥檛. Rather, the lesson is more subtle鈥� and more relevant today: Rate growth is essential, but not omnipotent. It cannot solve every profitability challenge on its own.

The more recent elasticity story: Rates and profit move together

The LFFI鈥檚 softening in Q4 was influenced not only by decelerating demand growth, but also by a subtle easing of rate growth鈥檚 momentum. Worked rates grew 7.1% for the quarter 鈥� as we said, still strong, but the slowest quarterly increase of 2025. In a different era, this might have been a footnote; however, since the pandemic, rate growth has become the central pillar supporting law firm profitability. Where productivity and demand once balanced the equation, rates now serve as the primary driver. This means that any moderation, even a slight one, carries outsized significance.

The chart above illustrates this dynamic clearly. Without belaboring the mechanics, each point represents one quarter, with worked rate growth on one axis and profitability on the other, both on a rolling 12鈥憁onth basis. The clustering shows a close, consistent linkage over the last several years, showing that as rate growth pushed steadily upward, profitability almost invariably followed.

One takeaway stands out, however. Since late 2022, every 1% increase in worked rates has corresponded with roughly a 0.9% increase in profit growth, contrasting sharply with the patterns observed during the pandemic period. That kind of elasticity is rare in the history of the legal industry, and it helps explain why 2025 was such a profitable year across the market. Firms exceeded a two鈥慸ecade threshold in rate growth, achieving average increases near 7% and double鈥慸igit gains at the top end.

Again, however, that relationship cuts both ways. If rate growth were to stall 鈥� or if clients were to push back more aggressively on rates 鈥� the profit engine that has powered firms through much of the last three years could lose momentum quickly. The early signs of that tension were already present in Q4, and they could intensify in 2026. Corporate budgets are under acute pressure, and counter鈥慶yclical demand often rises during economically turbulent periods, tightening constraints even further.

Put simply, the market is showing early signs that clients鈥� ability to absorb further rate increases may clash with firms鈥� dependence on that rate growth to sustain their profit growth. And the years of historical data serve as a reminder that this relationship isn鈥檛 unbreakable, and that even well鈥慶alibrated systems can behave unpredictably when conditions shift.

The real question heading into 2026 is not whether firms can continue pressing the accelerator, but whether they can do so safely. At this Formula 1 speed, maintaining profitability isn鈥檛 just about adding power 鈥� it鈥檚 about navigating a track that is becoming narrower, more volatile, and far less forgiving.

You can download the 成人VR视频 Institute鈥檚 Q4 2025 Law Firm Financial Index here

Key takeaways

• • • Rate strategies can mask performance 鈥擱ate and realization strategies can make it unclear how they affect the bottom line and what is actually driving firm performance.

    • Firms use vastly differing rates and discount strategies 鈥� Many law firms are taking various approaches to better balance different strategic goals around profitability and performance.

    • Firms need to understand their rate system configuration 鈥� Law firm leaders need to better understand how their rates and realization form an interconnected system.

Law firm leaders, practice group heads, and firm pricing teams go through countless discussions about setting rates, realization targets, and collection metrics. The conversation often devolves into debates about how much standard rates can be raised, how much to discount those rates, and how aggressively to apply write-downs or write-offs before submitting invoices to clients.

In fact, firms use vastly different rate and realization strategies in an attempt to better balance benefits and costs, according to the 成人VR视频 Institute鈥檚 recent Law Firm Rates Report 2026, which took a closer look at how law firms diverge in how they manage these different strategies. Understanding which configuration a firm runs 鈥� and why 鈥� can be key to effectively managing revenues in today’s legal market.

The 4-stage system

Think of a firm’s rate and realization as an integrated system having four sequential stages, similar to the operation of a jet engine. Inputs flow through multiple processing steps before emerging as collected revenue that powers the next cycle.

Stage 1: Standard rate increases (Intake)

This is where raw potential enters the billing system; and like a jet intake, standard rates determine how much volume enters the system.

These standard rates are the foundation 鈥� the starting point that feeds everything downstream. Some firms set aggressive annual increases of 10% to 15% on their standard rates, while others in the same market segment may push more modest 3% to 5% bumps.

This intake volume goes a long ways to determining how smoothly the following stages work. Set rates too aggressively without the infrastructure to support them, and it creates client resistance and downstream problems. Set rates too conservatively, and the rest of the system will be starved of the inputs needed to generate strong performance.

Stage 2: Pre-work realization (Compression)

At the compression stage of a jet engine, air gets squeezed down so that the remaining stages can use it efficiently.

For law firms, this is the critical stage in which standard rates meet the reality of client negotiations and market forces. Some firms utilize high-compression systems by limiting pre-work discounts and maintaining worked realization as high as 95%. Other firms operate low-compression models, immediately releasing pressure through aggressive discounts that can bring realization down to 75% to 80% before work on matters even starts.

