Key insights:

• • • Client expectations around AI have shifted from curiosity to accountability — Law firms are now being asked not just whether they use GenAI, but to prove how it delivers measurable cost savings on specific matters — a question most firms still cannot answer with hard data.

    • A growing contradiction defines firm/client relationships — As clients simultaneously demand AI adoption, require granular billing transparency, and in some cases refuse to pay for work performed with AI, they’re creating a pricing and value paradox with no clear resolution for their law firms.

    • The ROI challenge around AI is fundamentally a relationship problem — Driven by a widening gap between what clients expect to save and what firms can demonstrate, a rift has developed between clients and firms, which is compounded by the fact that few firms have a coherent GenAI strategy in place.

NEW YORK — opened with a keynote conversation featuring Mindy Kaling, the Emmy-nominated writer, producer, and Tony Award-winning playwright, who reflected on a career built around one enduring fascination: messy relationships. She talked about growing up wanting to write something like Sex and the City, only to end up helping to chronicle the internal politics of a Scranton, Pennsylvania paper company in The Office. She talked about her love of watching people navigate breakups and power struggles and then finding the comedy in it all.

If she’s looking for new material, the three standing-room-only panels that followed could keep her busy for seasons.

Not surprisingly, the relationship between clients and their law firms has always been complicated — bound by mutual need but strained by competing incentives. Now, that tension is starting to reach a rolling boil as many law firms can’t seem to agree on exactly how the gains of their use of AI tools, especially generative AI (GenAI), are going to be split, or even if they’re going to be split at all.

AI is no longer optional or experimental — and many clients simply assume it’s already in use.

Across three ¶¶ŇőłÉÄę-sponsored sessions during this week’s Legalweek event, that tension surfaced again and again — not as a future concern, but as a present reality. Today, clients are arriving at the table more informed, more demanding, and more willing to use AI themselves. Firms are investing heavily in AI, but they still are struggling to quantify returns in terms their clients will accept. With the rates that law firms charge increasing — averaging more than 7% growth in 2025, and likely to stay on that pace in 2026 — it sets up a collision with savings mandates that have yet to produce a shared framework for measurement. And underneath all of it, a fault line is building pressure — one that, as Ellen Hudock, GSK’s Chief of Staff Legal and Compliance, is not being resolved.

In 2026, GenAI has become the thing neither side can stop talking about, the thing both sides agree matters, and the thing that neither side can agree on how to handle.

This is not the story of an industry resisting change. Nearly everyone at Legalweek agreed that AI adoption is no longer optional. The harder questions, however, and the ones that echoed through every panel, every audience comment, and every hallway conversation is who benefits, how much, and who gets to decide.

Proving AI’s path to saving clients money

Three years ago, the client question was simple: Are you using AI, and would you use it on our matters? In 2026, that question has matured, and the new version is much harder to answer.

GSK’s Hudock described the shift bluntly during one panel. GSK is learning as much as it can from its outside law firms about how they’re deploying GenAI, she said, and are always looking to partner on new use cases. However, she noted that the conversation has moved well past curiosity. The pressure to deliver savings — internally and externally — is intense, and the questions have sharpened accordingly: What are you using? How are you using it? How does it generate savings?

Clearly, firms are hearing this message. Matthew Beekhuizen, Chief Pricing and Innovation Officer at Greenberg Traurig, noted that the pace of AI-driven change has accelerated sharply, particularly since October 2025. Clients who had previously said nothing about AI are now asking how it’s being used on their specific legal matters.

Indeed, AI is no longer optional or experimental — and many clients simply assume it’s already in use, said Mark Brennan, a partner at Hogan Lovells.

The trouble is that firms still can’t give clients the answer they most want to hear. When pressed on how much cost savings AI is actually achieving, the response from the firm side is often: We’re still gathering the data. Mitchell Kaplan, Managing Director of Zarwin Baum, acknowledged the industry is still in the anecdotal phase of measuring returns.

Sergey Polak, Director of Technology Innovation at Ropes & Gray, described the current state of ROI measurement as being based more on conventional wisdom rather than hard evidence. Hudock’s response to this was pointed: That’s exactly the situation in which clients want to partner. Supply the work, and let’s figure it out together.

The contradictions in the room

If the evolution in client expectations were the whole story, it would be manageable; however, the reality is messier than that, because clients are not speaking with one voice.

During another panel, Barclay Blair, Senior Managing Director of AI Innovation at DLA Piper, laid out the contradictions in sharp relief. Blair, who introduced himself as “the extremist on the panel,” is seeing clients who expect AI to be used and are asking how it will achieve specific savings targets. At the same time, many law firms are still receiving directives that feel lifted out of 2023, such as demands for warrants that models are unbiased, and declarations that firms cannot use AI without explicit permission. In 2026, both postures are arriving in the same inbox.

