You are sitting across from a client who has just asked why you have not passed on the savings from using AI. It is an increasingly common question.
So how do you answer it without either caving on your fee or getting defensive about it? That’s what this episode is all about.
Whilst the presenting problem is how to answer the question about price in the moment with your client, the bigger issue is about understanding the real value you bring to your client. Plus how AI will reduce or increase that value. Sorting that out is not a job for your marketing team or your finance team. It’s the type of thinking that a partner will need to be doing.
I’m Heather Townsend, author of Poised for Partnership and co-author of How to Make Partner & Still Have a Life. I’m the leading global expert in what it takes to move from senior fee earner to partner . Here are 5 ways to work with me.
In This Episode of the How To Make Partner Podcast You Will Learn:
- Why the asking for a discount because the client thinks you can use AI to do the work quicker isn’t really the issue.
- How to respond, in the moment, when a client asks you to justify your fee
- Why letting a client test the AI shortcut themselves can work in your favour
- What separates partner-level thinking about pricing from managing one fee on one call
If you find this episode useful, don’t forget to like it and then subscribe so you don’t miss another episode.
What Help Is Out There For You?
If you’re thinking, ‘That’s fine for you to say, but if I push back on price and the client walks, that’s on me,’ our Progress To Partner Academy can help you.
You can also listen to this episode on Substack and on Apple Podcasts
Hello, and welcome!
You’re on a call. Fee proposal on the screen. And the client says it: “Can’t AI do most of this now?”
Whether you are yet to have this conversation with a client. It is going to happen to you.
If you can’t explain why the value of your work or your firm’s service to your client, this is a problem. This kind of conversation is a partner level conversation. One which partners are expected to be able to do seamlessly, and one which your partners will be looking for you to do if you are showing that you are ready for partner.
This is a conversation you’re going to have more and more as AI becomes a common tool amongst your client base. Maybe their business is using it extensively. Or perhaps they believe your firm should be lowering its fees because you can swap out junior fee earner time for an AI tool that will do the work quicker with less need to people manage them!
This episode came out of a group coaching call I ran on pricing, with early years partners in a global law firm.
This is the How to Make Partner podcast with me, Heather Townsend. The author of Poised for Partnership, and co-author of How to Make Partner and Still Have a Life. In this podcast, I will be highlighting some of the great stuff in our Progress To Partner Academy. New episodes are released weekly, so press subscribe so you never miss a new episode.
Right let’s explore this hot topic.
Clients are watching AI take on the kind of work that used to be done by junior professionals on your team such as: reviewing documents, drafting a first pass, pulling data together. And they’re not wrong that it’s faster and more cost effective for your firm to do the work. So they draw what feels like an obvious conclusion. If it’s faster, it should be cheaper. So your bill needs to reduce.
Here’s where it goes wrong. The mistake isn’t that clients are asking the question. It’s assuming the answer has anything to do with hours on the clock in the first place.
If your pricing is built on hours rather than value delivered, this conversation is always going to be tough, because you’ll keep trying to justify a number by how long something took, rather than by what it was actually worth.
Whether or not you charge by hours spent, the client isn’t paying you for the hours on the clock. You are being paid for having delivered for the client the right outcome. That means using your judgement, understanding the context and nuance of the clients’ situation.
If your work or outcome for the client can be easily replicated on an AI tool, then my opinion is, that this is now a critical problem for you (and possibly your firm). After all, if a client can get the same answer as you, but quicker and without your bill attached, why wouldn’t they use the AI tool?
On the call, some partners had already made the jump. And these were litigation and M&A partners. The type of service line that normally says the work it does is too complicated to NOT bill by the hour. But these were junior partners who were billing via fixed fees, but with very clear assumptions on the scope of the work. These assumptions were built into the engagement letter so both sides know what happens if the scope changes partway through.
The question is whether the billing by time model is actually broken. After all, how much transaction work is already on a capped fee model? But the key now is understanding where you as the advisor actually add value to your client. For example taking a deal – often the value is about being in the room with the client. The calls, the negotiating, the judgement when the deal changes shape three weeks in, none of which AI can do. Whereas the discovery process and due diligence for the deal, how much can be safely done quicker with AI?
