Key insights:

• • • AI can help lawyers prepare better, more relevant client conversations — AI’s real value lies in synthesizing news, regulatory updates, client activity, and relationship data so lawyers have timely, tailored insights that make outreach easier and more meaningful.

    • AI works best as a foundation for client discussions, not a script — Panelists at a recent Forum repeatedly stressed that AI-generated briefs and opportunity matrices should only guide lawyers, but authenticity, experience, and interpretation are still what make client conversations effective.

    • Firms must actively and clearly talk to clients about their AI capabilities — Clients increasingly expect AI-savvy law firms, and those that can confidently explain how AI improves their service offerings while keeping humans at the center will stand out, while silence or vague messaging is a missed opportunity.

AMELIA ISLAND, Fla. — During the Thomson Reuters Institute’s recentĚý33rd Annual Chief Marketing & Business Development Officer ForumĚý(formerly theĚýMarketing Partner Forum), one concept became clear very quickly: When it comes to AI in law firms, the technology itself isn’t the hard part anymore. The real challenge — and the real opportunity — is how firms use AI to deepen client relationships and, just as importantly, how they talk to clients about what they’re doing.

Indeed, more than three-quarters of respondents (77%) say they believe law firms should take the initiative to begin these talks with clients around AI usage, according to the recent Thomson Reuters Institute’s 2026 AI in Professional Services Report.

Across multiple Forum panel discussions, speakers returned again and again to the same idea: AI is becoming a powerful business development engine, but only if lawyers and law firm business development teams are willing to use it proactively and communicate its value in human terms.

AI as an assistant, not a replacement

One of the most practical discussions that arose during the Forum centered on using AI to make client outreach less painful and more effective. Too often, panelists contended, senior lawyers often don’t send regular client notes — but it’s not because they don’t care. These notes get put on the backburner because crafting them takes time away from billable work and is hard to prioritize.

You can find out more about next year’s Chief Marketing & Business Development Officer Forum 2027Ěýhere

Several panelists talked about how AI can change that equation by pulling together information from news coverage, regulatory developments, earnings calls, relationship data, and even what clients are actively reading. Instead of staring at a blank page, partners can walk into a meeting or send a note armed with relevant, timely insights that actually matter to the client, they explained.

“We can plant things in our lawyers’ and partners’ minds to move the needle with clients so they can open conversations with clients that will make a difference,” said one panelist.

Of course, the point isn’t to automate relationships, rather it’s to give lawyers a smarter starting point — a short list of clients to contact, paired with concrete conversation openers that feel tailored rather than generic. “Those conversations and what results from those conversations will be revolutionary for your firm,” the panelist added.

Another theme that resonated at the Forum was the idea of matching client needs with firm capabilities in a much more structured way. AI can help generate documents that clearly show what a client is dealing with and where the firm can help — essentially an opportunity matrix that’s built from real data.

Strong need for lawyer training around AI

Several speakers were quick to stress, however, that this doesn’t mean that AI should be left on autopilot. The best results come when firms train their partners before client meetings, using AI-generated briefs as a foundation, not a script. That balance — between automation and authenticity — came up repeatedly throughout the Forum. As several panelists described, AI can bring insights to the surface, but lawyers still need to interpret those insights, contextualize them, and deliver them in a way that feels personal.

“AI might get you 90% of the way there, but that last 10% still depends on human judgment, experience, and relationship skills,” said one law firm technology specialist.

Indeed, if there was one clear takeaway from the Forum, it’s that AI adoption rises or falls on training. Not broad, one-size-fits-all sessions, but bespoke, one-on-one training that shows lawyers exactly how AI helps them prepare for client conversations. Indeed, several panelists argued that it is essential that firms educate their attorneys on how to use these tools effectively or give them very specific guidance — anything less will lead to hesitation, confusion, or outright resistance.

Of course, the problem is that AI adoption isn’t waiting for everyone to catch up. As one speaker noted, the train is already leaving the station, and those firms that fail to bring partners along — especially by showing clear, practical benefits of AI use — risk falling behind quickly.

In fact, several panelists discussed how the excitement around agentic AI is real, but so are the risks. They warned against assuming these more advanced tools are smarter or more autonomous than they really are. In fact, AI agents are still constrained by the data and tools they’re given, and a flawed understanding at the leadership level can lead to poor decisions and misplaced expectations.

That said, business development was repeatedly described as an ideal starting point for experimenting with agentic AI. The workflows are less rigid or high stakes than agentic use for legal work, the feedback loops are faster, and early wins are easier to spot.

Talking to clients about AI matters

Overall, perhaps the most important takeaway from the Forum wasn’t technical at all. It was strategic.

Because clients are increasingly expecting their law firms to be AI‑savvy, firms have to be proactive in their response. Firms have to not just be using AI internally, but understanding how the technology improves their service, efficiency, and insight. Those firms that can clearly and confidently explain to their own partners and clients how AI supports their best efforts — and where humans still play a critical role — will stand out. Staying silent about AI, or worse, being vague and generic about its value, is a missed opportunity, several panelists explained.

Those law firms that thrive, especially around business development and client service, will be the ones that treat AI not as a back-office experiment, but as a client-facing capability — something to be discussed openly, thoughtfully, and authentically.

