The global financial services consulting market grew by more than 7% last year, to a value of nearly $24 billion, which amounts to 26% of the entire industry. Work in regulatory areas, which includes risk, compliance and related IT services, accounts for a massive 80% all advisory activity in the sector.
In recent years the financial services landscape has been though a rollercoaster time, from the booming years up until 2008 to the gloomy financial crisis years and the recovery period which it currently finds itself in. In synch with the financial services industry, the consulting market for banks, insurers and other financial players has been volatile, yet in recent years it has on the back of massive transformation programmes returned to healthy growth. A recent report from Source Information Services (Source) reveals that globally the market is worth $23.96 billion, up roughly 7% from the previous year ($22.4 billion).
The globe’s largest consulting market, the US, not surprisingly houses the largest financial services consultancy market, estimated to be worth $8.58 billion. The German speaking DACH region (Germany; Austria; Switzerland) follows with $2.8 billion, and in third comes the UK with $2.2 billion. The fastest growth is however found in developing markets, which can grow very quickly, even if from a smaller base: Financial services consultants in the GCC and the burgeoning markets of East and West Africa* have all been experiencing growth of around 20%, and can expect further strong growth in the year ahead.
Banking ($9.39 billion) was the largest user of management consulting services, with Insurance ($6.77 billion), Private Equity ($4.21 billion), and Capital Markets ($3.08 billion) also significant users.
From a functional perspective, risk & compliance is with a distance the key service offering in the financial services market, and accounts according to Source for up to 80% of all consultancy work in the sector. Yet although compliance can in most cases be considered as the source of consulting engagements, in practice project scopes are enlarged to encompass other business objectives, hence widening the functional terrains covered by consulting firms. Alison Huntington, a Senior Analyst from Source, explains: “Financial services institutions being forced to transform themselves, not just to stay on the right side of the law, but also to find new ways to be profitable and competitive. And so while a lot of the consulting work happening here is simply about going into an organisation and making it compliant, it’s not uncommon for these compliance initiatives to be treated as an opportunity to make larger changes to the business.”
Going forward, the financial services consulting market is expected to grow further, in 2014 and beyond, says Huntington. “The sector shows no sign of losing its status as the engine of the consulting market and if anything looks to be expanding.” Expansion will be visible in all key industry segments, with Banking and Technology forecasted to be the most noteworthy performers.
Earlier this month, the MCA, the representative body for management consultancy firms in the UK, released a market research specifically on the state of the UK consulting market. The research revealed that 2014 was an attractive year for UK based consultants – more than 90% of firms have either met or exceeded their fee income expectations for the year. Similar to the Source report, financial services was earmarked one of the best performing industries, together with retail, public services and infrastructure.
* See the article ‘African consulting market grows 5% to nearly 1.5 billion’ for more information.