Profitability, Leverage, and Law Firm Technology
In the rapidly evolving landscape of legal practice, the intersection of profit, technology, and law firm leverage presents significant challenges and opportunities. This talk, featuring Gretta Rusanow, Managing Director and Head of Advisory Services at Citibank, delves into these dynamics with a unique perspective. Citi, as the largest law firm lender in the U.S., offers Gretta a comprehensive view of industry trends, backed by extensive data collection and analysis. Her insights into how these factors shape the legal industry's present and future provide valuable guidance for law firm leaders navigating a complex environment.
One key issue is the post-pandemic shift in revenue patterns across law firms. Gretta reveals that while the legal industry has seen notable volatility, it has demonstrated remarkable resilience, with revenue growth averaging 8.5% annually over the past five years (Note, while this episode was published Q1 2026, it was taped in Q3 2025). This is partly fueled by increased demand for legal services in both prosperous and challenging times. However, the growth is uneven, with top firms capturing more market share, particularly through strategic investments in partner leverage and capturing more high-value work. Gretta emphasizes that understanding these nuances is crucial for firms aiming to remain competitive as they navigate a rapidly shifting market landscape.
Another significant trend is the evolving leverage model within law firms, particularly the role of income partners. Traditionally, firms have been cautious in expanding equity partnership, focusing instead on growing leverage through non-equity partners. Gretta notes that this shift addresses the retention of top talent, allowing promising lawyers to develop their business acumen with a pathway to equity partnership. This approach not only helps to retain talent but also aligns with market forces, ensuring firms can adapt to competitive pressures, particularly in lateral recruiting, while maintaining profitability.
Technology, especially generative AI, is poised to transform legal practice, presenting both an opportunity and a challenge for law firms. Gretta points out that while some firms remain skeptical about the rapid impact of AI, others see it as a fundamental change that will reshape how legal services are delivered. This divergence in approach reflects a broader uncertainty about the pace and scope of technological adoption. Nonetheless, Gretta highlights that embracing AI and investing in supportive infrastructure is becoming an economic necessity, potentially driving further consolidation within the industry as firms seek the scale needed to manage these investments.
As the legal industry continues to consolidate, the implications extend beyond individual firms to the broader legal ecosystem. Gretta suggests that the growing concentration of market power among top firms, combined with the pressures of technological investment, will drive further industry consolidation. However, she also acknowledges the enduring demand for high-quality, smaller firms that can offer specialized services. This duality underscores the systemic pressures and opportunities shaping the future of legal practice, with technology and strategic growth at the forefront.
Gretta Rusanow works closely with the leadership of top law firms through her role at Citibank. Her expertise lies in understanding the financial and operational dynamics of law firms, offering a strategic perspective on how firms can navigate current challenges and capitalize on emerging opportunities.
New Law Order: Listen to the podcast co-hosted by Joel Cohen and Yale Law Professor John Morley on the current shake-up in the legal services world. Listen on Apple Podcasts or Spotify.
Federal Statutes
- Alternative Business Structures (ABS): These are legal structures that allow non-lawyers to have ownership interests in law firms, primarily seen in the UK and Australia, enabling different business models and investment opportunities.
Comparative International Law
- UK Legal Services Act 2007: This act introduced the concept of Alternative Business Structures, allowing external investment in law firms and fundamentally altering the regulation of legal service providers in the UK.
- Australian Legal Profession Legislation: Similar to the UK, Australia permits public ownership of law firms, providing a comparative model for considering non-lawyer firm ownership.