Stage 3: Post-work realization (Combustion)

This is where strategy meets execution. For jet engines, it鈥檚 where the massive amount of intake air is put to work by mixing with fuel and igniting into power. At the same time, some of the air is allowed to bypass the combustion chamber, helping maintain the optimal operating temperature.

Similarly, firms can apply write-downs after the matter is completed and worked hours are logged with the goal being to optimize billing for the current market conditions. Firms pushing for 100% post-work realization every time (pushing the engine too hard) might maximize revenue per transaction, but risk damaging client relationships over the long-term. Write-downs 鈥� particularly on associate work 鈥� can function as a buffer that protects higher partner rates from client pushback and preserves long-term relationships. Like a jet engine, some level of what initially could be seen as inefficiency may actually protect the engine.

Also, just as jet engines must be engineered to balance tradeoffs between compression ratios (Stage 2) and air bypass ratios (Stage 3), firm leaders must decide how to balance pre-work vs. post-work realization, even fine-tuning by timekeeper level or practice, according to how they feel they can best generate revenue more efficiently.

Stage 4: Collected revenue (Thrust)

This final stage produces thrust 鈥� the collected revenues that drive a firm 鈥� however, this doesn’t represent the end of the process. As the hot gases blast out the back of the jet engine, they also spin turbines on their way out, powering the air intake and compressor blades up front, creating a self-sustaining cycle.

Similarly, strong collection performance creates confidence for more aggressive standard rate increases in the next cycle. Conversely, weak collections undermine the ability and confidence to push rates higher, creating a negative feedback loop. This explains why some firms may sustain 8% to 10% annual rate hikes while others struggle to maintain 3% to 4% increases. Firms with strong collection discipline can reinvest that credibility into higher rates, while those with collection problems may find themselves prone to breakdowns.

Like a jet engine, sustained success depends on how efficiently the entire engine runs.

Three distinct configurations

As the Rates Report illustrates, most law firms can be clustered into three operating configurations based primarily on how they manage pre- and post-work realization.

Configuration 1: The low-compression approach

These firms start with higher standard rates but release billing pressure early and often through aggressive upfront discounting. While these firms tend to achieve better demand growth 鈥� 1.9% compared to a 1.0% for the average firm 鈥� at the end of the day, that higher demand translates to only marginally higher fees worked (9.0% growth compared to an 8.4% average).

These firms also lag in productivity, as measured by hours per lawyer. Comparing fees worked per lawyer, they’re running slightly behind the pack. This means that high activity levels don’t necessarily translate to proportionally higher performance.

Configuration 2: The high-compression approach

These firms strive to maintain high pre- and post-work realization with minimal pressure loss throughout the stages. While one might expect this approach to generate superior results, their demand growth sits right around average (1.3% compared to 1.0% for the average firm) and the same with fees worked.

Indeed, while these firms have earned the market position to maintain rates with minimal discounting, this premium positioning doesn’t translate into premium growth.

Configuration 3: The afterburner approach

These firms show a massive drop-off between standard rates and collected revenue because they鈥檙e incorporating higher discounts and write-downs across both the Compression and Combustion stages. These firms accept the realization losses in order to generate client satisfaction and maintain competitive momentum in a strategy that trades pricing efficiency for relationship velocity.

Indeed, these firms are essentially injecting extra fuel into their exhaust stream and lighting it on fire, similar to a jet鈥檚 afterburner. And like an afterburner, it appears hugely inefficient, burning upstream resources that theoretically could have been conserved. Some firms are succeeding with this approach in terms of demand growth and productivity improvement, while others are finding themselves locked in a dogfight to maintain performance.

So, which is the superior rate strategy?

What’s remarkable is that despite being significantly different approaches, all three end up collecting nearly identical amounts 鈥� between $553 and $580 per hour on average.

This means that the choice isn’t about finding the objectively best configuration, rather it’s about understanding which approach aligns best with a firm’s unique culture, client relationships, and operational strengths.

For example, a firm with strong project management and lean operations might thrive with the low-compression approach by trying to process more work through the system. A firm with premium brand position might excel with the high-compression approach by leveraging reputation to minimize discounting. And a firm with deep, long-standing client relationships might succeed with the afterburner approach, treating discounts and write-downs as strategic investments in future client retention.

As the Rates Report noted, firms shouldn鈥檛 evaluate any one stage in isolation. The best strategy isn’t about maximizing any single metric, rather it’s about understanding how each firm鈥檚 configuration fits with their specific market position and strategic goals. Understanding where a firm generates 鈥� and loses 鈥� power can help law firm leaders properly adjust their strategies as market conditions change in order to withstand any turbulence.