When pressed on how much cost savings AI is actually achieving, the response from the firm side is often: We’re still gathering the data.

The billing conversation captures this tension perfectly. Polak of Ropes & Gray noted that clients are beginning to ask for line-item transparency on invoices — was AI used on this task, and how much time or money did it save? Simultaneously, as Blair observed, other clients are issuing guidelines stating they won’t pay for certain services if performed by AI. This isn’t clients barring AI outright; rather, its clients demanding firms adopt AI, then using that very adoption as leverage to negotiate a decrease in costs. Not surprisingly, this becomes a self-reinforcing cycle with no obvious exit — at least, not for law firms.

Meanwhile, Zarwin Baum’s Kaplan raised a billing paradox that GenAI is making harder to ignore. As AI compresses work that once took hours into minutes, an itemized hourly bill increasingly tells a story that undersells the value delivered. His proposed answer: a return to the single line-item services rendered bill, which actually predated the billable hour. Kaplan then asked whether clients would actually accept it.

The advice to the law firms in the room from DLA Piper’s Blair was more blunt: Don’t wait for the client to set the terms. Lead the conversation about AI ROI and set the meeting. As Blair described, this is now the time to negotiate how value gets shared, while both sides are still figuring out the rules — not after one side has already written them.

The pressure hasn’t yet found a release valve

None of these tensions exist in isolation. They are symptoms of a structural mismatch between what clients need from the economics of legal AI and what firms are currently able to demonstrate — and the numbers suggest the legal industry is less prepared for this conversation than it thinks.

As ¶¶ŇőłÉÄę’ Steven Petrie pointed out, those law firms with a GenAI strategy are 3.9-times more likely to achieve ROI than those without one. Yet, only 22% of firms have such a strategy, Petrie said. That gap — between the firms that are thinking systematically about AI’s role in their business and those that aren’t — may turn out to matter less than the gap between what clients expect to save and what firms can show they’ve delivered.

The ROI question, in other words, is not just a measurement challenge, rather it’s a relationship challenge. And like all the best relationship drama, the tension doesn’t come from disagreement about whether the relationship matters. It comes from both sides wanting something slightly different from it — and neither being quite sure if both sides can get what they want.

If Mindy Kaling is still looking for complicated relationships to write about, she knows where to find them. This one’s going to need a few seasons to work itself out.

You can find more of here

You can read TRI’s first “Inside the Shift” feature, The 4 scenarios: Which law firm business model are you building? here

If you’re running a law firm right now, you’ve probably felt it — the ground is shifting fast. AI isn’t some future consideration; indeed, it’s already shaping how clients choose their firms, how work gets done, and which business models are built to last.

To examine this situation — and many more in the future — more deeply, the Thomson Reuters Institute (TRI) has begun publishing a new feature segment, , that will allow our expert analysis and supporting data to more fully tell some of the most important stories in the legal, tax, accounting, corporate, and government areas.

Our first Inside the Shift feature, The 4 scenarios: Which law firm business model are you building? by Elizabeth Duffy, TRI’s Senior Director of Client Engagement and Raghu Ramanathan, President of ¶¶ŇőłÉÄę Legal Professional business, cuts through much of the noise around AI adoption in the legal industry. The piece lays out a clear, uncomfortable truth: in the age of AI, strategic clarity isn’t optional — it’s survival.

For years, many law firms have tried to hedge their bets. A little bespoke work here, a little efficiency there. Premium pricing mixed with cost pressure. The result? A mushy middle that feels safe but is actually the most dangerous place to be. As the feature makes clear: Law firms without a distinct position — neither elite, automated, scaled, nor protected by regulation — are the ones most exposed to existential risk.

And here’s the kicker that the authors point out: Clients aren’t waiting for firms to catch up.

Corporate legal departments are already evaluating firms based on their AI maturity — how effectively they use technology to deliver speed, consistency, and quality. This is happening even as many clients are still figuring out their own AI strategies. In other words, law firms are being judged by their clients right now, whether they’re ready or not.

Client pressure is building faster than internal capabilities can keep pace.

Even corporate legal departments new to AI are asking pointed questions of outside counsel.

The authors don’t argue that there’s one correct model. Instead, the piece lays out four distinct scenarios that law firm leaders can choose from, making the case that choosing something deliberately is far better than drifting. Of course, each scenario demands different investments in talent, technology, pricing, and client engagement. What they all share, however, is intention.

