Financial Advisory
With an emphasis on expertise, financial consultants are hired to advise on a wide range of topics and concerns typically overseen by a client’s Chief Financial Officer (CFO). Consultants in the financial advisory segment are not financial analysts. Clients don’t hire financial consultants for insight into macro and micro-economic trends. Instead they are counted on to provide expert advice tailored to the client’s internal finance department.
Deep industry expertise in risk management, tax, real estate, transaction services, compliance, litigation, and other domains managed by a client’s CFO, are expected of consultancies in the financial advisory space. Financial advisory differs sharply from management, strategy and operations consulting in that it demands astute financial and accounting dexterity, rather than strategic vision, or problem solving and people skills.
What does a financial advisory consultant do?
Possession of specific financial competencies distinguish financial advisory experts from other consultants. There is also extreme differentiation within the segment, with corporate finance consultants, risk experts, and M&A advisors offering completely different services to clients. Depending on their branch of expertise, a financial advisory consultant might be hired by a CFO to put together a M&A deal, design an employee healthcare package, or help improve capital efficiency.
Despite occupying a specialized branch of the consulting industry, financial advisory services frequently overlap with other consulting segments. Financial consultants will work closely with their counterparts in HR or IT in devising compensation and benefits packages, or leveraging technology to optimize forensic services. Consultants in this segment will also find themselves engaging with the specialized investment bankers, lawyers, and accountants who manage unique aspects of compliance, M&A, and risk-based projects.
Financial advisory services
Financial advisory services is another consulting landscape where, as in strategy and operations, consultants often work in specialized fields. Which of the eight disciplines a financial advisory consultant excels in is strongly related to their hard knowledge, which is rarely transferable.
The eight main disciplines in financial advisory services are: Transaction Services, Corporate Finance, Crisis & Recovery, Risk Management, Accounting Advisory, Tax Advisory, Real Estate Advisory and Forensics & Litigation.
Transaction services - Range of advisory services tackling questions related to acquisitions, mergers, and divestiture. Consultants are involved in due diligence, target screening, valuations, post-merger support and other services. Example: Conducting due diligence on acquisition target.
Corporate finance - Vital input into clients’ internal financial structures. Advising on restructuring, capital management, IPOs, and other key responsibilities overseen by CFO. Example: Advising on alternative investments.
Crisis & recovery - Help clients mitigate damage during a crisis, get a handle on the situation and develop a viable recovery plan. Debt management, bankruptcy, administration and restructuring expertise is crucial. Example: Developing long-term turnaround plan.
Risk management - Assessing relevant financial risks and establishing processes and governance structure to control and mitigate them. Covers compliance, IT risk and developing accurate warning systems. Example: Bulletproofing internal financial processes against cybersecurity threat.
Tax advisory - Help clients comply with tax requirements. Includes advice on corporate tax strategy and incorporating tax duties into supply chain design. Example: Advising on tax demands in specific supply chain location.
Accounting advisory - Making accounting processes more efficient, managing compliance, streamlining flow of financial reporting and improving its quality. Example: Ensuring compliance with International Financial Reporting Standards.
Real estate - Supporting clients with financial interest in real estate and property management. Range of services includes real estate valuations, optimizing asset portfolios, and location advice. Example: Advising housing corporations on risky assets.
Forensics & litigation - Range of services, including forensic accounting, auditing, anti-trust and money laundering advice to help clients win disputes and litigation. Example: Investigating alleged theft of digital data ahead of litigation case.
Financial advisory market
Enjoying a greater degree of autonomy and differentiation from the other consulting industry segments, estimates of the value of the global financial advisory services market fall around the $70 billion mark. This places financial advisory on roughly equal footing with operations consulting, with each boasting a market share of approximately 30%. Since operations fall under the larger management consulting umbrella, this makes financial advisory the largest stand-alone market segment.
The comparisons don’t stop at size. Like operations consulting, financial advisory services enjoy robust health even (perhaps especially) during times of economic downturn. Crisis management, restructuring, debt advisory, and administration services were invaluable during the recession. In good times for the economy, healthy M&A activity drives demand for transaction services and corporate finance consultants, which compensates for the lower demand for crisis & recovery specialists.
Financial advisory firms
While the worlds of management, strategy and operations consulting are largely dominated by the Big Three and other major names, the more specialized segment of financial advisory is one area where the Big Four accountancy firms enjoy prestige. Yet the key players in financial advisory change considerably depending on the discipline — whether it be real estate, corporate finance, or crisis & recovery.
Within each financial advisory discipline is a varied range of IT and strategy consultancies; firms which advise public sector clients; process specialists; and systems experts. Each might prioritize other consulting services, whether HR or digital, but maintain a foothold in the financial landscape to add value to their client offering. That said there are firms outside the Big Four which specialize in financial advisory — Grant Thornton LLP and FTI Consulting being notable examples.