You can download a copy of the 成人VR视频 Institute鈥檚 Law Firm Rates Report 2026 here

Key insights:

• • • Rates have never been stronger, but concerns are mounting 鈥� Law firms continue to benefit from historically high rate increases, well above the rate of inflation, a new report shows.

    • Market forces drive pricing convergence across different configurations听鈥� While law firms employ a variety of rate and realization strategies, firms across all major configurations consistently collect similar amounts per hour despite employing highly distinctive realization strategies.

    • Client relationships enable rates but don’t win business鈥� The relationship factors that allow firms to push through significant annual rate increases with existing clients contribute only slightly to competitive differentiation, the report notes.

The legal profession has achieved what most industries can only imagine: The ability to raise prices year after year, with clients consistently agreeing to pay more. Over the past decade, law firms have pushed rates at twice (or more) the rate of inflation, and 2025 is no exception 鈥� worked rates are up 7.4% compared to just a 2.8% inflation rate. This isn鈥檛 just a routine cost-of-living adjustment, rather it鈥檚 a demonstration of genuine pricing power that has fundamentally reshaped how legal services firms generate revenue.

Jump to 鈫�

Law Firm Rates Report 2026

Yet, beneath this historic run of rate increases, warning signs are beginning to emerge. Law firm revenues are now more influenced by rate hikes than by legal demand, and with economic uncertainty on the horizon, there is growing anxiety about whether law firms鈥� pricing prowess can withstand future headwinds. Indeed, clients are becoming more cost-conscious, shifting work to lower-cost legal providers, and financial red flags are starting to appear in firm balance sheets. The sustainability of these record rates is far from guaranteed.

Against this backdrop, the 成人VR视频 Institute and the True Value Partnering Institute have released the Law Firm Rates Report 2026 which examines these developments in fuller detail, based on law firm data sources and interviews with legal services buyers and Stand-out Lawyers.

Not surprisingly, the prevailing wisdom among law firms to best address this situation has been to invest in technology 鈥� especially generative AI (GenAI) 鈥� in order to deliver more value per hour and justify their higher rates. Firms have pursued a variety of AI optimization strategies, including maintaining strict realization discipline, offering strategic volume discounts, and absorbing write-offs to preserve client relationships. The assumption has long been that one approach must be superior.

However, as the report shows, a surprising pattern emerges. Despite radically different approaches to discounting and realization, firms end up collecting roughly the same amount per hour. Understanding why these different paths all lead to the same destination is the next challenge for law firm leaders if they want to truly get ahead of their competition.

3 distinct models, 1 revenue outcome

The data reveals firms have self-sorted into three distinct operational models based on their level of aggressiveness when setting rates and their willingness to accept write-downs and discounts. Yet, for all this differentiation, firms generally collect the same hourly rate, right in line with the industry average, no matter what their strategy. As the report shows, market forces 鈥� such as client expectations, competitive pressures, and economic realities 鈥� act as gravitational pull, drawing everyone toward a common outcome.

Yet, far from meaning that strategy doesn’t matter, the report goes on to explain how the true differentiator is to find the best approach that fits your firm’s culture, client relationships, and operational strengths.

Indeed, analysis of client decision-making reveals that the factors which enable rate increases with existing clients contribute minimally to competitive advantage in attracting new ones. This means that those factors which make clients stick are totally different from those that attract new clients to begin with. So, to grow both rates and market share, leaders must run two games simultaneously 鈥� leveraging relationships for rate increases with existing clients while competing on entirely different set of attributes for new ones.

As the report illustrates, those firms that will thrive won’t be those with perfect strategies. They’ll be those whose leaders understand their specific rates and discounting configuration well enough to adapt when needed. Because when you’re pushing systems to their limits, the question isn’t whether you have the optimal settings 鈥� it’s whether you understand your system well enough to keep it running when conditions change.

You can download

a full copy of the “Law Firm Rates Report 2026” from the 成人VR视频 Institute and the True Value Partnering Institute by filling out the form below:

Key takeaways:

• • • The debate continues 鈥� GenAI is reigniting the debate over the billable hour in law firms but is unlikely to fully replace it within the next five years, with firms expected to adopt more hybrid billing models, panelists said.

    • AFAs on the rise 鈥� If alternative fee arrangements are the answer, firms need to develop clear communication, disciplined scoping, and a shared understanding of value between clients and law firms, which remains a challenge.

    • What the client needs 鈥� Clients want law firms to use GenAI not just to lower costs, but to deliver more effective and creative legal solutions, emphasizing the importance of combining human expertise with technology.

NATIONAL HARBOR, Maryland 鈥斕齌he death of the law firm billable hour has been advertised and failed to materialize so many times that many in the legal industry roll their eyes when they hear the next proclamation of its impending demise.

