Thursday, November 11, 2010

Consulting into the financial services sector has experienced a mini boom in 2010 – up 15 per cent in the last six months…
 
The financial services sector is increasingly turning to management consultants to stay competitive and upgrade aging technology. Figures from a new report[1], released today (10th November 2010) found that consulting into the sector increased by 15 per cent in the last six  months, with almost a third of consulting buyers in the sector expecting demand to rise further.
 
The Sourceforconsulting.com report specifically found that financial services institutions required outside assistance to drive through technological change; manage risk and comply with new regulation; develop new strategies; and deliver new projects and programmes.
 
Fiona Czerniawska, Director of Sourceforconsulting.com said:
“A gradual improvement in the economic indicators, growing business confidence, rising stock markets and profits all played a role in the increasing use of management consultants. There was also pent-up demand after the sector spent the first months of the recession in survival mode. It was then only towards the back end of 2009 that companies had the space to start considering how to re-build their businesses.”
 
The report also says that the buoyancy of the financial services consulting market largely depends on the following three factors:
  • Company performance/profitability – Over half (53 per cent) of buyers said that this was one of the top three factors influencing their use of consultants, and far more important than the state of the economy as a whole.
  • Lack of internal resources – Many companies stripped out so many staff during the recession that they no longer have enough people in-house to cope with new initiatives. The decision to bring in consultants can often come down to simple maths. 
  • The attitude of the board/senior management to the use of consultants – This can account for the difference in anticipated levels of expenditure on consultants across the sector. Many buyers interviewed for the report commented on the level of churn at the top of their organisations and the impact this had had. 

Chris Gant, Head of Financial Services at Logica, who sponsored the report, commented:
“There’s a massive amount of transformational change underway in this sector. On top of the post-merger integration work going on, we’re seeing new start-ups in the industry, smaller players launching new products and many established companies investing in wealth management.  And on top of all this there is huge spend focused on risk management and regulatory compliance.”
 
Regulation – a major influence
Whilst technology-related consulting is expected to be the greatest area of demand in the coming months, there are differences across the financial services sub sectors. In the banking sector, for instance, demand is expected to be relatively strong for project and programme management, post-merger integration and risk and regulation consulting. In contrast, capital markets will be focused exclusively on risk and regulatory related matters.
 
Sally Scutt at the British Bankers’ Association comments in the report:
“Recent announcements giving the outline and time table for Basel III in particular have been very helpful, clarifying the situation for the financial services sector. Although some banks will need to raise more capital in order to comply with the new regulations on liquidity, the regulators have listened to arguments about the time needed to respond. The mechanics of implementation will be vast.”
 
For further information on the Sourceforconsulting.com financial services report, visit www.sourceforconsulting.com or contact Julie Cleasby on 0845 293 0992.
 

 
About the Report
Banking on Financial Services is the latest in Source’s series of Client Insight Reports. These reports focus on either a specific consulting service, or a specific sector for the consulting industry, and provide deep insights from within client organisations through which the dynamics affecting each service or sector can be better understood. Research for each report is carried out using extensive surveys and interviews, and is directed by Source co-founder Fiona Czerniawska.  
 


[1] More than 60 major financial institutions were surveyed and interviewed during July-August 2010 for the report.