You can read the fullĚýExecutive Summary of the Thomson Reuters Institute’s 33rd Annual Chief Marketing & Business Development Officer ForumĚýhere

Key takeaways:

• • • LFFI dip driven by slowing demand — The small dip in the LFFI was driven almost entirely by decelerating demand growth, which slowed to a still-strong 3.3% in Q4.

• • • Changing of the guardĚý— M&A work slammed on the brakes while counter-cyclical practices surged, with bankruptcy re-emerging as a major engine of demand growth — a shift that often signals broader economic turbulence ahead.

    • Rate increases, client pressure buildsĚý— Firms fielded strong rates at the beginning of 2025, which helped power profits; however, with client budgets stretched, firms must demonstrate value to justify their higher rates.

Law firms ended 2025 in an enviable position, even as the Thomson Reuters Institute’s Law Firm Financial Index (LFFI) score dipped 2 points to 61 for the fourth quarter of 2025, snapping a yearlong upward streak as demand growth slowed from its Q3 pace. The final quarter of 2025 delivered one of the strongest finishes in recent memory, with profits surging and margins cresting above 40%. Yet even as the champagne flows, the winds may already have begun to shift.

Jump to ↓

Q4 2025 Law Firm Financial Index

The LFFI’s slight decline was driven almost entirely by decelerating demand growth, which slowed to a still strong 3.3% in Q4 from 3.9% in Q3. More telling than this headline figure, however, was a quieter changing of the guard beneath the surface.

Transactional practices began cooling from their Q3 peaks, with M&A work falling 5 percentage points from its prior pace. Filling the void, bankruptcy work surged in Q4, particularly in December, as counter-cyclical practices re-emerged as the dominant engine of demand growth. If this signals a greater shift for the United States economy, as it often does, law firms may find something far more important than just their demand threatened — their rates could come under pressure.

The rate question

Rate increases have historically been the primary power behind law firm finances, and 2025 proved no exception. Firms broke through a two-decade-old threshold, with the average firm seeing 7% growth in worked rates. Since the end of 2022, every 1% increase in worked rate growth has correlated to about a 0.9 percentage point increase in profits.

Where things may become less comfortable is the increasing potential for client pushback. Legal services buyers’ budgets are under more pressure than ever, and 2026’s new rate increases — expected to be as strong or stronger than 2025’s — are already in effect. If the legal industry continues raising rates at this pace without delivering corresponding increases value — and communicating that value to clients — they may see clients shift work to cheaper firms or move more legal work in-house entirely.

We’ve seen this movie before, in 2008 immediately after the global financial crisis, and the result was a stagnant decade of law firm growth.

Preparing for changing weather ahead

The good news is that none of this spell immediate trouble, and there is more than enough time for firms to avoid the worst of the long-term threats. A brighter future, one in which firms use advanced AI tools to deliver more value per hour and thus strengthen their surging rates even further, is just as possible.

By effectively locking in their revenue before the winds shifted and practicing disciplined expense management, law firms have bought themselves some breathing room to invest in technology and talent, at least in the short term.

For law firm leaders, this is a moment for preparation, not for a victory lap. The firms best positioned for whatever weather lies ahead will be those that solidify their efficiency gains and demonstrate value now, ensuring that when the next wind shift comes, they’re positioned not just to survive, but to thrive.

You can download

a full copy of the Thomson Reuters Institute’s “Q4 2025 Law Firm Financial Index” by filling out the form below:

Key insights:

• • • Pricing power now depends on clear, measurable value — Firms must prove their worth at every client touchpoint to justify charging premium rates.

    • Value delivery spans five critical stages — Demand management, service design, delivery excellence, value capture, and relationship management. All must be systematically audited and improved.

    • Action is essential — Diagnosing gaps is only the first step; law firms must assign accountability, set goals, and continuously adapt to meet evolving client expectations and avoid competing solely on price.

The 2026 Report on the State of the US Legal Market, published jointly by the ¶¶ŇőłÉÄę® Institute and the Center on Ethics and the Legal Profession at Georgetown Law,Ěýshows that over the past three years, legal industry pricing has skyrocketed at an unprecedented pace.

Many law firms have enjoyed strong demand and the ability to command higher rates, often without significant pushbacks from clients. However, that era of unchecked growth is coming to an end. Today’s clients are far more discerning about what they are willing to pay for and why. More often, they scrutinize every invoice, questioning whether the value delivered truly matches the premium price charged.

The danger for many law firms is complacency. Past success can create a false sense of security, leading to assumptions that reputation alone will sustain pricing power. However, as client procurement teams become more sophisticated and alternative legal services providers enter the market, firms that fail to prove their worth will find themselves competing on cost, which can result in a race to the bottom that few can afford.

This shift signals a fundamental change in the market in which pricing power is no longer guaranteed by reputation or past performance. Instead, pricing power hinges on a firm’s ability to demonstrate clear, measurable value at every stage of the client relationship. Those firms that fail to adapt risk being forced into price-based competition, eroding margins and undermining long-term sustainability.