The billable hour is an easy concept to calculate and understand, and today鈥檚 levels of law firm profitability suggests little urgency to change. However, the rapidly increasing use of generative AI (GenAI) has reopened the debate with some new excitement that this advanced tech is the long-awaited catalyst to ring the billable hour鈥檚 death knell. Certainly, GenAI use will drive law firms to adopt practices that will support profitability when using other forms of billing, and it will also help articulate value and provide clients with more transparent pricing.

At the recent听, a stopwatch-style debate 鈥� moderated by the 成人VR视频 Institute鈥檚 Zach Warren 鈥� tackled not just whether GenAI is a superior billing method to achieve firm and client goals but also what conditions must exist for a true shift toward it.

Client value and billing

Done well, alternative fee arrangements (AFAs) align client and outside counsel incentives, improve predictability, and shift focus to outcomes. 鈥淐lients don鈥檛 hire lawyers for how long something takes 鈥� they hire them for results,鈥� said , founder of This Might Help Consulting. Mature and successful value-based pricing requires phase-based scoping, milestone holdbacks and bonuses, and constant re-scoping 鈥� steps not easily accomplished.

There鈥檚 no secret as to why firms avoid all that and stay within their hourly billing comfort zone: Law firm recruiting and compensation hinges largely on utilization and maximizing billable hours. Also, scoping an expensive project for partners not trained in project management is risky, and any changes can drive the parties back to the bargaining table, further eroding client trust and even the firm鈥檚 own assumptions of what may be required.

Riffing on a famous Winston Churchill quote, , founder of AtJustice and former Records & E鈥慏iscovery practice group leader at Reed Smith, noted that the billable hour 鈥渕ay be the worst billing system 鈥� except for all the others.鈥� In addition, while clients may grumble, they still pay for billable hours, so firms have no true incentive to change.

There鈥檚 no secret as to why firms avoid all that and stay within their hourly billing comfort zone: Law firm recruiting and compensation hinges largely on utilization and maximizing billable hours.

However, the ILTACON panel did illuminate one major stumbling block in the shift to AFAs: Whether firms and clients can truly agree on what success and value looks like for both parties under an AFA. In a hypothetical, panelists debated whether an AFA set for $100,000 would satisfy clients if the firm completed the work more quickly in what would have cost $80,000 if billed hourly.

Cohen said the client would be unhappy they had paid more than needed, and McPherson argued that 鈥渋f the client got the value and it was predictable鈥� and the client avoided more costly litigation, they would consider that a win and a great value. The bottom line seems to be that firms and clients need more communication upfront around client value, and disciplined scoping, iterative recalibration, and tech-enabled matter intelligence will help drive success 鈥� otherwise firms will continue to default to the billable hour.

GenAI effectiveness vs. cost reduction

The promise of GenAI to drive the costs of billable hours down is attractive and often the most emphasized aspect in discussions around its impact on the shift in billing, but we shouldn鈥檛 overlook GenAI鈥檚 ability to increase how effectively and creatively law firms can solve clients鈥� problems. Corporate legal departments鈥� requests for proposals (RFPs) for outside counsel engagement often focus upon costs, but quality and predictability still matter. The lowest bids on reverse auction platforms lose out 54% of the time, and the highest bids win 18% of the time, said panelist , Senior Pricing Manager at Perkins Coie.

Still, the primary GenAI question in many RFPs, is simply 鈥淗ow will you use AI to lower our costs?鈥� This makes clear that clients just want to know how GenAI will lower their fees, and this is often what clients want to discuss when GenAI comes up, said , Director of Practice Innovation at Fried, Frank, Harris, Shriver & Jacobson.

Still, it鈥檚 becoming clearer that clients want their outside firms to use AI to deliver more effective and creative solutions to their legal matters, with lower costs just a happy by-product. 鈥淟itigation is a business problem stuck in the courtroom,鈥� said panelist , president of iDiscovery Solutions. In-house counsel can seem more firmly focused on their company鈥檚 business problems and how they can leverage the law to help solve internal business partners鈥� problems. Under the billable hour, outside counsel may be reluctant to consider other angles or solutions to a problem other than the most obvious, for fear of increasing the client鈥檚 bill.

Clients just want to know how GenAI will lower their fees, and this is often what clients want to discuss when GenAI comes up.

The panel further recommended that outside counsel should consider how using an AFA and GenAI in conjunction with their own legal and business acumen, may more quickly allow them to consider other solutions without fear of needlessly running up a client invoice. Overall, outside counsel needs to enunciate how the combination of their human value 鈥� strategy, judgment, and industry fluency 鈥� in conjunction with GenAI offers more effective and creative solutions, hopefully delivered more cost-effectively as well.

Will GenAI kill the billable hour in five years?

Overall, it鈥檚 unlikely GenAI kills the billable hour in the next five years, and panelists certainly foresee a slower shift that鈥檚 driven by client demand, not law firms鈥� own initiative.