So when a client puts the question to you directly, here’s what to do with it.
First, do not accept that faster means less valuable. If a tool gets you to the right answer more quickly, that doesn’t mean the judgement it took to know it was the right answer has gone anywhere. Or the choice to use a tool to speed up your processes necessarily means you should lower your fees. After all, nobody negotiates the price of a five star hotel room by pointing out that coffee beans have got cheaper. To use this analogy, the client didn’t come to you for the coffee beans.
And if a client is convinced this is now easy enough for AI to do, let them prove it. Tell them to run it through AI themselves and send you what comes out, and you’ll only charge for putting it right. It works two ways. Sometimes the client sees exactly how much still needed fixing. Sometimes you find out they were right, and you build that into how you deliver the work from then on.
Or you can use your experiences with how clients have used AI to try and DIY their work. And how much it cost them in the long run. After all you only have to look at the employment lawyers to realise that clients ‘DIY’ing their employment contracts and/or formal notification to employees or employers had led to more work rather than less work as a result of AI.
Whilst this will not stop every client questioning the fee, it does mean the stakes are higher for you and your conversation about pricing. The conversation has to now be about the value of the work rather than the hours it took. And you’ve got a real consequence to point to if you need one: firms are already billing real fees to put right contracts that clients drafted themselves with AI and that weren’t worth the paper they were written on.
Anyone can defend a single fee on a single call. What separates a highly commercial operator , almost always someone at partner level, is asking the bigger question behind it. As more of the routine work gets absorbed by AI, what are you actually going to sell, and what does your service need to look like in two or three years, not just on this one job, instruction, project or matter? That might mean turning something you currently do informally into a proper product with its own price. It might mean being honest that part of what you do has actually got cheaper to deliver, and pricing it that way before a client forces the conversation.
This is why in our early years partner assessment we look at pricing leadership as well as vision for a partners’ practice. The role of a partner is to look at both the medium to long-term viability of their practice as well as hitting their metrics for this month.
So the next time a client asks why AI hasn’t made you cheaper, you need to be crystal clear about the value you bring to the client. And the risks that using AI to DIY their stuff instead of taking professional advice.
I’ve popped a link to our Progress To Partner Academy, which contains resources and courses to help you step up to partner and when you get there stay there, directly in the show notes for this episode. Included in the academy are resources on business planning, what to do when a client asks for a discount and many, many more resources. Also in the show notes, you’ll find links to my books, Poised for Partnership and How to Make Partner and Still Have a Life, so you can easily find them on Amazon. And as a thank you for listening, there’s also a link for a 10% discount on annual membership for our Progress To Partner Academy using the code PODCAST10.
That’s all for this episode of the How to Make Partner podcast. What’s your action for this week? Before you next send a fee proposal, write down, in one sentence, the outcome the client is actually paying you to deliver, and lead the conversation with that instead of the hours.
If you have enjoyed this episode please leave us a review on Spotify or Apple Podcasts or give us a comment on Substack. This helps us get the word out to others who may need this advice too. Remember to hit subscribe so you don’t miss next week’s episode. Thanks for listening!
I’m Heather Townsend, author of Poised for Partnership and co-author of How to Make Partner & Still Have a Life. I’m the leading global expert in what it takes to move from senior fee earner to partner – and when you get there, stay there. Here are 5 ways to work with me.
What help is out there for you
If you’re thinking, ‘This all makes sense, but I don’t have the time or the data to work any of this out properly,’ our Progress To Partner Academy can help you.
Take the Partnership Readiness Assessment
Free to complete, 10 to 15 minutes, and gives you a personalised report across all 12 key indicators. Take the assessment here.
If the Partnership Admissions Process is what is in front of you, this section of Progress to Partner will help you go into it prepared rather than hoping.
Use code PODCAST10 for 10% off annual membership. Click here to join.
Books mentioned
Poised for Partnership by Heather Townsend – https://amzn.to/3ETEYk3
How to Make Partner and Still Have a Life by Heather Townsend and Jo Larbie – https://amzn.to/4iLxugM
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