By 2025, even as inflation eased to a more typical — but still elevated — 3%, many law firms continued to push rate increases at more than twice that level. The disconnect between pricing and underlying economic conditions had widened into a significant gulf, underscoring the critical need for firms to clearly demonstrate and defend the value behind their premium rates.

So, how can firms ensure they are delivering premium value to earn the right to charge premium rates? The answer lies in systematically diagnosing where value is created — and where it is destroyed — across the entire client experience journey.

The 5 stages of legal service delivery

To maintain pricing power, firms must examine their service delivery through five key client experience stages. Each stage represents an opportunity to create value or destroy it.

1. Demand management

Do you truly understand the client’s business problem, or are you focused solely on the legal question? Effective demand management requires moving beyond transactional requests to uncover a client’s strategic objectives. This ensures the solutions proposed align with business impact, not just technical compliance.

You can hear more about the “2026 Report on the State of the US Legal Market” inĚý, on YouTube

Start every engagement by asking: What client business goal is driving this need?, What constraints is the client operating under?, and How will success be measured beyond legal compliance? These questions can reframe the conversation from a focus on deliverables to a focus on strategic results, positioning your law firm as a proactive partner in the client’s success.

By facilitating co-design workshops with clients and requiring clear documentation of business goals for each project, your firm ensures that every initiative is aligned with measurable impact. This approach not only demonstrates leadership and a deep understanding of client needs, but it also builds lasting trust and drives greater value throughout the relationship.

2. Service design

Are your offerings built around client outcomes or your own internal structure? Many firms design services based on practice groups and billing models, not on what may serve clients best. This can create friction and inefficiency.

Adopting a client-centric design philosophy requires mapping the client journey, identifying pain points, and designing integrated services around client business needs. For instance, bundling advisory and compliance work into outcome-oriented solutions and coordinating delivery through a single relationship manager simplifies decision-making, strengthens trust, and delivers consistent, measurable value throughout the engagement.

3. Delivery excellence

Do you have safeguards that prevent failures before they ever reach the client? Even the most sophisticated legal advice loses its impact if delivery is inconsistent or error prone. Breakdowns in market research, service design, process conformance, or communication don’t just create inefficiencies, they erode client trust and diminish the firm’s perceived value. This is about embedding reliability into your delivery model, so clients don’t have to chase updates, catch errors, or manage deadlines on your behalf.

Invest in quality checks and project management tools and use proactive risk controls —such as early warning systems for potential delays — that provide automatic status updates and clear ownership. These measures signal professionalism and reliability, reinforcing your premium positioning.

4. Value capture

Can clients clearly see and articulate the value you’ve delivered? If your impact is invisible, your pricing will always feel inflated. Many firms struggle to articulate outcomes beyond hours billed, which can leave clients to wonder what they are paying for.

Communicate value in terms that matter to clients. Use outcome-based reporting to show how your work mitigated risk, accelerated timelines, or unlocked opportunities. Record these in quarterly impact reports — because when clients see tangible benefits, they are far more willing to pay premium rates.

5. Relationship management

Do you build trust systematically or hope it happens organically? Trust is the foundation of pricing power, but it doesn’t happen by accident. Firms that rely on personal rapport alone risk inconsistency and vulnerability when key contacts change.

Implement structured feedback loops, client listening programs, and regular value reviews. These mechanisms demonstrate commitment to continuous improvement and deepen client confidence in your firm’s ability to deliver.

Turning insights into action

Assessing your client’s journey is only the first step. The real challenge and opportunity lies in acting on those insights. Start by identifying gaps in the five key stages, then prioritize improvements that will have the greatest impact on client perception and outcomes.

Assign accountability for each stage, set measurable goals, and track progress over time. Consider creating cross-functional teams to break down silos and foster collaboration. Remember, value delivery is not a one-time project; it’s an ongoing discipline that requires vigilance and adaptability.

As the legal market transforms, so do client expectations. Firms that cling to outdated assumptions about pricing power will inevitably find themselves competing on cost alone — a losing strategy in an increasingly crowded and sophisticated marketplace.

You can download a full copy of theĚý2026 Report on the State of the US Legal Market, published jointly by the ¶¶ŇőłÉÄę® Institute and the Center on Ethics and the Legal Profession at Georgetown Law, here

Key points:

• • • Reactive service is obsolete — The traditional model of waiting for client problems has reached its expiration date. Proactive, AI-powered monitoring creates entirely new categories of legal value.

    • Consolidation is coming — Within five years, the legal sector will bifurcate between firms embracing agentic AI transformation and those clinging to traditional models.

    • Early adopters set expectations — Firms that deploy AI agents as embedded legal monitoring systems will establish new client expectations that laggards will not be able to meet.

Welcome back to The AI Law Professor. Last month, I explored why asking the question “What if AGI?”Ěýrepresents essential strategic planning for lawyers. This month, I’m examining a transformation already underway: How AI-powered legal risk management systems can prevent problems rather than just solve them, and what this shift means for the lawyer-client relationship.

When every business decision becomes an opportunity for real-time legal insight, the total addressable market for legal services grows exponentially — and AI, especially agentic AI, is going to make this happen at warp speed. Yet, this client-facing and proactive revolution isn’t about replacing lawyers with machines. It’s about reimagining the lawyer-client relationship entirely, moving lawyers from being reactive problem-solvers to embedded strategic partners who prevent issues before they arise.