That’s what makes this piece — and future Inside the Shift features — so valuable. It’s not full of hype, and it’s not fear‑mongering. Rather it’s offering a strategic framework for leaders who know that AI is reshaping professional service markets but are still wrestling with what that actually means for their organization.

If you’re a managing partner, innovation leader, or industry watcher who’s tired of vague predictions and wants a clearer map of what’s ahead, the Inside the Shift features will be well worth your time. The questions they will raise — about positioning, differentiation, and the cost of standing still — aren’t comfortable, but they’re exactly the questions firms need to be asking now.

So don’t just skim the headlines about AI in law. Click through and read today’s Inside the Shift feature. It might help you see, more clearly than before, which business model you’re actually building in your law firm — and whether it’s the one that will be able to carry your firm into the next decade.

You can find more from the Thomson Reuters Institute here

Key insights:

• • • Multi-disciplinary teams unlock AI’s potential — Law firms must integrate a wide range of expertise, including technologists, process experts, and risk professionals, directly into client-service teams to realize the full benefits of GenAI.

    • Clients expect cross-functional expertise — Today’s clients value the assurance that law firms have robust technology, security, and process capabilities alongside legal skills, which takes multi-disciplinary teams from preferable to essential.

    • Sustainable innovation requires ongoing, real-world collaboration — Long-term success with GenAI depends on multi-disciplinary teams working together on actual client matters, ensuring solutions are practical and continuously improved.

Not surprisingly, generative AI (GenAI) already is driving profound change in the legal industry. Looking beyond the waves of hype, one reality is becoming clear: GenAI will reshape how legal services are delivered. In our view, the only way for law firms to excel in this environment is by bringing together the strengths of multiple disciplines from around the firm into a cohesive client-service model.

A paradigm shift in staffing

GenAI is dismantling traditional assumptions about professional roles. The familiar advice to think outside the box no longer applies, because, in this world, there is no box. Nor is there a map with a bright red X marking a clear destination. There is no manual, no single set of instructions to move from today’s practice to a pre-defined better future.

In this environment, lawyers standing alone cannot fully harness the power of GenAI. As ¶¶ŇőłÉÄę’ Future of the Professionals 2025 report put it: “Those organizations that move quickly to establish new roles and rethink old ones will find themselves better able to hire the kinds of versatile, tech-savvy professionals needed to ensure their continued success.”

To be sure, law firms have long drawn on the expertise of other professionals, in finance, marketing, IT, and more. Historically, however, those disciplines were rarely integrated into direct client-service teams.

The lesson is simple but powerful: Diverse perspectives and expertise produce better results.

That has begun to change. Firms are increasingly visible in their utilization of innovation leaders, research and development professionals, and technologists. Yet even these professionals often remain on the periphery of client engagement. The opportunity — and the necessity — is to embed them directly into the service model.

At Seyfarth, we took this step more than a decade ago with the creation of what is now Seyfarth Labs, an experimental unit designed to enhance client experience through technology. From the outset, Labs was intentionally multi-dimensional, combining software developers, data analysts, and lawyers-turned-technologists. We quickly learned that the greatest value was created when these professionals worked not only with each other, but also directly with the lawyers serving our clients, as well as with the clients themselves.

The lesson was simple but powerful: Diverse perspectives and expertise produce better results.

Why multi-disciplinary teams matter now

This lesson has only grown more urgent in the era of GenAI. Capturing the potential of advanced technology demands a breadth of expertise. A multi-disciplinary approach balances innovation (what the technology can do) with professional responsibility (what it should do). This approach also reduces risk, accelerates adoption, and ensures that tools deliver real value to both clients and law firms.

From the client’s vantage point, the multi-disciplinary approach isn’t just preferable, it’s increasingly expected. In-house legal departments are no longer evaluating their outside law firms solely on legal expertise. They’re asking harder questions: How does your firm protect our data when using AI tools? What governance frameworks ensure quality control? How do you measure ROI on technology investments? These questions cannot be answered convincingly by lawyers alone.

Clients want to see the team behind the technology: the legal technologists who bridge the gap between AI capabilities and legal requirements, the security professionals who can walk the client through safeguards, and the process experts who can demonstrate measurable efficiency gains. When clients understand that a firm’s AI capabilities are backed by genuine cross-functional expertise rather than vendor promises, trust deepens and competitive differentiation becomes real.

