This story will be updated from ClioCon 2024 in Austin, Texas with the latest news and interviews from the conference
Legal Trends Report
Clio has released the ninth edition of the Legal Trends Report, which this year provides in-depth analyses of AI adoption in the legal industry; the growing use of flat fees; and law firm spending priorities.
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AI adoption is transforming legal practice
The latest report suggests that AI usage in law firms has skyrocketed, with 79% of legal professionals saying that they are now incorporating AI tools into their daily work—a significant jump from just 19% in 2023. Not only are law firms
embracing AI, but clients are increasingly supportive, with 70% either preferring or being neutral toward firms that utilize AI. This acceptance signals a shift in client expectations as AI becomes more mainstream in legal processes.
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The steep adoption of AI has the potential to disrupt how lawyers operate the business-side of their firms. Clio’s analysis shows that up to 74% of hourly billable tasks—such as information gathering and data analysis—could be automated with AI. The report says that law firms should consider moving away from hourly billing in favour of more flexible options like flat fees to preserve profitability while benefiting from the increased efficiencies AI brings to legal workflows. As AI reduces the time spent on billable work, law firms may see a decline in revenue if they continue to rely on hourly billing.
Flat fee billing is on the rise
Flat fee billing has become an increasingly popular option, with law firms charging 34% more of their cases on a flat-fee basis compared to 2016, according to the report. The report finds that the flat fee model is proving to be a more sustainable option as AI adoption accelerates. As AI reduces the time required for many administrative tasks, billing by the hour becomes less practical. Flat fees, on the other hand, enable law firms to capture the value of their services without being limited by time-based billing constraints.
While hourly billing remains predominant in law firms, clients are driving the shift towards flat fees with 71% now preferring to pay a flat fee for their entire case, and 51% favoring flat fees for individual activities. In addition, law firms using flat fees benefit from quicker billing cycles and faster payment collection, as they are
five times more likely to send bills—and nearly twice as likely to receive payments—as soon as they complete their work for clients.
In his opening keynote at ClioCon 2024, Clio’s CEO and founder Jack Newton said: “This is something that clients very clearly prefer – 71% of client tell us it’s their preferred modality and when you think about AI it enables you to automate tasks and streamline your operations; to think about where you’re spending your time; and connect at a human level with your clients, their problems and how you can better solve them.”
Law firms increase investment in marketing and technology
Law firms have been steadily increasing their marketing and technology investments, with software spending growing by an average of 20% annually since 2013. This increase has outpaced revenue growth, which has increased steadily at 9% each year.
The data shows that these investments could be paying off. Firms with above-average productivity—those billing more than the industry average of 33% of their workday, or roughly three hours of billable time per day—are making even larger investments in technology and marketing. These firms spend 12% more on software and 41% more on marketing, leading to a 21% increase in profitability.
The data demonstrates a clear link between tech adoption, higher marketing efforts, and overall financial success. Solo lawyers, while spending the least on software as a percentage of their overall expenses (0.58%), are rapidly
accelerating their technology investments. In fact, solo practitioners’ technology spending is growing at a remarkable rate of 56% annually, more than twice the industry average. By comparison, small firms with 2 to 4 lawyers spend 1.77% of their expenses on software, while firms with 5 to 19 employees spend 1.37%, and firms with 20 or more employees spend 1.6%. This rapid adoption by solo practitioners reflects their recognition of technology’s critical role in remaining competitive in an increasingly digital legal landscape.
Secret shopper study
Despite advancements in technology, potential clients still face major hurdles when trying to connect with law firms. A 2024 secret shopper study conducted by Clio, building on the findings of the 2019 Legal Trends Report, highlights these persistent challenges. Of the 500 law firms emailed, only 33% responded, a drop from 40% in 2019. Phone inquiries also showed a decline, with only 40% of firms answering calls, compared to 56% in 2019. In total, 48% of law firms were essentially unreachable by phone.
Newton said: “This is pretty damning data and irresponsible as a profession. We are driving disengagement in potential consumers of legal services. We are literally not answering calls.”
While firms that responded to emails did so promptly—84% within eight hours—just 18% provided clear next steps or cost information, and only 2% referenced similar legal cases as requested by shoppers. Phone interactions fared no better, as only 41% of firms offered rate information, 12% provided cost estimates, and 36% explained the legal process or outlined next steps. These gaps in communication left secret shoppers frustrated, with 73% unlikely to recommend the firms they contacted. However, personal interactions on the phone were more positively received, as 39% of shoppers said they would recommend firms they spoke with directly.
Law firm websites also offer a chance for improvement, as just 30% provide clear guidance on the hiring process, and 14% display pricing information.
Firms that focus on improving their client onboarding experience, like adding online client intake tools, are found to have 50% more incoming potential clients and earn 50% more revenue on average.“Clients today expect timely responses and clear communication from their law firms, and those firms that prioritize this are seeing outsized gains in both new clients and revenue,” said Joshua Lenon, lawyer-in-residence at Clio. “By incorporating an online intake process and using technology thoughtfully, law firms can address these challenges head on, creating a more seamless experience from the very first client interaction.”
Additionally, using technology like chatbots to enhance client engagement offers promising potential. While 51% of clients find chatbots useful for exploring legal options, 67% still prefer having the ability to speak with a human when needed. This balance of technological efficiency with personal connection presents a valuable opportunity for law firms to refine their client intake processes and better meet their expectations.
To download the report visit clio.com/ltr