Perhaps no industry has seen more dramatic upheaval and uncertainty over the last few years than Financial Services. Though, through all the volatility, the sector has not only survived, but its thrived. But what's the status of the market now? And what does the future hold for consultancies in this sector? Those are the question answered in Kennedy Consulting Research & Advisory's latest research report—Financial Services Consulting Marketplace: Key Trends, Profiles and Forecasts—which provides details on market demand for, and profiles of, leading firms that provide consulting services to the Financial Services industry, which includes banking, capital markets, and insurance. Consulting One on One recently sat down with the report's author, Paul Gronwall, a senior analyst with Kennedy Consulting Research & Advisory, to discuss the financial services market.
Consulting: What's the status of consulting to the financial services market right now?
Gronwall: Consulting to financial services organizations is in an upswing. Following a poor showing during the financial crisis, there was significant growth in 2010, and that has continued in 2011, albeit at a slightly slower pace. More mature, Western financial services markets continue to represent the largest portion of client spending, but growth rates are greater in developing economies in Asia, Latin America, and the Middle East and Africa. Economic uncertainty, especially fear of another recession or concerns regarding sovereign debt in several countries, may dampen growth, but it has not yet had a significant impact on consulting spending overall.
Consulting: What are some of the key trends in the market right now?
Gronwall: A couple of factors are contributing to the demand for consulting services. One is simply economic recovery. Many banks, insurance companies, and capital market firms are realizing better revenues, cautiously optimistic about the economy, and are ready to engage consultants in projects that will help them make the most of the improved economic climate. A major force is the need for financial institutions to respond to a rapidly expanding portfolio of regulations instituted in an effort to avoid another financial crisis. Rules are being promulgated in the U.S., across the E.U., and in a number of other mature markets.
Although the trend is not as significant in developing economies, governments there are likely to follow suit. Financial Services companies sometimes lack the knowledge, and commonly lack the resources, to design and implement these watershed regulatory changes. The need to achieve compliance is made even more challenging by fixed regulatory deadlines. The consulting efforts that support these ends often involve process change, organizational change, and new implementing new technology-based solutions to meet transparency, risk management, and reporting requirements for the long-term.
Consulting: What's the key takeaway from the research?
Gronwall: Of course clients demand financial services specialization—that is, consultants who have been there and done that, have experience in the finest details, and presence in all the appropriate markets. But since 2008 they have also been interested in scale. Financial services consulting practices that can do it all in every country have been winning the work. We see that changing now; our 2012 FS market research will chronicle how.
Consulting: Where are the consulting opportunities in financial services?
Gronwall: There are a number of areas, but one general area is in technology. New platforms are providing greater transparency that can improve risk management and provide the analysis and reporting needed to achieve regulatory compliance. Increased automation is also promising to achieve some of the operating cost reductions being sought. Consultants are also helping businesses improve their customer service with improved CRM tools, portable banking technologies, and the use of social media. Of course, fundamental corporate strategy is another area that has been hot.
Consulting: What's the most surprising aspect of the data? Was there something you didn't expect?
Gronwall: The resilience of the financial services industry and its arguably successful efforts to thrive so soon after the financial crisis were somewhat surprising. One would of course expect the world's largest banks and insurance companies to recover—particularly with the assistance of government bailouts—but the damage to their reputations and the problems they faced might have been expected to make financial services a less attractive market to enter. Instead, new entrants are scrambling to set up shop and get a piece of the now rapidly re-expanding pie. This is keeping consultants—generally the smaller and mid-size firms—busy helping to build and launch these new businesses. Meanwhile, the larger well established institutions are turning to their trusted advisors—generally the larger global firms—to help them succeed in this new competitive environment.
Consulting: How do you see the market evolving? What's the forecast for consulting to financial services?
Gronwall: Financial services will continue to be an attractive sector for consulting. Companies in Western markets will pursue a global footprint, seek to reduce costs, continue to scale up, and build better tools for serving customers. Those FS companies in developing economies will seek rapid growth, move into Western markets as they follow customers and chase new ones, and strive to leap-frog over their Western competitors that are distracted by and burdened with more regulations. While all that is happening, new, non-indigenous FS competitors will enter the market, and use of online and portable service delivery will continue. These are all things that bode well for FS consultants.
For additional information on KCRA or to purchase the report, Financial Services Consulting Marketplace: Key Trends, Profiles and Forecasts, please contact 603-924-6390 or customercare@alm.com .
Kennedy Consulting Research & Advisory
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