The end of reactive lawyering

Picture a senior partner at a prestigious law firm, circa 1995, dictating a memo while associates conduct research, mostly by carefully perusing large legal tomes, in the library. Fast forward to today: that partner now types their own emails, the library has become digital databases, and junior associates spend more time with search algorithms than with senior mentors. Yet for all this change, the fundamental model has remained static. Lawyers still react to problems after they arise, bill by the hour, and treat technology as a tool rather than a collaborative method.

We’re standing at the threshold of something fundamentally different. The emergence of agentic AI isn’t merely about making existing processes faster or cheaper. It’s about transforming law firms from reactive advisors into proactive business partners, embedded in the real-time operations of their clients.

Current adoption of agentic AI follows a predictable trajectory. Firms deploy it for high-volume, low-risk tasks, such as document sorting, initial contract reviews, and basic due diligence. However, limiting agentic AI to these mundane tasks is like using a Ferrari to deliver pizza.

The fundamental model has remained static. Lawyers still react to problems after they arise, bill by the hour, and treat technology as a tool rather than a collaborative method.

The real power emerges when we reconceptualize the lawyer-client relationship entirely. Instead of waiting for the phone to ring with the next legal crisis, imagine law firms with AI agents continuously monitoring client operations, analyzing contracts in real-time, flagging potential issues before they metastasize into lawsuits.

This shift from reactive to proactive legal service delivery represents a classic disruption pattern. It doesn’t just improve existing services, rather it creates entirely new categories of value.

The proactive revolution

Here’s a prediction that might ruffle some feathers: Within five years, we’ll witness massive consolidation in the legal sector. However, it won’t follow traditional patterns of big law firms absorbing smaller ones. Instead, we’ll see a bifurcation between those firms that embrace agentic transformation and those that cling to traditional models.

The firms that thrive will look radically different from today’s partnerships. They’ll employ machine learning experts alongside lawyers, and they’ll offer managed services that embed AI agents directly into client operations — and they’ll charge for value delivered rather than time spent. Think of them less like law firms and more like legal technology companies that happen to employ lawyers.

Meanwhile, firms that treat AI as just another tool, that continue billing by the hour while using AI to work faster, will find themselves in a death spiral. They’ll have missed the tipping point when incremental change becomes revolutionary transformation.

Of course, the most exciting possibility isn’t incremental improvement but the creation of entirely new categories of legal value. Imagine a firm that doesn’t wait for contracts to go sour but monitors them continuously, alerting clients to changing circumstances that might trigger renegotiation. Picture legal departments that can simulate the regulatory implications of business decisions before they’re made, running thousands of scenarios through AI agents trained on relevant case law.

The most exciting possibility isn’t incremental improvement but the creation of entirely new categories of legal value.

This proactive model transforms lawyers from fire fighters into strategic partners. It expands the total addressable market for legal services by orders of magnitude. Every business decision becomes an opportunity for legal insight, and every operational change gets real-time analysis. A law firm could offer legal monitoring as a service, with AI agents acting as an always-on legal nervous system for clients.

Once firms start down this path, they’ll find it difficult to reverse course. Early adopters will set new client expectations that laggards simply cannot meet. The competitive advantages will compound over time as firms accumulate data, refine their models, and deepen client integration.

The choice is stark but clear

After decades of building AI tools for legal practice, I’ve learned to distinguish between hype cycles and genuine paradigm shifts. Agentic AI represents the latter. It’s not about doing the same things faster or cheaper; rather, it’s about fundamentally reconsidering what legal services could become.

The firms that will dominate the next era are already experimenting, learning fast, and profiting faster. They’re building products that automate commodity work while developing new service models that were impossible before AI. They’re treating technology not as a threat but as an amplifier of human expertise.

The choice facing today’s legal professionals is clear: Embrace the agentic AI transformation and help shape how AI can change your legal practice, or resist and risk becoming casualties of technological disruption. The medieval guild system of legal apprenticeship has ended — and the age of human-AI collaboration has begun.

Those who recognize this shift, invest in understanding and deploying agentic AI strategically, and reimagine their business models and service offerings won’t just survive this transformation, they’ll thrive.

Indeed, they’ll thrive in ways that would seem like science fiction to that senior partner dictating memos in 1995.

The future of law isn’t about replacing lawyers with machines. It’s about lawyers and machines working together to deliver value that neither could achieve alone. And that future has already begun.

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Well, that brings us to the end of 2025! I wish you and yours a very happy holidays, and I’m excited to see what 2026 brings us. The future looks bright!

• • • 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.

Jump to ↓

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.”

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.

Jump to ↓

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 insights:

• • • Efficiency and cost savings are expected — AI is significantly increasing efficiency and reducing costs in the legal industry, with each lawyer expecting to save 190 work-hours per year by leveraging AI, resulting in approximately $20 billion worth of work-savings in the US alone.

    • Challenges to the billable hour model — The traditional billable hour model is being challenged by AI advancements, as lawyers are now able to complete tasks more efficiently and quickly, leading some law firms to explore alternative pricing models that reflect the value delivered rather than the time spent.

