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The post-crisis crackdown by watchdogs imposed severe pain on all but one area of the financial services industry: the consultants whose regulatory divisions enjoyed a golden decade helping banks and other clients to keep pace with ever-changing demands.
However, experts in the finer points of capital requirements and anti-money laundering protocols could soon be unseated as the superstars of their firms. “We’re getting to the end of some very important regulatory works,” says Philippe Morel, senior partner at Boston Consulting Group’s London practice, who believes “regulatory-driven consulting work should slow down” in the coming years.
Luckily for firms such as BCG, they have blossoming fintech practices to fall back on. Start-ups have helped to drive innovation in areas such as foreign exchange, mobile payments and personalised insurance, and customers have become accustomed to better and cheaper services.
Financial institutions are turning to consultants to help meet these demands, by using data scientists to harness customer information, app designers to create interfaces and systems experts to untangle expensive, outdated infrastructure.
“We’ve recruited more than 1,000 specialised consultants across BCG working on topics which didn’t exist just five years ago,” says Mr Morel. They are technologists, data scientists and process specialists who help banks decide what to prioritise and how to design and implement solutions. Most of those newcomers work in financial services, including 100 who work with UK institutions.
Technology is now so central that Accenture — whose roots are firmly in IT — has become highly regarded by UK financial services companies. It was “very frequently recommended” for financial institutions and services in the rating of the UK’s Leading Management Consultants compiled by the FT and Statista.
“A lot of our clients do have a fair chunk of in-house [technology] capacity,” says Andrew Poppleton, Accenture’s head of financial services for the UK and Ireland. “What they value from organisations like ours are people who can look at what is working in other industries and bring it to financial institutions, or people [with] more recent technology experience.”
Among clients “there’s been a shift from traditional advisory-based consulting to more engineering-led consulting”, he adds. “Architects, people who can really understand how the banks’ technology stacks [IT systems] work, are gold dust”.
To help maintain its cutting edge, Accenture has invested heavily in research facilities such as The Dock in Dublin, where more than 200 designers, developers and industry experts work on innovation and collaborate with clients across the consultancy’s practice.
The “Big Four” professional services firms KPMG, EY, Deloitte and PwC — which started out as auditing and accountancy practices and have long histories in consulting — are also reorienting their services to cater for clients’ demands.
“We do recognise and see that technology . . . underpins much of financial services,” says Deloitte partner David Myers. The consultancy aims to “own and operate across” the full range of technology work in the sector, from conception to strategy and delivery, he says. Technology is the fastest growing part of Deloitte’s UK financial services practice, which has expanded to about 1,000 staff.
Tim Howarth, partner at KPMG, says advising banks on how to harness new technologies is one of the financial services practice’s biggest areas of work, the others being regulation and cost. “Banks are looking for us to bring the ‘best in breed’ to them,” he says, adding that cyber security was a hot topic.
Mr Howarth and Mr Myers say regulatory work remains relevant. Mr Howarth says UK clients continue to plan for EU regulation as if it will apply after Brexit.
Mr Myers says that several changes are due to come into force this year led by investor protection rules Mifid II, which went live on January 3, and work around them will last much longer.
“We’re going to have to still work through a fair amount of process and technology issues,” he says, adding that there was a “lot of clean-up” in the US after the Dodd-Frank banking regulations came into force.
Another “financial and risk” income stream for consultants is advising on the fallout from Brexit. KPMG is so confident of the prospects for its UK financial services consulting division that it is recruiting 210 more staff into it. This is on top of 1,300 UK-based financial services consultants and 300 support staff in India.
Some in the sector say consultants will not always have it so good. “I don’t think it’s the case that they are demonstrably offering more wisdom now than before,” says the chief financial officer of a UK bank. He attributes current spending levels to a mixture of regulatory work, the high volume of projects which banks cannot handle internally and the fact that banks cannot retrain staff fast enough to deal with change.
“Collectively, consultancy firms have got themselves into the right place at the right time,” he says.