New Wolters Kluwer ELM Solutions report finds financial services companies more successful at containing legal spend

Rhea-AI Summary

A report by Wolters Kluwer ELM Solutions highlights that financial services firms effectively managed their legal spending compared to other industries. From 2019-2020, these companies saw only an 8% increase in outside counsel spending, while other sectors faced a 21% median increase. The average law firm rate increase for banks was just 2.8%. Banks' strategic investments in legal pricing and management tools helped control costs. Additionally, spending on alternative legal service providers surged by 80% in 2020, followed by 56% in 2021.

Positive

• Financial services managed outside counsel spending effectively with only an 8% increase from 2019-2020.
• Banks experienced an average law firm rate increase of 2.8%, significantly lower than other industries.
• Increased spending on alternative legal service providers (ALSPs) by 80% in 2020 and another 56% in 2021.

Negative

• None.

Financial institutions experienced a significantly smaller increase in outside legal spend compared to other industries

HOUSTON--(BUSINESS WIRE)-- A new report from Wolters Kluwer ELM Solutions indicates that financial services companies were largely successful at containing the steep increases in outside counsel spend seen by corporate legal departments at other large organizations in the last year. The study – “LegalVIEW Insights Volume Five, Finance Edition: Trends in Vendor Mix and Total Outside Spend” – reviews many of the topics explored in the latest installment of ELM Solutions’ LegalVIEW Insights report series through the lens of the financial services industry, pinpointing several key differences in how financial companies are approaching the delivery of legal services.

Leveraging insights gleaned from ELM Solutions LegalVIEW database – which contains more than $155 billion in legal invoice data – the report shows that from 2019-2020, financial services organizations saw an 8% increase in year-over-year outside counsel spend – with an increase of virtually zero in 2021. This stands in contrast to large companies rooted in other industries that experienced a 21% increase in median outside spend from 2020 to 2021, and a 36% increase in mean outside spend. The report suggests that as frequent targets of litigation, banks and other financial institutions may have benefitted from the pandemic-induced pause in litigation that began in 2020 and extended into 2021. Banks may have also invested more heavily in rate benchmarking tools, dedicated legal pricing experts and other resources that corporate legal departments can deploy to contain rate increases.

“Banks experienced an average law firm rate increase of only 2.8%, which stands in stark contrast to the up to 10.8% bump seen by industries such as manufacturing and basic materials,” says Nathan Cemenska, Director of Legal Operations and Industry Insights at Wolters Kluwer ELM Solutions. “One explanation is that financial organizations have traditionally invested more than the average corporate legal department in the people, processes and technology necessary to support rate management initiatives, a list that includes the use of dedicated legal pricing experts and access to rate benchmarking.”

Additional highlights from the report include:

• Corporate legal department vendor counts have generally remained depressed post pandemic, with the median vendor count dropping 16% over the course of 2020 alone and experiencing a further 8.6% decrease in 2021. However, the decline of legal provider counts in financial institutions appears to have begun as early as 2017, suggesting that those organizations may possess more sophisticated legal ops functions or face greater pressure from the C-suite to control costs.

• The spend going to alternative legal service providers (ALSPs) from large corporate legal departments has held relatively flat over the last two years. But financial companies increased their spend on ALSPs as a percentage of total spend by approximately 80% from 2019 to 2020, and then increased it by another 56% in 2021.

ELM Solutions released the fifth volume in its LegalVIEW Insights report series – which includes blogs, webinars and other content discussing emerging trends from the LegalVIEW database – earlier this year. Other topics explored by the LegalVIEW Insights series include law firm staffing ratios, the impact of megamatters on overall spend, and the biggest shakeup in legal services since the Great Recession.

ELM Solutions, part of Wolters Kluwer GRC, is the market-leading global provider of enterprise legal spend and matter management, contract lifecycle management and legal analytics solutions. The company provides a comprehensive suite of tools that address the growing needs of corporate legal operations departments to increase operational efficiency and reduce costs. Corporate legal and insurance claims departments trust its innovative technology and end-to-end customer experience to drive world-class business outcomes. The other legal solutions business of Wolters Kluwer GRC is CT Corporation. The division’s banking and regulatory compliance businesses are Wolters Kluwer Compliance Solutions and Wolters Kluwer Finance, Risk & Regulatory Reporting.

Wolters Kluwer ELM Solutions was named a leader in both the IDC MarketScape: Worldwide Enterprise Legal Spend Management 2020 Vendor Assessment and IDC MarketScape: Worldwide Enterprise Matter Management 2020 Vendor Assessment. The company’s award-winning products include Passport®, one of the highest rated ELM solutions in the latest Hyperion MarketView™ Legal Market Intelligence Report and TyMetrix® 360°, the industry’s leading SaaS-based e-billing and matter management solution. CLM Matrix, meanwhile, was named a “strong performer” in The Forrester Wave™: Contract Lifecycle Management For All Contracts, Q1 2021 report. ELM Solutions’ LegalVIEW® portfolio of legal analytics solutions is based upon the industry’s largest and most comprehensive legal spend database, with more than $155 billion in invoices.

About Wolters Kluwer Governance, Risk & Compliance

Governance, Risk & Compliance is a division of Wolters Kluwer, which provides legal and banking professionals with solutions to help ensure compliance with ever-changing regulatory and legal obligations, manage risk, increase efficiency, and produce better business outcomes. GRC offers a portfolio of technology-enabled expert services and solutions focused on legal entity compliance, legal operations management, banking product compliance, and banking regulatory compliance.

Wolters Kluwer (WKL) is a global leader in professional information, software solutions, and services for the healthcare; tax and accounting; governance, risk and compliance; and legal and regulatory sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2021 annual revenues of €4.8 billion. The group serves customers in over 180 countries, maintains operations in over 40 countries, and employs approximately 19,800 people worldwide. The company is headquartered in Alphen aan den Rijn, the Netherlands.

View source version on businesswire.com: https://www.businesswire.com/news/home/20221005005526/en/

Media Contacts for Wolters Kluwer GRC

(Including Wolters Kluwer ELM Solutions, Wolters Kluwer CT Corporation, Wolters Kluwer Compliance Solutions and Wolters Kluwer Finance, Risk & Regulatory Reporting)



Paul Lyon

Senior Director, Global Corporate Communications: Global Marketing, Communications & Planning

Governance, Risk & Compliance Division

Wolters Kluwer

Office +44 20 3197 6586

Paul.Lyon@wolterskluwer.com



Frank Ready

Senior Specialist, Corporate Communications, Legal Services

Governance, Risk & Compliance Division

Wolters Kluwer

717-205-3647

Frank.Ready@wolterskluwer.com

Source: Wolters Kluwer

FAQ

What did the Wolters Kluwer report indicate about financial services legal spending in 2021?

The report indicated that financial services companies had a significantly smaller increase in outside counsel spending, at only 8%, compared to 21% for other sectors in 2021.

How much did banks increase their spending on alternative legal service providers according to the report?

Banks increased their spending on alternative legal service providers by approximately 80% from 2019 to 2020, and by another 56% in 2021.

What was the average law firm rate increase for banks in the latest report?

The average law firm rate increase for banks was 2.8%, which is lower than the increases seen in many other industries.

How does the report reflect the legal spending trends in financial services compared to other industries?

The report shows that financial services have contained legal spending increases, indicating more effective management compared to other industries that faced much higher percentage increases.