Will the efficiency gains from AI destroy the professional services industry? Probably not

One of the biggest worries currently stalking the corridors of professional services firms is the extent to which AI could disrupt the industry by radically reducing the time spent delivering services and, consequently, the fees they can charge. Clients’ desire for faster delivery and lower fee rates, amplified by largely anecdotal information on the scale of the possible efficiencies, has been turning those worries into outright fear, if the Source inbox is any indication.

Data we’ve recently gathered on the UK and US consulting markets shows that clients overwhelmingly think that the use of AI by consultants will speed up work (82% say so). This poses obvious implications for any firm that relies on timesheets, so consultants’ consternation is clearly not unfounded. There is a striking lack of consensus, however, on whether the solutions produced will be better—almost a 50/50 split, with 49% saying they will and 51% saying they’ll actually be more generic—and clients are similarly divided on the question of fee rates. Forty-eight percent of US and UK clients think AI tools will make work cheaper, while 52% actually expect fees to go up. As you’d expect, clients who think the solutions will be better are more likely to think the price will rise. That’s an important message for anxious firms: focus on quality, rather than speed, and you are more likely to be able to defend your fees. 

Unquestionably, clients do believe that firms need to change the way they operate and deliver professional services: A third of audit clients want to see better data visualisation tools, and just over a quarter want real-time data to be used. A fifth welcome the increasing role played by private equity firms in the audit industry because there’ll be more investment in modernisation and advanced technologies. Clients are, however, becoming more cautious about the timeframes in which these changes are likely to happen, which is good news for professional services firms. In audit, for example, the proportion of clients who expected the industry to change significantly in the next one to two years dropped from 64% in 2024 to 40% in 2025. Moreover, last year, 22% thought AI would have only a limited impact over the next three to five years, compared to just 2% in the previous year. AI will have an impact on audit, but its impact will be more measured and slower than expected.  

The assumption that AI-enabled efficiency will have catastrophic consequences for firms’ revenues also needs to be challenged. Late last year, we looked at this issue through the lens of tax services. We surveyed over 50 senior tax clients in large US corporations to gauge the extent to which AI is likely to reduce prices and therefore the size of the $42bn tax advisory market in the US (in 2024). This revealed a high level of excitement about the extent to which AI can make a difference.   

In particular: 

• Nine in ten clients are excited about the potential opportunities of AI and would like to see firms making greater use of AI in their tax advisory practices. 
• More than 25% clients think that at least 50% of tax advisory work will be carried out by AI rather than human experts in five years’ time.
• 66% expect to pay less for an AI-enabled like-for-like tax advisory service, of whom 70% would redirect those savings to other tax advisory projects. 
• But 100% of tax clients expect to pay more for an AI-enabled tax advisory firm if more value is generated as a result​. 

However, we also found that expertise and accountability remain crucial to clients—and this limits the maximum expected use of AI to 50-60% of current tax advisory services.​ Even taking this into account, clients still think that the time and cost of these services could be cut by 30%—which, interestingly, is the average figure we hear firms quoting in the market. That could wipe around $12bn off the US tax advisory market—a substantial figure by any standards. But, before tax firms give up all hope, our research also found that the lower prices that result from AI-enabled efficiency are likely to be offset by expectations of greater delivery of value, only part of which is AI-related.  

As we summarise in the chart below, what is currently a market for tax services that’s worth $42bn could grow to $49bn, with improvements in the value the services add ($19bn) more than offsetting the lower fees that result from AI-driven efficiency (a loss of $12bn).  

What are the implications of our analysis?  

Tax advisory firms need to start investing in AI-enabled tax tools. If they don’t, they’ll lose out to competitors who do and who successfully exploit client needs to drive prices down—if not immediately, then certainly in the medium term. However, firms need to pick and choose exactly which activities and services are most susceptible to being replaced by AI and focus on these. Clients aren’t looking for wholesale replacement of people with AI, and there’s a danger that firms invest too much in AI tools that clients don’t want and aren’t prepared to pay for.​  

None of this should be seen as an excuse for complacency. AI could still devastate the professional services industry if firms don’t act now to: 

• Gauge the extent to which each of their services should be made more efficient via the use of AI and whether clients would value this. 
• Look for opportunities to make their services more valuable, either by introducing AI-enhancement or by investing in other aspects—such as specialist expertise—that clients will pay more for. 

What should firms do next? 

Source’s AI impact model will help your firm identify the threats and opportunities arising from global AI adoption, so you can focus your investment to create the most value. To discover how AI could reshape your firm, get in touch.