More than half of Australian law firms have shifted to alternative fee arrangements due to economic pressures, according to a recent report by global software company Litera.
More than 50% of law firms have changed their pricing models in response to the financial climate and 88% of firms are currently adopting an alternative fee arrangement (AFA), according to the research.
The research is based on responses from 300 law firms in Australia, the US and the UK, with Australian firms making up 31% of the companies surveyed.
The research found half of the law firms surveyed are looking at new ways to cut costs, and 46% found they had no choice but to increase their fees.
These measures underscore the financial strain many firms are experiencing and their attempts to adapt to the evolving economic landscape.
Fay Calderone, a partner at Hall & Wilcox law firm, says there is an alignment between global economic pressures and the need for cost certainty among clients.
Alternative fee arrangements provide a cash flow projection rather than a surprise bill at the end of the month, says Calderone.
“Alternative pricing strategies provide cost certainty, rather than just, pay as you go,” she adds.
Hall & Wilcox offers clients fixed price quotes, capped fees and retainer arrangements, says Calderone, and demand is increasing for such flexible options from smaller businesses and subsidiaries.
“SMEs, which lack in-house counsel and specialised teams, are under significant pressure from regulatory burdens and inflationary pressures,” she says.
“They need cost certainty and advice without the financial burden of traditional billing methods.”
In addition to pricing model changes, the Litera research identified a strong trend towards the adoption of AI-based solutions in the legal sector.
In the next 12 months, 80% of Australian respondents plan to implement AI technologies to boost efficiency, profitability, and overall value creation within their firms.
Globally, the report indicates a growing interest in all-in-one tech platforms, with 55% of respondents planning investments in such technologies over the next year.
Calderone believes there may be a role for AI in navigating the simple tasks of legal practice, however, complex legal issues need to be handled by professionals.
“AI can handle basic research and template creation, but nuanced legal analysis and strategic advice remain critical,” she says.
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