So, what does a truly multi-disciplinary model look like? Consider the following range of expertise:

• • • Lawyers — Practicing and former lawyers provide substantive knowledge to evaluate whether AI outputs are legally sound, aligned with professional standards, and ethically appropriate. Without this input, developers cannot determine whether tools are truly useful in practice.
    • Engineers & data experts — AI engineers and data scientists understand how these models function, how to fine-tune them, and how to mitigate risks such as bias, hallucinations, and privacy concerns. They can explain system limitations and design guardrails.
    • Knowledge management & process specialists — Simply bolting AI onto an outdated process produces nothing more than a faster bad process. Workflows must be reimagined, and AI integrated thoughtfully. Knowledge managers, innovation leaders, and process experts ensure that technology interacts effectively with precedent systems, document management, and knowledge bases.
    • Risk, compliance & security professionals — GenAI raises critical issues around information security, confidentiality, privilege, data security, and regulatory compliance. Risk experts can safeguard alignment with ethical rules (such as ABA Model Rules) and client contractual requirements.
    • Business & strategy leaders — Firm leaders, operations professionals, and business developers bring perspectives on client value, ROI, and competitive positioning. They can ensure that adoption is strategically aligned with both firm objectives and client expectations.
    • Change management & training specialists — Even the best AI tools fail without adoption. Professionals skilled in change management, training, and user experience design ensure that tools are intuitive, accessible, and supported by effective training so that attorneys and staff can work confidently with them.

From pilot to practice

Despite heightened interest — driven by both the pandemic and the rise of GenAI — skepticism remains high. Many lawyers hesitate to trust products built on unfamiliar technology, or to share control with those they see as non-lawyers. Indeed, lawyers want proof of value before adoption.

The answer to this skepticism lies in the teams that build and deploy the tools. If the proof is in the pudding, as we often say, then who is making the pudding? The answer? Multi-disciplinary teams — they are the ones capable of producing not just technology, but sustainable, trusted, and valuable solutions.

However, building multi-disciplinary teams is one thing and sustaining them is another. Many firms launch innovation initiatives with great fanfare, only to see them fade when initial enthusiasm wanes or when budget pressures mount. The difference between a pilot project and lasting transformation lies in integration.

Law firms have long drawn on the expertise of other professionals, in finance, marketing, IT, and more; historically, however, those disciplines were rarely integrated into direct client-service teams.

At Seyfarth, we’ve learned that multi-disciplinary teams cannot exist as separate innovation labs disconnected from daily practice. Instead, technologists and process experts must work alongside lawyers on real client matters, solving actual problems in real time. This embedded approach ensures that AI tools are designed for genuine practice needs rather than theoretical use cases.

This integration also creates natural feedback loops in which lawyers see immediate value and technologists understand practical constraints. When multi-disciplinary collaboration becomes part of how work gets done rather than a special project, sustainability follows.

Clearly, GenAI has become a transformative force that will shape the next era of legal service delivery. Law firms need to embrace the multi-disciplinary model by bringing together lawyers, technologists, process experts, risk professionals, business leaders, and change specialists — not in silos, but as integrated, client-facing teams. Those firms that chose do not do this risk being left behind.

The destination may not be marked on a map, but the path forward is clear: Innovation in law firms cannot succeed without collaboration across disciplines.

You can find more about how GenAI is impacting the legal industry here

Key insights:

• • • Rate growth remains at all-time highs — While this is good news, firms also need to plan for what may lie ahead when that growth cools.

    • Potential financial pressures are acceleratingĚý— Strong demand and rates are driving growth in revenue and profitability, but firms need to keep an eye on realization and expenses which are flashing troublesome signs.

    • A strong 2025 brings no promises for 2026 — This year’s momentum is an opportunity to plan for the next shift in the market.

Many law firms may be preparing to pop champagne corks in a few weeks to celebrate what is shaping up to be a record-setting 2025. As firms close the books on the year, however, it may be prudent to not only celebrate, but also to prepare themselves for potential headaches that could start in the new year after the celebrations die down.

The Thomson Reuters Institute’s recent Law Firm Rates Report 2026 laid out the paradox that is fueling the end-of-year party vibes: Law firms now are enjoying unprecedented pricing power and demand growth; but at the same time, the underlying economics reveal potentially destabilizing pressures that may await them in 2026. And the recent Law Firm Financial Index (LFFI) for the third quarter of 2025 found, those pressures continue to intensify.

Tectonic pressures growing

While the Rates Report raised fundamental questions about what’s driving rates higher and why long-held beliefs about what constitutes better rate performance may be incorrect, the Q3 LFFI likened this year’s surging demand and rate growth to rising tectonic pressures that can both lift mountains but also fracture previously stable ground.

Firms have arguably never had it better when it comes to rates. Worked rates have climbed steadily for the past four years, reaching levels that are not only historical highs, but are also easily outpacing inflation, representing genuine growth in pricing power. Coupled with strong demand, many firms are experiencing a windfall in revenues and profits this year.

