Wall Street banks push elite law firms to lower hourly rates as AI cuts legal labor

Goldman Sachs, Morgan Stanley and Citigroup have collectively asked their outside counsel to lower fees, claiming that AI dramatically reduces the time needed for routine legal tasks. Citigroup’s global head of legal, Adam Meshel, said the banks expect transaction costs to fall as AI cuts billable hours. Morgan Stanley’s general counsel, Eric Grossman, warned that the traditional partner compensation model, built on junior associates’ long-hour billing, is now "extraordinarily unstable" and may shift to fixed-fee structures by the end of the year.

Goldman Sachs is similarly seeking data on AI-driven efficiency and plans to share the savings. The banks hope that by quantifying AI savings, they can negotiate new pricing models, potentially reshaping the revenue foundation of large law firms. A recent survey indicated that nearly half of large firms have already felt AI’s impact on pricing, though the overall disruption remains limited. Experts suggest that clients will resist paying historic rates for work that now takes a fraction of the time.