    • Opportunities for smaller law firms — AI presents unique opportunities for smaller law firms to differentiate themselves and compete with larger firms, as AI solutions allow smaller firms to access advanced technology without significant investment and deliver innovative pricing models.

The legal industry is undergoing a significant transformation that’s being driven by the rapid adoption of AI — a shift that is poised to redefine traditional practices, particularly the billable hour model, a cornerstone of law firm operations.

Not surprisingly, AI is anticipated to have the biggest impact on the legal industry over the next five years, with 80% of law firm survey respondents to ¶¶ŇőłÉÄę recently published 2025 Future of Professionals report saying that they expect AI to fundamentally alter how they conduct business, especially around how law firms price, staff, and deliver legal work to their clients.

The $20 billion opportunity

Clearly, one of the most significant benefits that AI will bring to law firms is the potential for increased efficiency and cost savings. Already, almost half (47%) of law firm respondents say their firms are already experiencing at least one type of benefit from AI adoption.

And the benefits of greater efficiency could become a game-changer. On average, each lawyer expects to save 190 work-hours per year by leveraging AI tools and solutions to do work faster and more efficiently. That translates into approximately $20 billion worth of time-savings in the United States legal market alone.

Clearly, this should be seen as an opportunity. Law firms must put into action a strategy to incorporate AI into their existing systems and workflows to reap the benefits themselves and deliver greater value and service to their clients.

More importantly, by embracing AI, law firms will be able to demonstrate to their clients that they have the technological sophistication to be better partners. And when law firms can provide transparency related to the work performed, clients are more comfortable investing in the high-level strategic counsel that those firms provide.

This creates a clear opportunity for law firms to build transformational relationships with their clients and demonstrate their value beyond simply being a vendor of traditional legal services.

The end of an era? Reimagining billable hours in the age of AI

Of course, the advantages of AI don’t come without challenges as well, and the impact of AI’s advancement on the billable hour model, a long-standing practice in the legal industry, cannot be underestimated.

Many law firm leaders already are asking: As my firm embraces AI, what does it do to my billing rates and the economics of my firm? And while that’s a fair question, it may not necessarily be the right one, for two main reasons.

First, remember that $20 billion worth of time-savings the industry expects? That will be reinvested by every individual law firm, and this time-investment then can redirect lawyers to higher-value work, better client service, and a stronger focus on firm growth. In fact, law firms with a visible AI strategy are almost four times more likely to experience benefits compared to firms without any significant plans for AI adoption, according to the report.

And that is the second point — when the work that law firms are doing today can be done at a lower price point, basic economic theory kicks in and demand will go up. Indeed, many in-house legal counsel would be happy to give more work to their favored law firms if the economics are more attractive. This theory of demand expansion will more than compensate for the reform — not the repeal — of the billable hour, and the legal industry will continue to grow.

Still, the traditional billable hour still holds sway — as much as 90% of corporate legal spend on outside law firms involves hourly rates, according to our latest research. Yet, it is encouraging that a growing number of law firms are exploring alternative pricing models that reflect the value delivered rather than the time spent. And a continuation of this shift could lead to more strategic counsel and higher-value work for which clients are willing to pay a higher premium.

Small but mighty: How smaller law firms can win with AI

Another aspect of this AI-fueled challenge to the billable hour is the unique opportunities it offers smaller law firms to differentiate themselves and compete with larger firms. The availability of AI tools and solutions can allow smaller firms to access advanced technology without significant investment.

This means that smaller firms can become more nimble, embrace alternative ways of pricing and delivering legal work that might have been unimaginable to them before. In this way, AI will level the playing field and enable smaller firms to have an opportunity to expand their services and grow market share.

Already, what we’re seeing in the legal industry is that the level of usage of AI tools among lawyers at smaller law firms is even higher than that of lawyers at larger law firms, underscoring the opportunity for smaller law firms to proactively use AI to differentiate themselves not only from competitors, large and small, but in the minds of clients as well.

Law firm leaders need to take control of their firm’s future, and that means adjusting how their firm operates — including their use of the traditional billable hour model — to better reflect today’s AI-driven reality. Indeed, leaders need to recognize that embracing AI is no longer a choice, it is a necessity for success in today’s legal market.

You can download a copy of the here

Key takeaways:

• • • Subscriptions are a high-value option — Subscription-led pricing correlates with the highest value confidence and steadier revenue compared to hourly or fixed-fee models.

    • Three pricing packages evolve — Three tier packages (basic, standard & premium) create a clear value ladder and enable increased customization through modular add-ons.

    • Regular billing cycles help — Monthly or quarterly billing cadences improve transparency, client trust, and firm cash flow.

Tax, audit & accounting firms are in the middle of a pricing reckoning. Clients want clarity, firm leaders want confidence, and teams want to escape the treadmill of selling hours. The firms pulling ahead aren’t just raising rates, they’re re-engineering how they define and deliver value. Packaging, bundling, and especially subscription-based pricing are allowing firms to price with conviction, increase margins, and deepen client loyalty. The shift is not cosmetic, rather it’s a strategic reset from billing for hours to being paid for outcomes instead.

