Insights from the Annual Legal Industry Report

In today’s episode, I sit down with Gretta Rusanow, Head of Law Firm Group Advisory Services for Citi Global Wealth at Work, to break down the findings of the 2025 Citi Hildebrandt Client Advisory. This annual report is one of the most closely watched analyses in the legal industry, providing insights on market trends, firm growth strategies, and the evolving business model of law firms.

We explore some of the biggest challenges and opportunities law firms are facing, including the slow but inevitable adoption of generative AI, shifting leverage models, the expansion of non-equity partner tiers, and how firms are approaching lateral hiring in an increasingly competitive market. If you’re a law firm leader, an aspiring partner, or simply want to stay ahead of where the legal industry is headed, this episode is packed with valuable insights.

At a Glance:

• 00:00 Introduction: The Future of Big Law 

• 01:20 Overview of the Citi Hildebrandt Client Advisory and its influence on law firm strategy

• 04:03 How law firms are responding to generative AI and why spending remains low

• 08:20 The challenge of recouping AI investment costs while maintaining profitability

• 10:46 How AI may reshape associate leverage models and impact billing structures

• 16:07 The role of lateral partner hiring and why success rates remain modest

• 20:56 The rise of the non-equity partner tier and its impact on law firm economics

• 27:21 The risks of an overgrown income partner tier and how firms can manage it effectively

• 30:51 Growth markets and law firm consolidation trends in 2025

A Few Takeaways:

Generative AI Adoption Is Slow, But Inevitable: Despite all the buzz, law firms spent less than 1% of their revenue on generative AI tools in 2023. Firms are still in the assessment phase, but large-scale investment is coming. Those that successfully integrate AI will need to balance efficiency gains with sustainable billing models.

Leverage Models Will Shift, But Not Disappear: While AI may reduce the need for first- and second-year associates to perform certain tasks, firms are more likely to reshape their leverage models than abandon them. Many firms expect a shift toward mid-level and senior associates who can refine AI-generated work rather than a dramatic cut in junior hiring.

Lateral Hiring Is a Gamble: The success rate of lateral hires remains low, with many firms finding that promised books of business don’t always materialize. Firms that succeed in lateral hiring have rigorous integration strategies, ensuring new partners are fully embedded in firm culture and client relationships.

The Non-Equity Partner Tier Is Expanding for Retention: More firms are embracing the income partner model as a way to retain senior associates who might otherwise leave. While this strategy can strengthen talent pipelines, firms must carefully manage this tier to avoid the inefficiencies seen in past decades.

Market Consolidation Is Expected to Continue: The cost of running a law firm is rising, from AI investments to partner compensation. In an environment of modest demand growth, firms will increasingly turn to mergers and strategic consolidation to remain competitive, particularly in high-cost legal markets like New York, California, and London.

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How to reach Gretta Rusanow: gretta.rusanow@citi.com

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