For now, as the panel suggested, there likely will be more use of AFAs, especially around more predictable matters or those with repeatable processes, clearer tasks, and more predictable outcomes. To prepare, law firms should clarify their value beyond AI, increase pricing transparency, and better leverage their legal professionals to improve client satisfaction.

You can find more of our听coverage of recent ILTACON events听here

Key insights:

• • • New methods of managing revenue 鈥� Changing technologies will require new ways of looking at revenue management beyond traditional methods of cost recovery

    • The rise of non-hourly billing 鈥� The shift to value-based billing or alternative fee arrangements will be almost inevitable as continued reliance on billable hours could prove detrimental in light of technology鈥檚 promises of increased efficiency

    • Looking for efficiencies and ROI 鈥� Law firms have readily available opportunities to demonstrate a return on their investments in AI by looking at places where revenue is currently being lost to write down, turning otherwise lost time into new potential revenue streams.

While the recently released 2025 Future of Professionals report, published by 成人VR视频, provides in-depth coverage of many of the changes that business professional anticipate or are already experiencing due to the rising influence of AI, the report did not really dive into issues of how AI may impact some of the business management aspects of professional services firms 鈥� specifically around how the pricing of legal services may be impacted by an AI-powered future.

Fortunately, the 成人VR视频 Institute has been closely examining this very issue for some time as part of an ongoing body of work dedicated to the pricing of AI-driven legal services.

This article is intended to serve as a compendium of a few of those pieces to help provide starting points for strategic discussions among law firm leaders around how to develop or adapt strategic plans to meet evolving realities in an increasingly AI-driven legal market.

Focusing on new methods of cost recovery

Law firms are increasingly reliant on advanced technologies, but those technologies can come with fairly significant costs. Traditionally, law firms would seek to recover those costs from their client through various billing mechanisms. However, client resistance and ethical considerations will create challenges for those law firms looking to apply such traditional methods to these new tech tools. Instead of focusing on how to offset the cost of technology, firms should instead be exploring ways that these advanced tools can create new mechanisms to drive revenue.

Indeed, a large component of that exploration will include more experimentation with value-based billing arrangements or alternate fee arrangements (AFAs). Currently, most legal work is billed based on the amount of time the work took to complete. However, as technology increases the speed with which work can be completed, the continued strong reliance on billable hours could have a detrimental effect on law firm billings.

That said, just because the outcome was delivered much more quickly does not mean it necessarily offers less value to the client and therefore should be dramatically cheaper. Law firms will need to pivot to different models to capture and then demonstrate that value. Firms that resist these changing market forces likely risk having their revenue streams fully dependent on their hourly inputs alone. And ultimately, those firms that lag behind risk losing out to more proactive firms that have made strides toward delivering higher levels of service.

Leveraging AI to reclaim lost revenue

Compounding this challenge is the fact that many law firms face a hidden cost due to inefficient workflows. The result of that inefficiency can be seen in the amount of time lawyers worked on behalf of clients but ultimately didn鈥檛 bill them for their services 鈥� a metric commonly known as write-downs.

Indeed, the average law firm partner loses approximately 300 hours of their own time every year due to tasks like correcting associates鈥� mistakes or getting up to speed on legal questions. The cumulative effect of these write-downs can quickly climb into the millions of dollars. Often times, lawyers are correct that clients would not want to be billed for this time; but the challenge, then, becomes how to not spend time on those tasks.

Clearly, AI can help law firms address this problem quickly. Once areas of potential revenue and time leakage are identified, law firms can more readily apply AI solutions targeted to these specific challenges, creating a more direct path to a return on a firm鈥檚 AI investment, and ultimately pushing the firm in a more productive direction.

You can keep current on how AI will impact law firm business model here

• • • Corporate GCs are focused on serving their businesses as strategic enablers and expect the same from their outside counsel

    • GCs increasingly demand advice that is proactive, clear, actionable, and aligned with broader business needs

    • Law firms that fail to meet these expectations risk being replaced by another law firm or an alternative provider

The legal landscape in the United Kingdom is experiencing a fundamental transformation, driven by economic uncertainty and rapid technological advancement. As corporate legal departments navigate these challenging waters, their expectations of outside counsel are evolving dramatically. Technical competence, while undoubtedly necessary, is no longer sufficient. Instead, UK general counsel (GCs) are increasingly expecting that their outside law firms evolve into true strategic business partners that can deliver measurable value beyond billable hours.

The shift from technical advisors to strategic enablers

Corporate in-house legal teams are increasingly focused on positioning themselves as trusted strategic advisors to their C-Suite; and in turn, they expect their external legal partners to support this same end, according to the 成人VR视频 Institute鈥檚 State of the UK Legal Market 2025 report. Indeed, the conclusion is clear: solid technical advice is no longer enough for law firms to maintain a competitive advantage in the legal services market.