The confidence advantage of subscriptions

According to the recent Thomson Reuters Instiitute’s 2025 Tax Firm Pricing Report, firms that have adopted subscription billing for most clients, tax professionals’ confidence in the value they’re providing is materially higher than when hourly or fixed-fee pricing models are used. Indeed, nearly one-third of tax professionals in subscription-first firms say they are highly confident that their pricing aligns with the value delivered, compared to less than 20% of those professionals in firms that use in hourly pricing.

Why the gap? Subscription pricing models reframe the client relationship around results, not individual tasks. These models anchor expectations, create continuity, and prompt ongoing conversations about progress and outcomes. They also bring predictability — steady revenue for the firm and transparent costs for the client.

Conversely, hourly and even traditional fixed-fee pricing models struggle to tell that story. They describe inputs and deliverables, while subscriptions describe impact.

Despite the benefits, firm adoption of subscription pricing is still in its early stages. Only a small portion of client engagements are currently based on subscriptions, although that share is growing rapidly. This gap is an opportunity for many tax, audit & accounting firms and their leaders. Indeed, the invitation is clear: Firm leaderss should identify those offered services in which outcomes compound over time — such as tax planning, strategy, compliance along with advisory — and transition those into ongoing, subscription-based relationships with clients.

Design services like products: The 3-tiered architecture

Modern pricing gains power from clarity. That’s why the most effective firms are organizing their services offering catalog into three simple tiers — basic, standard, and premium — which then allows for additional customization through modular add-ons.

This architecture does three things well: First, it creates a value ladder that allows firms to guide their clients to the right entry point while giving them a clear path to upgrade; second, it standardizes delivery, improving margins and team efficiency; and third, it enables customization without chaos.

Rather than reinventing a customized scope for each client, firms use defined add-ons — education planning, entity structuring, succession planning, and more — to tailor engagements to the client while maintaining operational consistency across all services.

Earning (and keeping) your fee increases

The best-performing firms aren’t timid about fees. They’re raising prices — and keeping clients — because they’ve reframed the value conversation. Instead of talking about more hours or complexity, they instead talk about the kind of outcomes that clients actually care about: peace of mind, risk reduction, strategic clarity, and measurable savings. The tax professionals bring real examples, case studies, and ROI to the table, and they benchmark. They review pricing annually or even quarterly, and they communicate changes to their clients in a way that feels transparent, justified, and aligned with client goals.

This is a pivotal shift for many tax, audit & accounting firms. The professionals at these firms have learned that when clients understand the outcome, the price makes sense; and when they don’t, the conversation reverts to cost. Packaging and subscriptions make this communication repeatable. In this environment, tiers create contrast, add-ons create choice, and benchmarks create external validation. Together, these factors shift the dialogue with clients from How much? to What’s the impact? — and that’s a win for firms.

Predictability is a service

If trust is the currency of advisory work, predictability is the interest it earns. Monthly or quarterly billing rhythms can reduce friction, improve cash flow on both sides, and transform tax from a once-a-year scramble into an ongoing partnership. Sending out clear, consistent invoices mapped to packages and add-ons can reinforce the story of value delivery. Internally, predictable revenue can smooth seasonality within a firm, supporting hiring and capacity planning, and reducing the temptation to discount prices under pressure.

Customization at scale

Clients want to feel known, and your tax team needs to stay sane. The answer isn’t to create bespoke products for everything, rather it’s to encourage segment-smart design. Build packages for common client profiles by industry, entity type, size, or lifecycle stage, then equip your team with modular upgrades that align to clear outcomes. This allows tax advisors to make confident recommendations, identify retention risks early, and adjust scope based on profitability and feedback — all without blowing up workflows.

Think like a product organization: Define standard features, articulate premium benefits, and maintain a disciplined roadmap of add-ons. Then enable your tax advisors with a playbook — which clients get what, when, and why — so the client experience feels personal while the back office remains efficient.

A practical path to transition

If you’re ready to move from hours to outcomes, you should start with focus and speed. Here are several steps that can help:

• • • Choose the right beachhead — Identify one or two services that are ideally suited for ongoing value, such as monthly accounting plus tax, annual planning with quarterly check-ins, or entity support and then package those services into clear tiers.
    • Build the narrative — For each tier, translate features into outcomes. Replace X reconciliations and Y reports with real-time visibility, faster decisions, and fewer surprises. Back this effort with case studies and quantified savings wherever possible.
    • Set billing cadence and service-level agreements — Decide what services can be billed monthly compared to quarterly, define response times and access levels per tier, and codify communication rhythms. Make service levels visible, because again, clients value clarity.
    • Pilot, then expand — Roll out your initial offerings to a defined client segment or cohort. Collect feedback, refine scope, and test pricing elasticity. Use early wins to train your team and inform a broader rollout.
    • Institutionalize benchmarking and reviews — Compare your pricing against peers and alternative service providers at least annually. Review client outcomes quarterly and then adjust tiers, add-ons, and messaging based on what you learn.
    • Equip your team — Give your tax advisors scripts, ROI calculators, and objection-handling guidelines. Realize that confidence is contagious, both internally and externally.

