Citi Private Bank Law Firm Group and Hildebrandt Consulting Issue 2021 Citi Hildebrandt Client Advisory

Citi Private Bank Law Firm Group and Hildebrandt Consulting today released their 2021 Citi Hildebrandt Client Advisory, which establishes the broad landscape for the law firm industry, how firms are responding to industry challenges, including the Covid-19 pandemic and resulting economic recession, and their best opportunities for growth in the year ahead.

The Client Advisory finds that law firms saw better than expected performance in 2020 due in large part to a strong start of the year, the successful move to a fully remote work environment and the robust performance of certain practice areas. Revenue growth is expected to be in the mid-single digit range, and with the benefit of expense reductions, PPEP growth for the industry could be in the mid to high-single digit range. With modest momentum going into 2021, we are optimistic about the year ahead.

Total expenses are down 2.1% for the first nine months, in no small part to the agility we have encountered across the law firm industry. With attrition grinding to a halt and headcount up over last year, the expense relief has been driven by reduction in operating expenses, which declined 5.3%, while compensation expense was still up 1.9%. Some firms report they are prepaying expenses, especially where they have met their revenue targets, and in an effort to manage expense growth in 2021.

“Looking forward to 2021, we remain optimistic, and expect that the market will favor firms with a strong brand who stay close to their clients and have the right practice mix,” said Gretta Rusanow, Head of Advisory Services for Law Firm Group at Citi Private Bank. “While these factors will drive topline growth, we also expect that firms who capitalize on the success of the remote working experiment to accelerate further adoption of operational efficiencies, will be rewarded.”

This year’s Client Advisory also finds that the Covid-19 pandemic accelerated a number of trends affecting growth and operational efficiency, how lawyers work, how equity partners are compensated, and how firms fund their businesses. Some of the key trends to watch in 2021 and beyond include: more outsourcing by law departments, a greater focus on business development, more diversity in practice, industry and geography, a remaining combination of remote and office work, and re-examining lawyer headcount and leverage.