鈥淐orporate legal teams place more trust in firms with strong reputations and deep industry knowledge that can help them drive strategic discussions with their organization鈥檚 leaders,鈥� the report states, noting that this development represents a significant departure from the traditional model in which law firms were valued primarily for their legal expertise and ability to navigate complex regulatory frameworks.

However, today鈥檚 economic climate has intensified pressure on corporate legal departments to demonstrate clear value while controlling costs. According to the report, 28% of UK-based corporate legal departments are planning for their legal spend to decline in 2025. That represents an increase of 6 percentage points from the 22% that had anticipated a spending decrease in 2024. And UK GCs have proved that they know how to make these reductions happen, even as corporate matter volumes and law firm billing rates both increase. Clever GCs are becoming increasingly selective about how they allocate their external legal budgets, opting for lower-cost law firms or, in an increasing number of instances, alternative legal service providers (ALSPs).

This cost consciousness has fundamentally altered the value proposition that law firms need to offer in order to secure work matters. As one technology industry in-house counsel quoted in the report noted: 鈥淥ur job is to provide cost effective, valuable legal advice to our function teams in the next 12 months. The priority would be to find an efficient way of doing this.鈥�

Corporate GCs are no longer willing to pay premium fees for legal work that can be automated, streamlined, or just as easily performed in-house. Instead, they’re seeking legal partners that can help their in-house teams achieve their broader business objectives while delivering measurable efficiency gains.

The four pillars of modern legal partnership

In the report, UK GCs identified several key areas in which they expect their law firms to excel beyond traditional technical competence:

1. 1. 1. Business-aligned strategic thinking 鈥� Corporate legal teams want law firms that understand their industry, business model, and strategic objectives. This means providing guidance that goes beyond legal compliance to support business growth and competitive positioning. Law firms must demonstrate deep sector knowledge and offer insights that help drive strategic discussions at the boardroom level.
      2. Proactive communication and responsiveness 鈥� The report underscores that GCs 鈥渁ppreciate law firms that are proactive, communicative, and responsive.鈥� This expectation extends beyond mere availability to encompass anticipatory guidance and regular strategic check-ins that keep legal issues from becoming business problems.
      3. Clear, actionable advice 鈥� GCs emphasize the critical importance of 鈥渟implifying complex legal advice into clear, non-technical language, making it actionable for business leaders and stakeholders without legal backgrounds.鈥� Law firms that can translate legal complexity into business-focused recommendations position themselves as indispensable strategic partners.
      4. Value-added services 鈥� Beyond individual matters, corporate legal teams value outside firms that offer thought leadership content, training sessions, and informational resources that reinforce expertise while providing ongoing value to the organization.

Technology as a catalyst for change

Not surprisingly, the rise of AI and legal technology is accelerating the shift away from hourly billing model and toward outcome-based value delivery. GCs are optimistic about the potential impact of these changes with 41% of respondents expressing excitement about AI’s potential to free up time for complex and strategic work. At the same time, 18% of GCs also see technology as a means to handle increasing data volumes more effectively.

This technological transformation is forcing law firms to reconsider how they position their value to GCs. As routine tasks become automated, focus increasingly will shift toward strategic thinking, business judgment, and the ability to synthesize complex information into actionable business intelligence. And those law firms that fail to evolve beyond their role as technical service providers will risk losing market share to more strategically minded or even lower-cost competitors and ALSPs. In fact, the report notes that almost two-thirds (65%) of UK respondents said their corporate legal departments already work with firm-affiliated or independent ALSPs 鈥� a significantly higher portion than their counterparts in the United States, at 52%.

These shifts reflect a willingness on the part of GCs to unbundle traditional legal services, reserving high-value strategic matters for law firms but being more selective about which firms have demonstrated clear business value.

What GCs want

The report made clear that there are a few key criteria that GCs in the UK are looking for in their outside law firms, including:

• • • deep industry expertise and sector-specific knowledge;
    • investment in client relationship management that goes beyond individual matters;
    • value-added services such as training programs and thought leadership;
    • technology solutions that demonstrate efficiency and cost-effectiveness; and
    • restructured pricing models that better align with client outcomes rather than time spent.

The message from UK general counsel is clear: The legal market is moving beyond technical competence toward strategic partnership 鈥� and outside law firms that want to succeed need to make that move.

GCs have an increasing set of demands being placed upon them, and those law firms that recognize this shift and actively work to become trusted business advisors will have greater opportunity to thrive in this new environment. Those that cling to traditional models of legal service delivery, however, risk being relegated to commodity status or replaced entirely by more agile alternatives.

You can download a copy of the 成人VR视频 Institute鈥檚 State of the UK Legal Market 2025 report here

Key takeaways:

• • • AI allows lawyers to work on more complex matters 鈥� By streamlining routine legal tasks, AI enables lawyers to focus on higher-value work, which then revives market interest in outcome-based pricing models.