Shifting from selling time to selling outcomes requires more than a new price list. It asks firm leaders to design services intentionally, measure impact consistently, and coach their teams to speak the language of results. It also asks firms to treat pricing as strategy, not administration. Firms should be explicit about what clients they serve, what they promise, and what it’s worth.

The firms that make this shift will do more than improve margins. They’ll build sturdier client relationships, reduce scope creep, and cultivate a culture in which the team understands — and can articulate — the value they create. In a world in which talent is tight and client expectations are rising, that kind of intentional clarity can be a strong competitive advantage.

You can download a full copy of the Thomson Reuters Institute’s recent report on tax firm pricing,ĚýSteps for increased confidence in pricing, here

Key takeaways:

• • • Most tax professionals feel their rates are competitive, but few are confident that those rates reflect the true value of their expertise.

    • Subscription and bundled pricing models lead to greater pricing confidence and more successful price increases.

    • Regular benchmarking, reviews, and transparent client communication are underused but essential methods for aligning pricing with value and market trends.

The manner in which tax, audit & accounting firms price their services is often a complex mixture of accounting, strategy, and intuition. Many firms set their rates based on tradition or perceived market standards. Yet, according to a new report on pricing from the Thomson Reuters Institute, Steps for increased confidence in pricing, there’s a notable lack of confidence that these fees truly capture the value of the expertise provided.

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Steps for increased confidence in pricing

Indeed, this pricing confidence gap could be a missed opportunity for firms to improve profitability and enhance their client relationships.

Despite healthy demand, the report found that almost two-thirds of respondents surveyed say their firm saw its revenues rise last year, but less than half experienced an increase in profits. While the vast majority of tax professionals believe their rates are competitive, less than 1-in-5 say they feel certain their pricing reflects the real value they deliver. This suggests that firms may be undervaluing their professionals’ expertise and leaving revenue on the table.

Evolving price models

One significant insight from the report is that alternative pricing models can help close this confidence gap. Hourly billing still dominates, accounting for less than half of client arrangements, but models like subscriptions and bundling are gaining traction, the report shows. Subscription pricing, which ties fees directly to ongoing value and offers clients clear expectations and predictable budgets, is clearly associated with higher pricing confidence.

In fact, almost one-third of respondents from firms using subscriptions for most clients say they have high confidence in their pricing, compared to a much smaller percentage of respondents from firms relying on hourly or fixed fees. Although subscription billing has grown by almost four-fold in the past year, it remains significantly underutilized.

Bundled services are also proving effective, as the report explains. By packaging offerings into tiered levels based on client needs and complexity, firms can more easily communicate the value of their services. Most respondents from firms offering bundled packages say this has enabled them to raise prices, thanks to improved confidence that their fees align with the value delivered.

Beyond pricing models, the report highlights the importance of market intelligence and data-driven decision-making. Less than one-third of respondents say their firm regularly benchmarks its rates against competitors, often relying instead on informal data sources like websites or trade publications. The report makes the case that robust benchmarking and accurate data give tax, audit & accounting firms the confidence to set fees that are both competitive and justifiable.

Another missed opportunity is the frequency of pricing reviews, according to the report. Most firms review rates annually, but only a small percentage do so quarterly. More frequent reviews allow for quicker adjustments in response to rising costs, regulatory changes, or shifts in service offerings. Even simple mid-year check-ins or pricing health checks against key metrics can prevent margin erosion and ensure firms’ pricing strategies stay relevant.

Communication is key

The report also cites how critical client communication and transparency is to effective pricing, noting at less than 1-in-10 respondents say their firm surveys clients about pricing satisfaction, meaning most are missing out on valuable feedback. Regular discussions with clients can help explain pricing structures, provide updates on tax law changes, and ensure that the services offered are aligned with client needs and goals. Demonstrating return on investment (ROI) and value — something that less than 1-in-5 respondents say their firm currently does — also helps clients see fees as a worthwhile investment, not just a cost.

As the report makes clear, the path to more profitable and value-driven pricing for tax, audit & accounting firms involves more than just being competitive enough. By adopting flexible pricing models, leveraging better data, conducting regular pricing reviews, and communicating more openly with clients, firms can move closer to a pricing strategy that truly reflects the value of their professionals’ expertise and strengthens client relationships.

The ultimate result will be not just improved confidence for the firm’s tax professional, but also greater profitability and long-term success for the firm itself.

You can download

a full copy of the Thomson Reuters Institute’s tax, audit & accounting firm pricing report, “Steps-for-increased-confidence-in-pricing” by filling out the form below:

Key insights:

• • • Managing resources is key — The effectiveness of a legal department depends on how internal and external resources are managed, coupled with the quality and commerciality of the advice provided.

    • Strategic resource allocation needed — Using the right resources for the type of task is critical for GCs who are looking to create operational value in their legal departments.

    • Providing quality legal advice is a differentiator — GCs are looking to their outside law firms to provide commercially relevant legal advice that will help the in-house legal department drive value creation.

