Consultants are filling a talent gap in financial services. Rather than being brought in for their specialist expertise, consultants are being drafted into banks and finance firms to compensate for their inability to hire.
The consulting world is growing in the U.S. – by 7.7% year on year to $55bn, with financial services accounting for around $13bn of this, according to a new report from Source Global Research. But finance firms are making up for their “lack of internal capacity”, it says, rather than hiring in consultants for big (and well-paid) strategic projects.
Much of this is down to the strain of regulation, says Edward Haigh, director at Source Global Research.
“The reality at the moment is the financial services sector is so caught up responding to regulations, it’s a bit like a storm creeping through the centre of the sector – compliance is absorbing everyone’s energy,” said Edward Haigh, director at Source Global Research. “Management consultants, driven by the need to respond to that, are faced with the innovation versus commoditization problem – what is innovative one moment is a commodity the next.”
Regulatory expertise is becoming ‘commoditised’, meaning that consultants are de facto employees rather than strategic innovators. They can no longer charge such big fees as a result.
“Some consulting firms have made an active decision to steer clear of financial services for now and align themselves in the sectors with a more strategic focus currently,” he says.
If you want to work in consulting, therefore, being a financial services specialist is not necessarily the best place to be. But if this is your area of expertise, the Big Four accounting firms offer the best opportunities.
“For the Big Four firms, regulatory consulting is a large and lucrative part of their business,” Haigh said. “It may not be glamorous, working on major regulatory initiatives at a big bank, wondering where all the excitement went, but nevertheless, it’s an important part of the market for them.”
It’s simply a case of scale, says Haigh. The Big Four firms have perfectly capable people and lots of them: “Many financial services firms don’t see significant differences in what one consulting firm can offer compared to another,” he said.
While the Big Four are taking most of the regulation work currently, McKinsey, Bain and Boston Consulting Group are finding a niche on the bigger strategic questions – assuming banks are thinking about this.
“McKinsey, Bain and BCG will find that they have an active role to play with some clients who are desperate to put energy into resolving some of the long-term questions, but it’s a much smaller market right now because most are struggling to get out of compliance mode,” says Haigh.
Photo credit: Wavebreak Media/Thinkstock