Wall Street Banks Push Big Law to Cut Fees, Citing AI Efficiency
Goldman Sachs, Morgan Stanley, and Citi are pressing Big Law to cut fees, arguing AI has made the billable-hour associate model unsustainable. Here is what it means for the banks and the market.
Wall Street is coming for the billable hour. Goldman Sachs, Morgan Stanley, and Citigroup are pushing Big Law to cut fees, arguing AI has made routine legal work faster and cheaper, according to a Financial Times report picked up across the industry this week.
The message from the banks: if AI is compressing associate hours, the invoice should reflect it.
What the banks are actually asking for
Goldman has asked firms to quantify their AI savings and is using the number as leverage in fee negotiations. Morgan Stanley and Citigroup have told firms they want new payment arrangements that save them money.
Citigroup’s global head of legal, Adam Meshel, told the FT that if hours on a matter come down because of AI, the expectation is for costs to come down significantly per transaction. Morgan Stanley general counsel Eric Grossman went further, calling BigLaw’s compensation model “extraordinarily unstable.”
Why the leverage model is under pressure
Firms have long billed hourly for armies of junior lawyers grinding through research, document review, and discovery. AI now does that grunt work in a fraction of the time, at a fraction of the cost.
The math is brutal at the top of the market. Bloomberg Law reported in 2023 that one first-year Sullivan & Cromwell associate on the FTX bankruptcy case was billed at $1,310 an hour, while lawyers who graduated in 2021 were often billed at $960 an hour. Clients are looking at those rates and asking why AI-assisted work should still command them.
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The counterargument from the legal side
Not everyone is convinced AI is actually cutting time. Some early indications suggest AI isn’t reducing lawyer hours but increasing them, as AI surfaces research rabbit holes that humans then chase down to deliver better work product.
There’s also the risk angle: banks are betting the company on complex M&A, bankruptcy, and regulatory work. Handing routine review to models still prone to hallucination is a live liability question that partners are quick to raise.
Options market and stocks to watch
The story is less about a single earnings catalyst and more about a slow margin story for the banks driving it. Watch for:
- GS - Goldman Sachs is out in front on the AI-savings ask; watch for any commentary on legal and professional expense lines.
- MS - Morgan Stanley’s general counsel publicly called the BigLaw comp model unstable, worth tracking for further cost signaling.
- C - Citi is pushing for new fee arrangements; another data point on the broader cost discipline theme at the megabanks.
- JPM - Watch for whether JPMorgan joins the public push, given its scale of outside counsel spend.
- MSFT - Microsoft is a proxy for enterprise AI adoption via Copilot; legal is one of the loudest new verticals.
For more on how AI is reshaping enterprise cost structures, see other coverage on Unusual Whales.
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