Today’s corporate general counsel (GCs) find themselves juggling a challenging load of responsibilities. Frequently in the past, the Thomson Reuters Institute (TRI) has talked about the four spinning plates that today’s GC must monitor — effectiveness, efficiency, protection, and enablement of business growth.

Previously, we described the first of these plates, effectiveness, as an area in which frequently the expectations of C-Suite leaders about their GCs’ office are slightly out of alignment with the daily reality of many GCs.

This misalignment does not mean that business leaders overemphasize operational effectiveness or that GCs neglect this priority; rather, this misalignment is most likely due to the differing perspectives each group has on the operations of in-house legal departments. Within each organization, the C-Suite rightly expects its GC to be operating its enabling function as effectively as possible — it’s a baseline expectation. However, because it is a baseline expectation, it can easily become table stakes for the GC in terms of day-to-day focus. It’s not that effectiveness isn’t top of mind, it’s that focusing on the effectiveness of the department has become business as usual.

However, TRI’s 2025 State of the Corporate Law Department report provides a new lens through which to view the effectiveness of the legal team. As covered extensively in that report, GCs have demonstrated a rapidly increasing focus on extracting value from their team. GCs are looking to bring their teams into alignment with the business’s enterprise-wide value system, attaining greater value from their external legal spend and generating greater value for the business — all while working to protect the value the business itself has created.

Generating value for the business

The idea of generating greater value for the business can be a challenging one for GCs to deliver. The legal team isn’t tasked with product development, lead generation, or sales, so how is the team supposed to generate value?

As discussed in the recent Corporate Law Department report, one way that GCs can create value for the business is by creating greater operational value. This relies on how effectively the in-house team operates, adding a new label to the now-familiar effectiveness plate that GCs are already spinning.

But how does that kind of value-generation work in practice?

This effectiveness equation provides a handy framework to which GCs can refer when trying to optimize the effectives of their operations. In sum, how GCs manage their resources and talent, coupled with how they provide advice and service, equates to how effectively their team operates.

Which resources to use and when

The first component of the equation deals with striking a balance between internal and external resources. GCs tend to look primarily to internal resources for day-to-day and core types of work as well as matters that require a greater sense of the commercial interests of the business. They also favor their in-house teams when cost is a factor, an increasingly common consideration.

Further, GCs tend to look to law firms for help when they need specialized expertise or a boost to their in-house capacity. Many GCs describe themselves as Swiss Army Knives, that are adept at doing a little bit of a lot of things. However, when a matter requires deeper expertise, GCs will then turn to their specialized toolbox, which means outside law firms or, occasionally, alternative legal service providers (ALSPs). Another common area in which GCs will leverage outside law firms deals with issues of capacity. GCs frequently report dealing with increasing matter volumes while managing flat to declining internal attorney headcounts and budgets. External law firms can provide much needed pressure relief, but such relief often comes at a cost.

Ensuring quality of service

Even as GCs strive to strike a balance on the first portion of the effectiveness equation, they must be mindful of the quality of the service they are providing. The Corporate Law Department report made the point that corporate law departments do not operate effectively or efficiently as ends in their own right. Rather, all of the law department’s activities must be done in service to the broader commercial interests of the business.

This applies not only to the advice the in-house lawyers provide but also to external counsel, whether that be a law firm or an ALSP. Legal advice, no matter how correct or thorough, will be of little ultimate value to the business if it bears no relation whatsoever to the commercial realities of the business. Likewise, advice that is not responsive or timely to the end stakeholder’s needs, or which is so complex as to be unusable, does little to help demonstrate the effectiveness of the legal team.

As a result, GCs are increasingly making it a priority to ensure that their in-house lawyers provide advice that is timely, responsive, and understandable for stakeholders across the business, and increasingly, they expect their outside counsel to do the same.

When the component parts of this effectiveness equation come into balance, it not only helps the GC demonstrate the effectiveness of their team, but it also helps to service broader interest in growing the business and providing strategically relevant counsel to leadership.

Keys to driving business objectives

Another TRI report — the recent 2025 C-Suite Survey — discussed how business leaders do not generally view their enabling functions as making significant contributions to the ability of the business to achieve its overall objectives. For GCs looking to improve the perception of their in-house legal teams, how effectively their team operates in the creation of operational value can be key.

For starters, GCs looking to enhance operational value should:

• • • constantly evaluate when to keep work in-house, when to outsource, and which type of outside resources are most appropriate to GCs’ specific needs;
    • explore whether technological enhancement could create additional capacity to keep work in-house, mitigating the need to seek outside counsel;
    • ensure that the advice their teams offer is commercially attuned to the needs of the business and responsive to the stakeholders; and
    • hold outside counsel and ALSPs accountable to the same standards of commerciality.

While the discrete goals and key results of the business may vary from year to year, GCs must always be attentive to how effectively their legal department is operating. Frameworks such as the effectiveness equation can prove to be useful reference tools for GCs who are trying to identify what metrics they should be monitoring.

Not surprisingly, C-Suite leaders have high expectations for the leaders of their enabling functions. The good news for GCs is that they have plenty of options at their disposal to demonstrate how effective their departments can be in improving organizations’ ability to meet their goals.

You can download a full copy of the Thomson Reuters Institute’s 2025 State of the Corporate Law Department report here