In the session: “A Pricing Revolution? Rethinking Value in the Age of AI”, the principal of legal and consulting firm The Lawyer’s Friend, Jennie Pakula, said AI presents an “amazing opportunity” for small law practices to start breaking into the “missing majority” market of people who need legal help but can’t afford traditional end-to-end services.

“And I think a lot of us are experiencing that AI is increasing the speed with which we can provide legal services. The question there is, how much faster can it get? And I think an understandable and right concern is accuracy. How much better can it get in terms of accuracy? So, there’s a lot that it can do at a reasonable level,” she said.

“Accuracy continues to remain a problem when it comes to legal research and finding cases that actually exist, although there are a lot of tools that are being provided now that are doing a better job with that. But it’s not 100 per cent reliable, and accuracy remains a concern. There’s no doubt that AI is a big challenge to the legal profession because it is starting to bring to a head the long-recognised problems with time-based billing and pricing of legal services.”

However, legal services can be “quite a vague and difficult thing to define”, added Pakula, who said that understanding client needs can be tricky.

“We’ve kind of defaulted to a proxy that’s easy, but not necessarily accurate, and that is how much time it takes us to provide. And an alley rate that’s really calibrated on the level of our expertise and experience. But it’s only ever been a real approximation for what value is in legal services, particularly from the client’s point of view.

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“This is the big challenge, though, that AI presents to consumers as a substitute to legal services, and in a lot of cases, consumers don’t actually know whether this is true or not. One of the things about AI is that it’s called confidently wrong. It sounds very persuasive, but what it’s doing is just packaging up what seems to be the most likely response based on the data set, which is not necessarily going to be the correct response or the type of response that the client needs,” she said.

AI systems also have no “skin in the game” when it comes to providing legal advice.

“If [lawyers] get something wrong. If we give the wrong advice, we can cop a complaint, we can cop a negligence claim. We can get bad reviews on Google, which makes us feel ashamed of ourselves. So, we have a great deal at stake when it comes to providing accurate and helpful legal services. But we’ve got this cheap alternative that we really need to deal with,” Pakula said.

“So, all of this adds up to significant challenges in our way of working, and it forces us to really rethink our value as lawyers. What is it that is actually valuable about what we do?”

For the clientele of smaller law firms, in particular, they can often have “no idea of value until they’ve experienced the service” and then “have very different levels of price awareness”, not realising how much they should be paying, or how complex their matter might be compared to other cases, according to Pakula.

“You need to understand in a really deep way what your clients value.

“Lawyers and clients view value in different ways. Our clients want us to manage risk. They want us to manage the uncertainty, the hassle that comes with a legal proceeding, helping them to survive and supporting them, to make the strategic decisions that will have an impact on their lives going forward,” she added.

“All of that stuff requires a human, and all of that relational stuff is actually [what] makes the difference between a client feeling satisfied or ripped off.”

As such, there are many aspects of law – and of legal services within smaller firms – that “can’t be substituted”.

“Law is a deeply human thing. It’s inherent to any complex society, and it’s very nuanced and flexible. You’ve got general rules that have to apply to very, very particular situations. So, it’s not a sausage machine. You don’t enter the problem in at the beginning, work it through the machine and get the 100 per cent answer at the end,” Pakula said.

“There are relationships, experience, understanding of context, common sense. AI doesn’t have common sense giving the support, the advocacy that the client needs. They need another human to do for them, being the expert in their corner, helping them make strategic decisions. Those are all things that you can’t substitute with AI.”

AI can, however, help sole practitioners and small firms with things like formulating questions for clients, marketing ideas and simplifying language – all of which Pakula said can help with “positioning”, as well as entering a new market.

“For some people, AI being a real value enhancer means that you can go for clients that want more personal attention, so for clients that need a much closer relationship and much more hand holding, AI might support you to provide those kinds of services at an effective cost, and thus move up the value chain,” she said.

“But AI can also help us to enter a new market. You might have a range of standard documents that can be adapted to the client’s needs, or you might have an AI agent that you can help them with drafting their affidavits and things of that nature, and you provide the expert supervision and coaching of the whole process.”

AI can also assist in looking at different pricing models, data analysis, and analysing and identifying financial information – and Pakula encouraged smaller firms to experiment with AI “with care” moving forward.

“Start with something small. So, start with a pilot project, start with something that you think is relatively simple and relatively predictable, and try to think about how you might automate elements of that, whether it’s at the back end within your practice, or whether it’s some kind of AI that’s actually going to be working with the client,” she said.

“So, AI has a lot of possibilities. I think it’s a great opportunity for us. We don’t need to be freaked out by it, and it’s a really great opportunity for us to really revisit and lean into the incredible value that we, as lawyers, can provide for our clients.”

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