    • Establishing trust with AI is critical 鈥� Building client trust with AI means providing clear explanations, maintaining open communication, and ensuring that human judgment remains central to the legal process.

    • Keeping an eye on AI鈥檚 work quality 鈥� Declines in quality from AI-assisted work can make clients question the value of legal services.

As AI becomes part of everyday legal work, the traditional way of charging clients by the hour may be long past its expiration date. And as the 成人VR视频 Institute鈥檚 2025 State of the US Legal Market Report argues, this change isn鈥檛 just about using new tools 鈥� it鈥檚 about redefining how legal value is delivered.

A new opportunity to bill based on value

For many years, the billable hour has held sway in the legal industry; and while this method is familiar, it is falling behind how legal work is increasingly being performed today. AI now supports tasks like document review, legal research, and drafting, reducing the time lawyers spend on routine work and creating more opportunities for higher-value work.

As a result, a seemingly stagnated theory of pricing is once again gaining ground 鈥� one that focuses on outcomes instead of hours. In this model, clients pay for what gets accomplished: resolving a dispute, drafting a contract, or ensuring compliance with regulations.

This approach ultimately strengthens the relationship between firms and clients. It rewards results, encourages clear communication, and makes pricing more predictable and fair. However, this shift also brings new challenges for law firms and their clients, especially around trust and quality.

Building client trust using AI tools

Clearly, clients benefit from faster and more cost-effective legal services; however, they also need to trust that the work they receive from outside counsel is accurate and meets professional standards, even 鈥� or perhaps especially 鈥� when AI is involved.

To build that trust, AI systems must be used responsibly. Lawyers using AI should be able to provide clear explanations of how they reached conclusions, keep records of their steps, and always involve a human review and approval of the final work. Clients don鈥檛 need to understand every intricacy of the technology of course, but they do need to know that the process is safe, ethical, and well-managed.

Many law firms are already using AI tools in their daily work. While these tools can improve efficiency, it鈥檚 important to not assume that clients will always be comfortable with them. One way to monitor this is by looking at the realization rate in fees, especially the difference between what the client actually agreed to and what was actually collected. This metric can show to what degree clients may be pushing back on service they feel didn鈥檛 meet expectations.

Over the past three years, realization rates have remained steady, just above 90% 鈥� however, that doesn鈥檛 mean there鈥檚 no risk. If AI is used carelessly, the quality of work could suffer, and clients may start to question their bill. That鈥檚 why it鈥檚 essential to use AI with clear processes and human oversight, so it supports the value that clients expect rather than creating problems for the firm and the client.

Declines in quality can lead to doubts about value

As AI becomes more commonplace in legal processes, the quality and reliability of submissions must remain high. This matters not only for the fairness of proceedings, but also for how legal services are valued.

If AI-generated documents are submitted without proper review or contain errors, it can lead to delays, rejections, or even sanctions. These outcomes affect the perceived value of legal services and can undermine client trust, especially in an outcome-based pricing model, where results matter more than effort.

To support this shift in pricing, legal professionals must ensure that AI-assisted work meets the same standards as their traditional submissions. This includes verifying sources, disclosing AI use when appropriate, and maintaining human oversight. By doing so, law firms protect the quality of their work and reinforce the value they had promised to deliver.

According to the 成人VR视频 Institute鈥檚 2025 survey of state courts, many in the legal profession already are thinking about these issues. The top concern 鈥� shared by 35% of judges and court staff professionals who were surveyed 鈥� is that people may rely too much on technology and lose essential skills. Another 25% said they worry about AI being misused, such as by generating fake legal documents or false evidence.

These concerns highlight the need for clear standards and responsible AI use 鈥� not just to protect the legal process, but to support the shift toward pricing models that are based on trust and outcomes.

What the legal industry needs from AI

To enable the transition to outcome-based pricing, the legal industry needs AI systems that do more than just answer questions. These tools should be able to plan, reason, and complete complex legal tasks. They must be easy to understand, explain their results, and fit naturally into legal workflows. Most importantly, they should always allow for human judgment.

These systems should be built with expert knowledge, trusted legal content, and strong ethical standards. Indeed, these AI-driven technologies aren鈥檛 just tools, rather they鈥檙e partners that help legal professionals do their work better.听In fact, moving from billable hours to outcome-based pricing is more than a change in billing 鈥� it鈥檚 a new way of thinking about legal work.

As AI continues to evolve, lawyers will spend more time on strategy and client relationships. And that鈥檚 good, because the future of legal work isn鈥檛 about doing more, it鈥檚 about doing better 鈥� and that future is already taking shape.

You can download a full copy of the 成人VR视频 Institute鈥檚 2025 State of the US Legal Market Report here

Pursuing a career in law with a focus on public service inherently aligns with the desire to contribute positively to society. Indeed, public service law offers attorneys a profound sense of purpose and fulfillment, a key ingredient for the well-being of lawyers.

