Several surveys at the tail end of 2015 and the beginning of 2016 provide a glimpse at the law firm outlook for 2016. Below is a summary of three recent surveys, including two by banks, with a flavor for law firm economics.
As always we have linked to underlying sources for those interested in delving deeper.
1. Law Firm Leaders Vote Modest Optimism
A majority of law firm leaders expressed modest optimism about 2016, according to The American Lawyer’s 13th Annual Law Firm Leaders Survey (PDF).
“Thirteen percent of respondents said that they were “very” optimistic about 2016 with respect to their firms, the highest percentage in years, and 68 percent said that they were “somewhat” optimistic,” the American Lawyer reported in November 2015.
The reporter writes the survey of 104 respondents expect “modest” headcount increases but will “thin the heard of partners” even as concerns over losing lateral hires rises. Most firms plan small increases billable hour rates as competition continues to place pressures on pricing.
According to the report, the top practice areas where law firm leaders see growth opportunity include:
- Corporate – 36%
- IP – 21%
- Litigation – 18%
- Real estate – 16%
- Bankruptcy – 4%
2. Citi Says Economic Confidence Slid
Despite the mildly optimistic outlook for firms, “managing partners’ confidence in the economy slumped in the last quarter of 2015,” according to an article which cited a survey conducted by the Citi Private Bank.
Managing partner confidence in the economy “slid six points to 97 in the final quarter” the article said offering an explanation from Citi Private Bank Law Firm Group Chairman Dan DiPietro:
“While managing partners continue to feel reasonably positive about their own firms and the legal industry, their worries about the overall economy are greater.”
3. Wells Fargo: Rates Up, but Realization Down
The third survey in this summary was conducted by the Wells Fargo Private Bank, which noted year-end law firm revenue growth was driven by rate increases rather than demand, according to Law360. “BigLaw revenues were up more than 4 percent and mid-sized law firm revenues were up nearly 2.5 percent,” according to Law360 reporter Aebra Coe.
The American Lawyer, which also covered the Wells Fargo survey, pointed out client response to higher rates is being rendered in the form of lower realization:
“Realization rates today are lower than they were five years ago. That’s how clients are answering it [increasing rates],” according to the article, quoting Jeff Grossman, national managing director for Wells Fargo Wealth Management.
The 2015 mid-year analysis for $18 billion in legal invoices by the CounselLink team found median partner rates at law firms with more than 750 lawyers rose to $711 per hour – up from $675 per hour for the 12 months ending December 31, 2014.
Likewise, median partner billing rates among law firms with between 501-750 attorneys also rose, albeit more modestly, from $490 to $495 during the same time period.
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