The adoption of artificial intelligence by legal professionals has dramatically increased, soaring from 19% in 2023 to 79% in the current year. This significant finding comes from the ninth edition of the Legal Trends Report, a comprehensive analysis released at the Clio Cloud Conference in Austin.
The report highlights the potential for AI to disrupt the business of law, noting that up to 74% of hourly billable tasks, such as information gathering and data analysis, could be automated. Consequently, the analysis suggests that law firms should consider transitioning away from traditional hourly billing toward more adaptable options like flat fees. As AI minimizes the time necessary for various tasks, firms that continue to rely solely on the billable hour model may experience a decline in revenue.
Client Attitudes and Universal Adoption
Clients appear increasingly supportive of lawyers utilizing AI. The report indicates that 70% of clients are either neutral or prefer law firms that incorporate AI technology. When asked about their preference when hiring legal counsel, 42% expressed a preference for a firm using or exploring AI, 28% had no preference, and 31% preferred a firm not using the technology.
The report emphasizes that the modern law firm is primed for automation, suggesting that nearly three-quarters of hourly billable tasks face potential automation by AI. This integration, the report posits, can free up firms to concentrate on work that requires human expertise, such as high level legal strategy, client advocacy, and relationship development, all while maintaining excellent service quality.
Although 79% of firms report adopting AI in some capacity, universal adoption remains low at just 8%, with another 17% reporting wide adoption. A substantial 34% indicate only minimal adoption, and 21% report partial adoption.
For those hesitant to adopt AI, the primary concern, cited by 59%, is uncertainty about its utility in their work. Other reported reasons include a lack of trust (44%), perceived unreliability (34%), and a belief that the technology is not yet sufficiently advanced (30%).
Firms that are adopting AI are most commonly utilizing generic non legal AI tools, such as ChatGPT, followed by AI powered legal research platforms and document drafting tools.
Potential for Automation and Task Exposure
Further analysis in the Legal Trends Report sheds light on the extent of automation potential within the legal industry. A 2023 study by Goldman Sachs concluded that 44% of work tasks in the legal industry could be automated by AI. The Legal Trends Report conducts a more refined analysis, starting with the same data set as the Goldman Sachs study but comparing it with aggregated and anonymized billing data from numerous legal professionals.
This deeper examination found that nearly three-quarters of a law firm’s hourly billable tasks are potentially susceptible to AI automation. Tasks with the highest potential for automation include documenting and recording information, information retrieval, and data or information analysis. Importantly, these specific tasks account for 66% of the average law firm’s hourly billable work. In contrast, tasks least likely to be automated include providing consultation and advice, and developing objectives and strategies.
The report concludes that if firms implement more AI technologies to automate routine, information heavy work like document drafting and review, they could secure greater opportunity to undertake more high value, strategic work with clients.
Billing Model Evolution and Investment Trends
The report reveals a growing popularity in flat fee billing, with law firms applying it to 34% more cases than they did in 2016. Since AI decreases the time required for many legal tasks, flat fees allow law firms to capture the full value of their services without being restricted by time based billing.
Despite this trend, hourly billing remains the most common practice. However, the report highlights that 71% of clients favor paying a flat fee for an entire case, and 51% prefer flat fees for individual activities. Furthermore, firms that employ flat fees benefit from quicker billing cycles and faster payment collection. These firms are five times more likely to issue bills, and nearly twice as likely to receive payments, immediately upon task completion for clients.
Law firms are also consistently increasing their investment in marketing and technology. Spending on software has risen by an average of 20% annually since 2013, surpassing the 9% yearly growth in revenue. This disproportionate increase in technology expenditure demonstrates that firms increasingly view technology as essential to their future business strategy. Firms with above average productivity, those billing more than the industry average of 33% of their workday, are making even greater investments in technology and marketing. These highly productive firms spend 12% more on software and 41% more on marketing, leading to a 21% rise in profitability.
Solo practitioners, while spending the least on software as a percentage of overall expenses (0.58%), are rapidly accelerating their technology investments, with spending growing at a rate of 56% annually, more than double the industry average. This rapid uptake by solo lawyers signifies their recognition of technology’s vital role in maintaining competitiveness in the evolving legal landscape.
Client Intake Challenges Exposed by “Secret Shopper” Study
This year’s report incorporates findings from a “secret shopper” study, which involved sending hypothetical legal help inquiries via email to 500 law firms. The study revealed significant issues in client intake processes.
Only 33% of firms responded to the email inquiries, a decline from 40% in a similar study conducted in 2019. Phone inquiry response rates also fell, with only 40% of firms answering calls, down from 56% in 2019. Overall, 48% of law firms were functionally unreachable by phone.
Of the firms that did respond to emails, most did so promptly, with 84% replying within eight hours. However, only 18% provided clear next steps or cost information, and just 2% referenced similar legal cases as requested by the shoppers. Those who reached firms by phone experienced comparable issues, with only 41% offering rate information, 12% providing cost estimates, and 36% explaining the legal process or outlining next steps.
These deficiencies in communication resulted in frustration for the secret shoppers, with 73% unlikely to recommend the firms they contacted via email. Shoppers who successfully reached firms by phone were more positive, with 39% willing to recommend the firms they spoke with directly.
Law firm websites also present an opportunity for improvement, as only 30% offer clear guidance on the hiring process, and a mere 14% display pricing information. The report suggests that by enhancing the client onboarding experience, for example through the addition of online client intake tools, firms experience 50% more incoming potential clients and earn 50% more revenue on average.
“Clients today expect timely responses and clear communication from their law firms, and those firms that prioritize this are seeing outsized gains in both new clients and revenue,” said Joshua Lenon, lawyer-in-residence at the company that published the report. “By incorporating an online intake process and using technology thoughtfully, law firms can address these challenges head on, creating a more seamless experience from the very first client interaction.”
