Feb 10, 2025 | Law Firm Financial Index

Law firms closed out the year strong as they pushed innovation and key investment in technology and talent, according to the Q4 2024 Thomson Reuters Law Firm Financial Index (LFFI), powered by Financial Insights. Below are a few key takeaways from the report.

Double-Digit Profit Growth

Law firms ended 2024 on a high note, with the average firm experiencing double-digit profit growth for the year. In the fourth quarter alone, profits grew by an impressive 11.5%. This strong financial performance underscores the industry’s ability to adapt and thrive.

Transactional Practices Lead the Way

Transactional practices were a significant driver of growth in Q4, with corporates seeing a 4.0% increase and real estate growing by 3.0%. Counter-cyclical practices slowed after two years of record growth, counterbalancing the increase in transactional work. The report suggests that demand is expected to be more static in the first half of 2025 compared to 2024.

Investment in Technology and Knowledge Management

Law firms have been investing heavily in technology and knowledge management, leading to a 6.9% increase in overhead expenses in Q4. These investments are crucial for maintaining competitive advantage and improving client service. Direct expenses also rose by 6.2% as firms paid out sizeable bonuses to their associates and staff.

Embracing AI and Upskilling

Many law firms are strategically using AI and that is expected to drive sustainable productivity growth and position firms for continued success in 2025.

“Law firms continue to successfully navigate the dynamic landscape and demonstrate their commitment to serve their clients at the highest level by investing significantly in technology, including generative AI, and the upskilling of their people,” said Raghu Ramanathan, president of Legal Professionals, Thomson Reuters. “Law firms enter 2025 from a position of strength and appear ready to drive profitability. As the AI market matures, law firms can enhance job satisfaction, well-being, and work-life balance by using AI for routine tasks, freeing up time to focus on their clients’ complex needs and driving sustainable productivity growth.”

Download the full report for additional insights on the factors shaping the future of law firms.