And the upward momentum continues to gain strength. Demand growth accelerated to 3.9%, according to the Q3 LFFI, even as worked rates held steady at Q2’s all-time high of 7.4%.

Hiding cracks in the foundation?

Beyond questions about whether the current growth in demand and rates is sustainable, there are signals that the impressive performance may be masking warning signs of potential trouble ahead.

First, expenses are now rising faster than rates, and expense growth is accelerating. Direct costs are up 8.5% year-over-year, while overhead expenses climbed 7.5%, according to Q3 LFFI data. This is an extremely risky proposition because expense growth is generally sticky and hard to control, especially during intense growth periods because firms feel they need to continue feeding the human capital and overhead infrastructure that is driving growth.

However, history teaches a harsh lesson: Revenue can vanish overnight, but expenses rarely do.

Second, realization is wobbling in troubling ways. Firms saw an unseasonal downtick in collection realization in Q2, counter to normal seasonal patterns in which realization typically improves throughout the year. This wobble may feel uncomfortably familiar to anyone who survived the aftermath of the global financial crisis that began in 2007. While Q3 showed some recovery in realization, the long-term trend since 2021 has been a slow decline, which means that despite record standard rate increases, the percentage of those rates actually collected continues to erode.

Third, work continues to shift down market. The Rates Report noted that corporate clients with annual revenues of more than $10 billion saw their effective paid rates decline at a double-digit rate in 2025, even as law firms reported average worked rate increases of 7.4%. This reflects how price-sensitive matters had been shifted towards smaller, lower-cost providers while the largest firms seek to retain higher value work.

The challenge then becomes for law firms to identify which matters justify premium pricing and which are vulnerable to downstream migration. Strategic partnerships with smaller firms or alternative legal providers could potentially be an avenue for larger firms to retain client loyalty while protecting their margins.

Looking ahead

While many law firms are enjoying the fruits of a bountiful 2025, it’s not too early for firm leaders to turn their attention to 2026 and determine what their strategies will be. This is no time for complacency or an assumption that next year will merely be a replay of 2025. Instead, firms need to start mapping contingency plans in case demand or pricing falter, expense growth accelerates further, or work continues to flow downstream to lower-cost law firms.

The flashing lights in the distance may turn out to not be celebratory holiday displays but rather caution signs that lie in wait for the year ahead. The warning lights aren’t showing red yet, but they’re definitely moving from a festive green to a cautionary amber.

You can download a copy of the Thomson Reuters Institute’sĚýLaw Firm Rates Report 2026 here

• • • Understanding is critical — Law firms must seek to deeply understand their clients’ businesses and proactively use data and AI to build trust and deliver value.

    • Transparent communication is needed — Conversations with clients around pricing, value, and staffing — supported by clear metrics — strengthens client relationships and helps firms demonstrate their worth.

    • Pull a lot of levers — Proactive business development, creative billing models, and leveraging advanced technology are critical for law firms to differentiate themselves and meet evolving client expectations.

WASHINGTON, DC — Today, law firms are facing unprecedented pressure to deliver more value, build deeper relationships with clients, and differentiate themselves in a crowded market. The recent Thomson Reuters Institute’s 24th Annual Law Firm COO & CFO Forum brought these developments into sharp focus, highlighting how client management is now seeping into every aspect of law firm operations.

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The 24^th Annual Law Firm COO & CFO Forum Executive Summary

The message from industry leaders at this event was clear: Law firms must prioritize deep client understanding, proactive business development, and transparent use of data and AI to build trust and deliver — and demonstrate — value in client relationships.

The not-so-new imperative: Deep client understanding

As many speakers underscored at the Forum event, the foundation of any successful client relationship is understanding — not just of the client’s current needs, but of their business, market, and future ambitions. While not new, this sentiment is now echoed more strongly by many clients who expect their law firms to act as true partners, invested in their growth and success.

For clients, that even seeps down into the minutiae of running a firm, said one corporate counsel. “What clients really look for is outside law firms that have a track record of good work, meet deadlines, and don’t overstaff — of course, those are just table stakes now,” the counsel said. “Beyond that, clients are increasingly looking at how law firms train and retain their lawyers — because it’s a trust issue, and we don’t want any surprises around who is working with us.”

Increasingly, clients seem to be using their legal spend to speak to those priorities, our research shows. The portion of total legal spending going to outside counsel increased this year to more than two-thirds (67%) of the total. And almost one-quarter (24%) of clients’ outside counsel spend goes to the law firm they use most, with 15% of clients saying they plan to use their most-used firm more this year, compared to last year.