Yet first-year law students find out quickly that their prime reason for entering the legal profession can be drilled out of them by the realities of law school. One of these is known as the law warrior culture, a term describing the profession鈥檚 premium on and showing a minimum of vulnerability. Another reality is the high cost of law school, which leaves students who entered the profession for altruistic reasons finding themselves having to postpone potential dream jobs and instead seek high-paying jobs to pay down their large student loan balances.

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Both of these factors contribute to the ongoing access to justice gap and the high cost of legal representation. Most low-income Americans do not get any or enough legal help for their civil legal problems, and the cost of legal help stands out as an important barrier, according to the .

Indeed, this broken social contract between the legal profession and the public is something that could be improved by more widespread us of AI, says , Esq., a corporate legal strategist who works with founders and CEOs. Clark鈥檚 decade-long work and leadership on lawyer well-being gave her insight into how AI could significantly improve lawyer well-being by radically changing how we value legal services.

The question hinges on whether AI could both improve access to justice and attorney well-being; and Clark and , Legal Futurist at Filevine, believe so.

Ways AI helps improve junior lawyer well-being

AI emerges as a transformative force by offering significant opportunities to enhance lawyer well-being, especially for junior lawyers, according to Boyko, who has used her law degree to push innovation in law firms, especially around issues of听legal tech, in-house talent, and legal education. Her interests 鈥� which converge at the intersection of technology, the business of law, law students and legal careers, and professional well-being 鈥� have served as a focal point for her observations about AI and junior lawyers.

Specifically, Boyko highlights the potential of AI in streamlining low-level tasks, which often burden young attorneys. Freeing junior lawyers up from this allows them to focus on more meaningful work. 鈥淚 like to think about [using AI] in terms of being able to minimize or streamline a lot of the rote low-level tasks that lawyers often find themselves doing, which I think are a huge drag on our well-being as attorneys,鈥� she explains.

Boyko says she also sees AI as a way to nurture curiosity and proactive learning. For example, AI can provide context and resources to junior lawyers, which is something that senior lawyers too often lack the time to do because of their own billable hour demands.

Finally, AI can benefit junior lawyers during times when they feel uncertain and unsure of the direction to take. 鈥淎I can help you think through situations where you may not have answers,鈥� she notes. 鈥淏eing able to use AI鈥� can really help to support well-being when you feel very lost and there’s a lot of pressure to find the answer quickly.”

Shifting to AI-driven value-based services

Clark advocates for the use of AI to help lawyers鈥� well-being in an industry that鈥檚 rapidly shifting from time-based to value-based metrics to better track performance.

鈥淲hat does it mean to have value outside of your time output?鈥� Clark asks. 鈥淚 think our value is judgment, discernment, and experience 鈥� things that just are not measured by time.” Requiring a quota of billable hours as part of the law warrior culture is often a significant source of stress and burn-out for lawyers. Value-based billing instead offers lawyers the opportunity to be paid for their judgement, expertise, and experience as a source of value rather than by hourly billings.

And AI can enable this shift away from the traditional billable hour to a value-based model as well as an overall transition from a reactionary model to a proactive type of workflow in order to improve client service, Clark says, drawing a compelling analogy between initiative-taking lawyering and preventive healthcare. Just as preventive care can avert serious health issues, proactive legal advice can prevent costly legal problems, she says. “We no longer practice or incentivize proactive lawyering,鈥� Clark adds. 鈥淲e’re paid to be reactionary.鈥�

This shift to value-based service allows legal professionals to reclaim a portion of their time and dedicate it to proactive lawyering. In this way, AI can become a thought partner in legal work, empowering lawyers to engage in deeper, more nuanced legal analysis and client service, Boyko explains. And as stated earlier, more proactive legal service is a top motivator for lawyers and source of well-being 鈥� both of which are key ingredients for lawyers to achieve their professional purpose.

AI planting the seeds for change

To foster positive well-being among lawyers, it is crucial for legal organization leaders to address the challenge of overcoming fear and resistance to change. AI has the opportunity to enable this paradigm shift by cultivating a culture of openness and continuous learning within the legal profession. And by encouraging curiosity and providing training on AI tools, organizations can help their lawyers become more comfortable with new technologies.

The integration of AI into legal workflows will transform attorney well-being and help avert the impact of several additional headwinds facing the profession, including the entrenched billable hour model, reaction-based lawyering, and the gap in access to justice.

In fact, some believe the question is not if AI will spur these changes, but when? The legal profession stands on the brink of a transformative era, Boyko and Clark say, and it鈥檚 one in which enhanced well-being, client service, and lawyers鈥� futures as well as the communities they serve all can thrive.

You can find more about the use of AI and GenAI in the legal industry here