Reality-Testing Firm Leaders' Financial Projections

How well can law firm leaders predict the results of their own firms? In our second-half 2016 issue of the Citi Private Bank Law Firm Leaders Confidence Index (LFLCI), published in July 2016, law firm leaders expressed lukewarm confidence about the second half of 2016, as compared to the second half of 2015. They were less confident about the macro economy, both domestically and globally, than they were about the fortunes of their own firms. In fact, law firm leaders were particularly confident about their firms’ ability to grow demand, despite the modest average annual growth in demand we’ve seen during the post-recession years. Now with the luxury of hindsight, via our Citi Quarterly Flash survey, we can explore how accurate law firm leaders were in those growth projections.

Citi Private Bank’s Law Firm Leaders Confidence Index is a semi-annual, forward-looking measure of confidence levels within the legal industry. The second-half 2016 confidence index values are based on a sample of 155 firms (72 Am Law 100 firms, 39 Second Hundred firms and 44 niche/boutique firms). One response is accepted from each firm and is submitted by either the firm’s managing partner, executive director, chief operating officer, chief financial officer or equivalent member of the management team. The result is a composite index that shows the relative level of overall confidence based on a series of component indices. For each index, 0 indicates very low confidence, 100 indicates neutrality, and 200 indicates extreme confidence. We then compared the second-half 2016 LFLCI projections with the actual second-half 2016 results, based on 141 common firms (65 Am Law 100 firms, 41 Second Hundred firms and 35 niche/boutique firms) from the Citi Quarterly Flash surveys conducted for the first half of 2016 and full-year 2016. Citi Private Bank provides financial services to more than 600 U.S. and U.K. law firms and more than 35,000 individual lawyers. In addition to the Law Firm Leaders Confidence Index and the Quarterly Flash survey, we conduct a more detailed annual survey. These reports, together with extensive discussions with law firm leaders, provide a comprehensive overview of current financial trends in the industry as well as forward-looking insight.