Warren Smith explains why these firms risk becoming 'the Hudson's Bay of law'
The future of Canada’s legal market could resemble a barbell: heavy at both ends and thinning in the middle. That’s the impression of Warren Smith, managing partner at Smith Legal Search and a veteran legal consultant.
At one end, large national and international firms are rapidly pulling ahead through deep investments in artificial intelligence and scalable business models. On the other hand, specialized boutiques stand to thrive by offering expert advice and nurturing strong client relationships, Smith says.
But the firms caught in the middle – broad in scope yet lacking distinction – face a more precarious path, he says.
"The risk is where you're trying to be all things to all people… You've built out a large structure, but you haven't asked the most important question: how do we compete and win?"
Smith says the Canadian legal market is reaching an inflection point where firms must decisively choose their lane.
He adds that traditional middle-tier firms – often national but not top-tier, full-service but not focused – face increasing pressure from both ends of the spectrum.
Smith says Canada’s largest firms are not just holding ground – they are accelerating. Many are heavily investing in AI development and scaling, creating systems that multiply the productivity of their legal talent.
"They have the ability to put real time and money into building AI tech – essentially Ironman suits for their associates… An associate with that super suit might produce the equivalent of 4,000 hours. That’s where the economics change," Smith says.
This investment also allows big firms to raise rates while competing globally. "They're pushing rates hard, sometimes at $1,000 an hour in Canada, because they're competing globally," he says.
While AI is central to this shift, Smith says their competitive edge runs deeper.
"The big law firms are not just playing defence – they're investing in tools and scale that others can't match," Smith adds.
Boutiques stay strong by staying specific
In contrast, Smith says specialized firms – particularly in areas like tax, intellectual property, and high-stakes litigation – continue to perform well by focusing on depth over breadth. For them, intimate client relationships and deep subject matter expertise are key differentiators.
"The client is often in a situation where they pick up the phone, and they get the senior partner every time. That kind of relationship is almost impossible to split," Smith says.
He likens it to calling a private clinic instead of a massive hospital. These clients, he says, “need a service that is comparable to that of a surgeon,” not a general medical practitioner.
"Once you get down to a very niche question, these are very discrete issues, and the consumer is very sophisticated," he says.
Boutiques, he adds, succeed by knowing exactly whom they serve and how.
"They build trust over decades and know the history of every client relationship," he adds.
Smith says the firms in between – broadly positioned but without clear market distinction – face the greatest headwinds. Many of these firms are spread across multiple provinces and practice areas but lack a distinctive competitive edge.
"You’ve got to be careful you’re not the Hudson’s Bay of law – trying to sell everything to everyone, but end up selling nothing to no one," says Smith.
They’re vulnerable to both ends of the spectrum without a clear strategy. "Some of these firms are chasing top-of-market strategies with middle-of-market capabilities," Smith says.
He says one telltale sign of trouble is when a firm hasn’t decisively answered the question, "What is it that you are doing that is distinctive that allows you to sort of hold your territory effectively?"
Without that clarity, mid-tier firms risk stagnation – or worse, he says.
Still, he says mid-tier firms can’t be counted out. While the middle market faces threats, he adds that it’s not necessarily doomed.
"I think you are 100 percent at risk if you aren't sure who you are… What I don't know is, is that if you are certain on where you are, but you're still operating in the middle of the market – is there a risk that a bigger, better, more focused, Iron Man-suit equipped law firm from above can still come and steal your lunch money?"
