Wall Street Banks Demand Lower Fees as AI Speeds Up Legal Work

Wall Street banks are pushing back against their law firms' traditional billing model by demanding lower fees due to the increasing use of artificial intelligence (AI) in legal work.

The three largest US banks, Goldman Sachs, Morgan Stanley, and Citigroup, have asked elite law firms to reduce their hourly billings, citing AI's ability to speed up routine tasks like research, document review, and contract analysis.

Citigroup's global head of legal, Adam Meshel, told the Financial Times that if AI has reduced the number of hours spent on a matter, clients can expect costs to decrease significantly per transaction. Citigroup is even asking law firms bidding for its business to disclose how much they are saving by using AI.

Morgan Stanley's general counsel, Eric Grossman, warned that AI could fundamentally alter the revenue foundation for top law firms. He noted that partners have long been compensated based on associates billing for long hours and that their compensation model is now unstable.