Wall Street banks press law firms to cut fees over AI efficiencies

Goldman Sachs, Morgan Stanley and Citigroup are pressing large law firms to cut bills or revise how they price work because generative AI has made routine legal tasks faster, the Financial Times reported.

Citigroup has begun requiring firms bidding for its work to explain how much they save by using AI, the bank’s global head of legal, Adam Meshel, told the newspaper. He said the bank expected costs per transaction to fall significantly and anticipated a different working model within a year.

Morgan Stanley general counsel Eric Grossman said the bank planned to put most of its external legal work out to competitive tender by the end of 2026 and use alternatives to hourly billing, including fixed fees. Goldman Sachs sought information from firms about AI-driven efficiency gains and expected to share in those benefits, the report said, citing two unnamed people. Goldman Sachs declined to comment for the article.

The demands target the billable hour, under which firms charge clients for recorded time rather than a defined output. According to the report, AI can accelerate research, document review, contract assessment and litigation discovery—work often performed by junior lawyers—reducing the hours available to bill. Grossman described law firms’ compensation model as extraordinarily unstable.

The Financial Times cited data from legal procurement platform Persuit showing that the average associate billing rate at the largest US firms reached $798 in 2026, 33 per cent above 2023, while partner rates rose 29 per cent. The newspaper also cited a 2026 Citi Law Firm Group survey in which almost half of large firms reported that AI had affected pricing. Neither the Persuit dataset nor the survey was publicly available for independent inspection, so both findings rest on the newspaper’s account.

Citi’s Global Wealth at Work unit and Hildebrandt Consulting wrote in their 2024 Client Advisory that generative AI was likely to change how legal work is produced and priced, making project management increasingly important to profitability. PwC’s 2024 survey of UK law firms found that just under half of the surveyed Top 100 firms expected generative AI to save at least 10 per cent of chargeable hours. DataPhoenix has separately covered Allianz Partners’ planned AI-linked job cuts as another instance of AI changing the economics of service work.

The Financial Times did not identify the law firms approached by the three banks, include responses from those firms or establish when the requests began.