To meet these deepening expectations around collaboration and value, law firms are increasingly leveraging advanced, AI-driven technologies that enable them to gain deeper insights into their clients’ industries, anticipate challenges, and proactively offer solutions. Indeed, these pathways to partnership, it seems, run directly through AI, several panelists suggested. “It’s not just about being reactive to client needs but about anticipating those needs and demonstrating value at every turn,” said one speaker.

However, law firms — for the sake of their own economics — need to train their partners to hold sometimes difficult conversations with clients around pricing and be able to explain the value the firm is offering. “We need to show what’s working and what’s not working in a client relationship,” said one law firm leader. “Not just once a year when we set rates, but in conversations all year long.”

Building trust through transparency & metrics

While trust is the cornerstone of any client relationship, it’s built on transparency. Clients want to know not only what their law firms are doing, but also why, and how value is being delivered, several panelists explained, adding that this means having open conversations with clients around pricing, value, and staffing that are supported by clear, objective metrics.

At the Forum, several law firm leaders emphasized the importance of ongoing, transparent dialogue with clients that backed by data, which helps eliminate any surprises and ensures that both sides are aligned on expectations and outcomes.

“I mean, clients are why we’re in business, and client expectations should be a priority for every firm,” said one panelist. “It’s shocking how frequently we ask ourselves, How will this affect the client? — we ask it a lot, because everything naturally does.”

“Law firms will need to get better on their own metrics so they can see — and explain — what is happening.”

Not surprisingly, many firms are beginning to leverage advanced technology to build out these critical metrics to demonstrate value to clients — yet, it’s not a panacea. Lawyers will still need to review and validate AI-generated work, and the anticipated cost savings may not always materialize as quickly as clients hope. This makes ongoing communication and expectation management all the more important.

Clients and law firms must move forward together, several panelists suggested, adding that firms regularly need to ask their clients, “What do you want to do? What problems do you want to solve and what opportunities do you want to seize?” This collaborative approach ensures that the firm’s efforts are always aligned with the client’s goals.

Proactive business development and creative billing

As many speakers at the Forum contended, gone are the days when law firms could rely solely on traditional billing models and reactive business development. Today’s clients expect more flexibility, creativity, and initiative from their outside counsel.

To that end, firms are getting better at using data to help sharpen their pricing prowess, offering more alternative billing structures, flat-fee arrangements, subscription models, and even tech surcharges. “You have to get creative, and you have to have options,” one speaker explained. “Law firms will need to get better on their own metrics so they can see — and explain — what is happening.”

As evidenced by this, many law firms are taking multiple approaches to addressing pricing issues and questions of value with clients. For example, one firm leader said his firm looked at its own billing and revenue data and the client feedback it had gathered and saw with which clients the firm was most successful and where growth opportunities could be identified. “This is extremely helpful information to guide your lawyers as they prioritize their actions,” he said. “It helps you determine where you want to go as a firm.”

Another firm’s goal was to find more green space — those law firm service offerings that clients weren’t using but could, adding that the firm had much more success finding added value for current clients than locating new ones. Yet another firm did tariff modeling by using data analysis to determine how their manufacturing clients could save money by changing locales. The firm provided the tool, trained clients’ in-house lawyers on the tool, gave the data results to clients, and then worked with them on solutions.

Another argued for tech surcharges — fees charged to the clients to help offset the high costs of law firms’ tech investments. While admittedly controversial, the speaker explained that clients may not balk at reasonable charges because they want their law firms to succeed too — an idea that didn’t draw immediate objection, even from the corporate counsel in attendance. “And I think if one big law firm does it, the industry will follow along,” he added.

Putting clients at the center

As many of the panels at the Forum underscored, clients are the reason law firms exist, and their expectations should be the driving force behind every decision. By prioritizing deep client understanding, embracing transparent communication, and proactively seeking new ways to deliver value, law firms can build stronger, more enduring partnerships — while setting themselves apart in a challenging market.

And, several speakers noted, this is going to be increasingly important going forward. “If the legal market is going to get rocky,” one panelist said, “it’s going to be tech investment and client management that will become critical differentiators for many law firms.”

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a full copy of the Thomson Reuters Institute’s “The 24^th Annual Law Firm COO & CFO Forum Executive Summary” by filling out the form below:

Key takeaways

• • • Rate strategies can mask performance —Rate 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 — 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 — 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 Thomson Reuters Institute’s 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 — and why — 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 — 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’s 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 — particularly on associate work — 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 — the collected revenues that drive a firm — 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 — 1.9% compared to a 1.0% for the average firm — 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’re 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’s 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 — 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’t evaluate any one stage in isolation. The best strategy isn’t about maximizing any single metric, rather it’s about understanding how each firm’s configuration fits with their specific market position and strategic goals. Understanding where a firm generates — and loses — 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 Thomson Reuters Institute’s Law Firm Rates Report 2026 here

Key takeaways:

• • • The legal market is experiencing uneven growth — While some law firms are emerging as performance leaders due to their effective use of technology and client management, others risk falling behind.

