The Financial Advisory (or financial consulting) segment delivers consulting services that build on a strong financial analytical fundament. Service offerings span a wide variety of topics, such as transaction services, risk management, tax advisory, real estate advisory, compliance and litigation services to name a few, however, financial and accounting skills always stand at the heart of the services delivered.
Financial advisory markt
The financial advisory segment is estimated to be worth $67 billion, roughly a quarter of the global consulting market. Unlike other segments within the consulting industry, throughout the crisis years and its aftermath, financial advisory continued to perform relatively stable, driven by three key factors. During the economic woes, the demand for crisis & turnaround management grew strongly, while not much later the demand for accounting advisory services and risk management took off, particularly in the financial services sector. In the slipstream of the recovering economy, the M&A market has rebounded strongly, driving demand in corporate finance and transaction services. These three services combined more than offset the (large) drop in demand in other financial advisory fields, across the board spurring an upwards trend in the overall market.
Financial advisory services
The market for financial advisory consists of eight main disciplines: Transaction Services, Corporate Finance, Crisis & Recovery, Risk Management, Accounting Advisory, Tax Advisory, Real Estate Advisory and Forensics & Litigation.
Transaction services provides client with a range of services related to the acquisition, merger or divestiture of an organisation. Services range from setting an M&A strategy, target screening, valuations and due diligence in the pre-deal process to post-merger integration support and other operational transaction services after a deal has been unveiled. Corporate finance is the area of consulting that deals with funding and capital structure matters. Key propositions include financing (including alternative investments) restructuring, working capital management (also closely tied to the finance consulting segment within operations consulting), IPO’s and capital markets.
When companies find themselves in financial difficulties, they commonly turn to crisis & recovery advisors. Experts support them with getting a grip on the crisis situation (short term) and subsequently ensuring a turnaround plan is in place for the longer term. Key services include insolvency (or bankruptcy) management (consultants are often called in as administrators), restructuring, turnaround advisory and debt management. Risk management consultants help organisations with ensuring that uncertainty in the enterprise and market does not impact (or minimally) business goals. Main offerings are, among others, risk management (analyzing risks and ensuring a process and governance is in place to mitigate risks), risk control (setting up the right warning systems that can detect risks), internal audit (assessments aimed at mapping risk profiles and compliance) and IT risk; which covers the growing risks in the information technology arena, such as cybersecurity, digital governance and enterprise data management.
The tax advisory segment centres around helping enterprises adhere with tax law, which includes propositions such as corporate tax strategy, location advisory, transfer pricing and tax aligned supply chains. Accounting advisory focuses on supporting clients with optimising the accounting and financial reporting challenges facing their businesses and the finance function. Projects typically entail boosting the efficiency of the accounting function, improving financial reporting quality and flows, and ensuring compliance to regulatory requirements at all levels, such as International Financial Reporting Standards (IFRS) globally and local legislation.
The real estate advisory segment supports clients with financial matters in the area of real estate and property management. Key offerings include location advisory, real estate valuations, transaction support on property deals, and optimising real estate asset portfolios (often in combination with financial asset management). Clients typically span four stakeholders types: governments and local municipalities (i.e. area development), housing corporations (i.e. strategic supply management, risk management), companies (portfolio management, location support) and real estate investors (i.e. due diligence, portfolio analyses).
The forensics & litigation segment supports clients with a range of services that follow from actual or anticipated disputes or litigation cases. Propositions include dispute advisory, forensic accounting services (which combines accounting, auditing and investigative skills), litigation support and electronic discovery (or e-discovery). Work can range across industries and topics – a forensic consultant (also known as an auditor or investigative auditor) can deliver economic damages calculations for governments, antitrust bodies or companies, support tax fraud or money laundering investigations or look into digital crimes such as cyber-attacks or data theft.
What does a financial advisory consultant do?
Unlike the other four consulting segments, the main disciplines within Financial Advisory are less related from a functional perspective – the grouping is based on the dependency on financial skills and competences, in many cases combined with analytical rigour. As a consequence, the disciplines can, to a large extent, be seen as separate service areas: a corporate finance or M&A consultant, for example, performs substantially different activities than a risk expert, while a forensics engagement entails complete different activities compared to property valuation project. In addition, a share of financial advisory services overlaps with other consulting segments and even non-consulting services. For instance, corporate finance and M&A services are also offered by strategy consultants and investment bankers, while litigation & forensic services also are part of the service portfolio of (specialised) law firms. Typically, the financial side of compensation & benefits – part of the HR consulting segment – also falls within the scope of financial advisory, in particular pensions and healthcare consulting.
Financial advisory firms
Traditionally the market for financial advisory is dominated by firms with a legacy in tax and audit services, such as the large accounting- and consulting firms. Yet, over the past years, firms from other segments, such as strategy consultants, process specialists, economic experts and systems integrators have developed their footprint in the financial advisory landscape. As a result of the variety of services within financial advisory, each discipline tends to have a relatively large group of different players, such as corporate finance boutiques, real estate experts or risk management specialists.