Citi Private Bank Law Firm Group and Hildebrandt Consulting today released their 2020 Citi Hildebrandt Client Advisory, which establishes the broad landscape for the law firm industry, how firms are responding to industry challenges and their best opportunities for growth in the year ahead.
The Client Advisory finds that 2019 was a good year for the law firm industry, with an expected revenue growth of 5.5 to 6.5 percent by year-end, and projects that the industry will grow in the range of five to six percent in 2020.
In the first nine months of 2019, billing rates had the highest growth rate since before the recession and were the primary driver of revenue growth for firms, growing by an average of 4.7 percent. By contrast, demand grew far less than in 2018 at a rate of 0.9 percent. The most significant impact on revenue growth was the continued trend of a lengthening of the collection cycle, which was largely driven by clients delaying payment of their bills.
An additional key finding from this year’s Client Advisory is the increasing anticipation of a recession among law firm leaders. Although Citi Private Bank does not anticipate a recession in 2020, a small majority of the industry’s leaders predict a recession will occur by 2020 and a larger majority predict a recession by 2021.
“Although 2020 is expected to be a positive year for the law firm industry, it is an opportunity for firms to ensure they are well-positioned should there be a downturn in the market,” said Gretta Rusanow, Head of Advisory Services for the Law Firm Group at Citi Private Bank. “Despite the ongoing macroeconomic uncertainty and volatility, and a challenging talent market, we expect the most successful firms will continue to expand and innovate in 2020. For those firms, expansion will be closely aligned to the firm’s business strategy – more so than pursuing opportunistic growth.”
Another defining trend in 2019 was an active lateral recruitment market. This trend remains the primary driver of consolidation in the U.S. legal industry and is expected to continue in 2020, in addition to dispersion across and within market segments and market volatility. Additionally, the average industry profit per equity partner growth is expected to be in the mid-single digit range.
“As we expect to see further consolidation of the law firm industry in 2020, we are advising firms to look for growth opportunities,“ explained Brad Hildebrandt, Chairman of Hildebrandt Consulting. “For many firms, this means taking steps to do more with existing clients; broaden their client base; focus on growth practices, industries and regions; and introduce further efficiencies in the way they deliver legal services.”
The 2019 Citi Hildebrandt Client Advisory draws on data collected from a sampling of primarily US-headquartered law firms by Citi Private Bank, as well as conversations with law firm leaders. For firms headquartered outside the US and third-party providers of legal services, our information is mostly anecdotal. Sources include the “Citi Annual Survey Database” of 228 US and UK-headquartered firms, including 43 Am Law 1-50 firms, 40 Am Law 51-100 firms, 57 Am Law Second Hundred firms, and 88 additional firms; 166 firms from the “Citi Flash Survey”, including 37 Am Law 1-50 firms, 30 Am Law 51-100 firms, 49 Am Law Second Hundred firms and 50 additional firms; the “Citi Law Firm Leaders Survey” of 53 large firms headquartered in the US, UK, Australia, China and India; and the “Law Firm Leaders Confidence Index” which reports the forward-looking opinions of law firm leaders from 157 firms.
The full report can be accessed via the Citi Private Bank website here.
About Citi Private Bank:
Citi Private Bank is one of the world’s fastest growing private banks; dedicated to serving worldly and wealthy individuals and families, providing customized private banking across borders. With approximately $460 billion in global assets under management, the franchise includes 48 offices, serving clients across 116 countries. Citi Private Bank helps clients grow and preserve wealth, finance assets, make cash work harder, preserve legacies, and serve family and family business needs through objective advice and a truly open architecture investment platform. The firm offers clients products and services covering capital markets, managed investments, portfolio management, trust and estate planning, investment finance, banking and aircraft finance, as well as art and sports advisory and finance.
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
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About Hildebrandt Consulting:
Hildebrandt Consulting is continuing its long and distinguished history as the preeminent global consulting firm in the legal profession. With clients in over 15 countries, Hildebrandt has built up unmatched expertise in every aspect of professional firm management. Our reputation for helping firms arrive at strategic solutions comes from our knowledge of the interdependent elements that contribute to overall business performance.