    • Law firms are increasingly investing in AI technology— They’re doing this in order to stay competitive, meet client expectations, and address concerns about being left behind as clients themselves adopt advanced tools.

    • Clients now expect law firms to use AI — Clients want this not just for efficiency’s sake, but so that firms better understand their clients’ businesses and provide more valuable, tailored guidance and solutions.

WASHINGTON, DC — As the opening session of the Thomson Reuters Institute’s 24th Annual Law Firm COO & CFO Forum began, presenters painted a somewhat rosy picture for the state of the legal market. After all, legal demand is climbing as are billing rates, which is a net positive overall, explained Jen Dezso, Director of Client Relations at ¶¶ŇőłÉÄę.

“It’s a pretty good time to be a law firm,” Dezso said. “More so than we thought it would be at the beginning of the year.”

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The 24^th Annual Law Firm COO & CFO Forum Executive Summary

Despite the good times, however, there are darker clouds behind the silver linings. For example, all this growth isn’t being distributed evenly, and this bifurcation seems to be driving some firms into a group of performance leaders and others into a group of laggards. “Previously, the rising tide lifted all boats,” Dezso said. “This time, we’re not seeing that.”

Other metrics, such as realization and expenses, are moving — albeit slowly and tentatively — in the wrong direction. This hasn’t really been seen since 2008-’09, which were not great years for law firms, she noted, adding that this may add a wrinkle of worry to forecasts for the current fourth quarter and for next year.

Still, there are a lot of positives, Dezso said, especially around law firms’ opportunities for growth and the largely optimistic view of many large corporate clients. Indeed, recent research shows that about one-third of corporate clients — including 41% of those with annual revenues of $1 billion or more — plan to increase their legal spend over the next year.

As the big questions shift

The annual COO & CFO Forum attracts not only its namesake executives and corporate clients but an alphabet soup of C-Suite roles that range from Innovation and Legal Operations Officers to Chiefs of Strategy and Growth.

“It’s a pretty good time to be a law firm. More so than we thought it would be at the beginning of the year.”

Many of the legal professionals gathered for this event in the past may have been seeking answers to the age-old questions that puzzle lawyers every time they gather: What do clients want and how can I best deliver it to them? Now, however, those questions have evolved, quickly morphing during this time of AI-driven innovation. Today, the question is: How can I best use advanced technology to not only give my clients what they may not know they need, but also to demonstrate the value of what I am offering?

Not surprisingly, top of mind for many speakers and attendees were the twin and intertwined concerns of technology investment and client management. Indeed, if the legal market is going to become rocky over the next year, these questions around tech investment and implementation will become more critical than they even are now.

The AI question… and answer

During a panel on formulating business strategy during turbulent times, one panelist said that it wasn’t that long ago that some corporate clients said they didn’t want their outside law firms using AI, whether out of fears over data security or potentially damaging hallucinations. Now, however, it’s not whether an outside firm will use it, but how and to what impact on service and price. “Most clients want their outside firms to use AI because their corporate teams are already using it,” the panelist noted.

In fact, several panelists said it was this pressure — fears of being left behind by their own clients — that is pushing more law firms to expand their investment in AI-driven tools and solutions. Of course, that is only part of the battle. “AI is already here,” another panelist explained. “But the next part of this equation is how law firms are going to invest in training our lawyers to use this technology to clients’ advantage.”

How to train lawyers to leverage the most of a firm’s investment AI is a key question that hinges not only on aspects of lawyer training, hiring, and retention, but also on aspects of AI implementation and client management.

“We don’t have the advantage any more of walking the dog slowly on this,” said another law firm panelist, adding that firms need an implementation strategy to get ahead of the game in areas such as pricing, because clients are already thinking about that. “They want their law firms to use it, for example, to look at trends in business data and create specific solutions for clients while keeping their data secure.”

A little understanding… okay, a lot

In fact, that’s what ties law firms’ use of AI so closely to issues of client management: Clients, more than anything, want their outside law firms to more closely understand them, their business, their market, and their internal operations. Only in this way, clients say, can their outside lawyers offer the best service and provide the best guidance — and if AI gets them there faster, so much the better.

“We want to see that our outside counsel does not just understand where we, as a business, are now, but rather that they understand where we want to go,” said one corporate client, noting that these relationships should develop into true partnerships. “If you help us grow, we can help you grow.”

