Not so long ago, business leaders and news outlets were startled at the idea that a small group of partners at elite Wall Street law firms were charging $1,000 or more an hour. Now, hourly rates for second-year associates are reaching that mark, and firms that can get away with it are asking clients to pay more than $3,000 an hour for top legal talent.
Clients are, by no means, thrilled. Time and again, they say they want firms to offer more alternative fee arrangements, work within budgets, and make billing more transparent.
Are law firms listening? A new Best Law Firms® survey finds that 72% of U.S. firms now offer alternative fee arrangements (AFAs)—adoption levels, firm-size breakdowns, and a full explanation of each fee type are covered in our companion piece, Alternative Fee Arrangements in 2026: Why the Billable Hour Still Dominates.
What's more revealing this year isn't whether firms offer alternatives—it's why they aren't offering more, and what artificial intelligence, despite two years of hype, has actually done to the way firms bill for their time. The short answer: not much, yet.
- Hourly rates keep climbing, with some firms charging more than $3,000 an hour while 72% now offer alternative fee arrangements.
- Clients want clearer pricing and budgets, yet only 1.9% of firms said pricing flexibility helps win or retain business.
- AI adoption is growing, but 58% of firms said it has not changed billing practices or reduced billable hours.
- Strong revenue growth and limited billing transparency suggest the billable hour still dominates. Read the full article to see where firms may face pressure next.
Appearances Can Be Deceiving
The data shows that most firms apply AFAs unevenly, presenting clients with a relatively narrow list of alternative fee options rather than taking a flexible, matter-by-matter approach.
At the same time, firms have little financial incentive to change. Rate increases drove revenue growth for firms of every size this past year, even as many of the largest players spent heavily on AI-related technology upgrades. Firms surveyed said pricing flexibility is almost never the deciding factor in winning or keeping a client.
Meanwhile, clients hoping AI would be a cost-saving panacea may be disappointed by the early returns: most firms report that AI has had little effect on billing, and even where it has, firms report no corresponding drop in billable hours.
Survey Scope
Best Law Firms surveys thousands of U.S. firms annually as part of its rankings process. This year, 4,852 firms responded, ranging from solo practices to global mega-firms and collectively employing more than 164,000 lawyers—roughly 12% of active U.S. attorneys. Eighty-four percent of respondents answered questions specifically about billing and AFAs.
As covered in our AFA explainer, AFA adoption climbs sharply with firm size, from 68% among firms with 2–19 lawyers to 96% among firms with 150 or more.
Firms Offer a Narrow Menu
When firms do offer alternative fees, most stick to a limited, unevenly distributed set of familiar options. Flat fees remain the clear leader, offered by 73% of firms with AFAs—up 5 percentage points from the prior year. Retainers (67%), contingency fees (62%), blended hourly rates (55%), and fixed fees (50%) round out the most common structures. No other option—fee caps, volume discounts, collared fees—tops 50%.
One structure worth watching: use of hybrid fees climbed 20% year over year, though still only about a third of firms with AFAs use them.
Clients Complain, But Rarely Act on Price
Earlier this year, BTI Consulting Group's annual client-attitudes report found overall client satisfaction at a 25-year low, driven in part by firms "still holding onto legacy models" that don't meet client demands. In-house counsel, BTI noted, are caught in a squeeze—facing tighter timelines, greater risk, and constant pressure from their own leadership to control costs.
Yet clients rarely act on that frustration. Just 1.9% of firms in the Best Law Firms survey said pricing flexibility was a significant factor in winning or retaining clients this past year, compared with 56% who cited superior client service and 33% who cited industry specialization. Only 1.1% of firms credited "operational efficiency through technology"—including AI—with meaningfully contributing to client retention or acquisition.
Revenue Is Still Climbing
Wells Fargo's Legal Specialty Group reported in August that revenue for the 130 firms it tracks rose 11.3% in the first half of the year, driven mainly by a 9% jump in rates. The most recent Am Law 200 data showed double-digit revenue gains across Big Law.
Performance outside the Am Law 200—the vast majority of U.S. firms—is harder to track, but Best Law Firms collected revenue data from more than 1,700 firms with fewer than 150 lawyers. Revenue at these smaller and midsize firms grew a healthy 6.5% last year, up from 5.1% the year before. Revenue per lawyer averaged $578,000 at firms with fewer than 150 lawyers (excluding solos) and $571,000 among solo practitioners.
Strong revenue growth built on rate increases gives most firms little reason to expand alternative fee usage—particularly as firms above the 150-lawyer mark absorb rising costs from AI investment. Wells Fargo reported firm expenses (excluding salaries) rose 8.6% in the first half of the year.
What AI Has Actually Done to Billing
Despite two years of speculation that AI would upend legal billing, the data shows adoption moving slowly and its effect on billing remaining muted. Across firm sizes, more than 70% of firms are exploring or piloting generative AI tools. Large firms are furthest along—about a quarter of firms with 150-plus lawyers report full implementation across multiple practice areas.
But faster AI adoption hasn't translated into the billing shift clients are hoping for. Among large firms, just 20% said AI had reduced billable hours for certain tasks; 36% said it increased efficiency without changing billable hours at all.
Across all firms surveyed, the picture is even flatter: 58% said AI has had no effect on billing practices, 23% said it increased efficiency without changing billable hours, and only 19% said billable hours had actually declined as a result of AI use.
Transparency Is Still a Work in Progress
Half of clients in a recent BigHand survey said they want greater billing transparency from their firms, warning that outdated systems and slow adoption of pricing analytics put both client relationships and revenue at risk.
Billing disputes remain fairly rare—accounting for about 10% of client disagreements firms reported last year—and nearly all firms said they provide detailed, line-item invoices. But other transparency practices lag: about three-quarters of firms are willing to share upfront cost estimates, but only 55% provide regular budget updates during an engagement, and just 54% use fixed fees or predictable pricing to help clients anticipate costs. Only 14% offer clients an online billing portal to track spending in real time.
The Bottom Line
AI hasn't yet forced law firms to rethink how they bill. Revenue is climbing on the back of rate increases, most clients aren't punishing firms for high hourly rates, and billing transparency tools remain the exception rather than the rule. If AI is going to break the billable hour's grip, this year's data suggests that shift is still ahead of us, not behind us.
For a full breakdown of alternative fee arrangement types and adoption rates by firm size, see Alternative Fee Arrangements in 2026: Why the Billable Hour Still Dominates.
---
David L. Brown is a legal affairs writer and consultant, who has served as head of editorial at ALM Media, editor-in-chief of The National Law Journal and Legal Times and executive editor of The American Lawyer. He consults on thought leadership strategy and creates in-depth content for legal industry clients and works closely with Best Law Firms as senior content consultant.