Again, many corporate clients and their outside firms now see that the pathway to becoming true partners runs directly through AI. It is this advanced technology that can best and most rapidly allow firms to deepen their understanding of clients’ businesses and needs while providing the metrics that can help firms demonstrate the value they are bringing to clients.

As these two factors — AI investment and client management — continue to swirl around together, each influencing and impacting the other, it’s the firms that can best use the implementation of AI-driven technology to understand their clients and articulate the value of the services they can offer that will end up in the performance-leader group, rather than in with the laggards.

You can download

a full copy of the Thomson Reuters Institute’s “The 24^th Annual Law Firm COO & CFO Forum Executive Summary” by filling out the form below:

Key insights:

• • • Rates have never been stronger, but concerns are mounting — 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 configurationsĚý— 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— 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 — worked rates are up 7.4% compared to just a 2.8% inflation rate. This isn’t just a routine cost-of-living adjustment, rather it’s a demonstration of genuine pricing power that has fundamentally reshaped how legal services firms generate revenue.

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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’ 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 Thomson Reuters 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 — especially generative AI (GenAI) — 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 — such as client expectations, competitive pressures, and economic realities — 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 — 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 — 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 Thomson Reuters Institute and the True Value Partnering Institute by filling out the form below:

Key findings:

• • • Law firms are preparing, but many lack a full strategy — While most legal professionals in Brazil have engaged in technical reading, nearly half of firms still have no formal plan for the 2026 tax reform changes.

    • Technology readiness is high, but talent gaps persist — Brazilian law firms are investing in digital tools, yet more than half of legal professionals admit their colleagues are not prepared to manage the regulatory changes due to insufficient training.

    • Client risks are rising, but awareness is uneven — Increased tax burdens and legislative complexity are major concerns for clients and their legal counsel, yet many clients remain underprepared.

Brazil is entering a new chapter in its fiscal history. With a sweeping tax reform regime set to begin in 2026, the country is preparing to simplify its complex tax system by introducing a dual value-added tax (VAT) model. This reform replaces multiple existing taxes with a more streamlined structure, aiming to improve transparency, reduce bureaucracy, and create a more predictable environment for businesses and citizens alike.

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Brazil Tax Reform for Law Firm Professionals 2025

For law firms, this reform represents both a challenge and an opportunity. Many legal professionals and their firms are being called upon to act as guides, helping clients navigate a new and unfamiliar legal landscape. Many professionals have already begun preparing by studying the new legislation and participating in training sessions. However, their early efforts alone won’t be enough.

However, the real test will come in how firms translate their professionals’ knowledge into action by building internal capabilities, advising clients effectively, and adapting firm strategies to meet the demands of a changing system.

The pressure is already being felt. Legal professionals are seeing shifts in their daily work, with more questions, more complexity, and more demand for guidance from their clients. As Brazil’s tax reform progresses, this demand is expected to grow, placing even greater importance on preparation and foresight. Law firms that wait too long to act may find themselves overwhelmed, while those that invest early in the right tools and talent will be in a better position to lead.

Not surprisingly, technology is playing a key role in this transition. Legal professionals are turning to digital platforms that help simulate tax scenarios, interpret new rules, and provide real-time insights. These tools are becoming essential for firms that want to stay ahead of the curve.Ěý

You can download a full copy of the Thomson Reuters Institute’s “Brazil Tax Reform for Law Firm Professionals 2025” in Portuguese here

However, technology alone isn’t enough. The human element — skilled professionals who understand both the law and the needs of their clients — remains a critical piece of this solution. Without the right talent in place, even the most advanced systems can fall short.

Clients, too, are facing uncertainty. The new tax structure introduces unfamiliar rules and potential risks, from increased tax burdens to challenges in interpreting the law. Many already are looking to their legal advisors for clarity and direction. This makes it even more important for law firms and their professionals to be proactive — not just reacting to questions, but anticipating needs, educating clients, and offering strategic guidance.

The road ahead will not be easy. The reform is complex, and its full impact will unfold over several years; but it also offers a rare opportunity to modernize Brazil’s tax system and strengthen the legal infrastructure that supports it.

Those law firms that embrace this moment — by investing in talent, adopting smart technologies, and engaging clients with intention — will not only survive the transition but emerge stronger on the other side.

You can download

a full copy of the Thomson Reuters Institute’s “Brazil Tax Reform for Law Firm Professionals 2025” by filling out the form below:

Key insights:

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

    • The rise of non-hourly billing — 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’s promises of increased efficiency

    • Looking for efficiencies and ROI — 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 ¶¶ŇőłÉÄę, 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 — specifically around how the pricing of legal services may be impacted by an AI-powered future.

Fortunately, the Thomson Reuters 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’t bill them for their services — 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’ 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’s 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