Imagine you've just received your first paycheck from a part-time job. You're thrilled, but then you start thinking about how best to use this money. Should you save some? How much should you set aside for expenses? And what about investing a bit for the future? This is where you might seek advice from someone knowledgeable about managing money—essentially, what an individual does when they need financial advice.
Now, let's scale this situation up to a business context. A company, much like you with your paycheck, earns money (though on a much larger scale) and faces similar dilemmas. How should they allocate their funds to cover expenses, save for future projects, or invest in new opportunities? This is where financial consultants, or advisors, come into play.
Financial consultants assess a company's financial health by looking at their earnings, expenses, and investments. Using this information, they craft strategies to help the business manage its money more effectively. This could involve suggesting ways to reduce costs, advising on investment opportunities, guiding tax planning, or even helping to manage the financial risks associated with entering new markets.
For a business, working with a financial consultant can mean the difference between merely surviving and thriving. These experts not only help in making informed decisions about day-to-day financial operations but also in planning for long-term goals and navigating the complex legal and regulatory landscape of business finance.
In essence, financial consultants provide the expertise businesses need to make smart financial choices. They're sometimes also called "financial advisory consultants."
Financial consulting shouldn't be confused with "financial services consulting," which is consulting work that specifically helps financial service institutions, like banks and insurance companies.
For example:
The services that EY's FSO and Oliver Wyman provide are examples of financial services consulting – not financial consulting.
Organizations bring in financial consultants to help them navigate complex financial landscapes, safeguard their operations, and set the stage for future success. Here are a few of the main services financial consultants offer.
Whether a company is acquiring another company, merging with it, or selling off a part of its own business – these actions are all different types of "deals."
Deals tend to be quite complicated, which is why companies hire consultants to help with the process. As a deal advisor, you might help a company with:
Deal advisory is a big and growing type of consulting at the Big 4 firms (Deloitte, EY, KPMG, and PwC) and beyond. However, it's taken a bit of a hit as companies have been making fewer deals due to economic uncertainty.
Some firms call this type of consulting "deals advisory" while others call it "transaction services" or "M&A advisory."
This area is all about helping businesses manage their money well. Consultants offer advice on how to raise funds, restructure finances if the current setup isn’t working, manage everyday cash flow more efficiently, and navigate the complex worlds of initial public offerings (IPOs) and capital markets. It’s like having an expert strategist to ensure the company’s financial foundation is strong and can support its goals.
Uncertainty is a part of business, but unmanaged risks can lead to significant losses. Financial consultants in risk management help companies identify potential risks, develop strategies to minimize their impact, and set up systems to detect and manage those risks early on. This includes everything from general business risks to specific issues like cybersecurity threats. By ensuring a robust risk management process, consultants help businesses protect their goals and maintain smooth operations.
When companies face financial distress or operational challenges, they turn to restructuring and turnaround consultants. These experts assist in managing immediate crisis situations and developing long-term turnaround plans. Services include managing insolvency processes, restructuring the company to improve efficiency and profitability, advising on debt management, and ensuring the company can recover and thrive post-crisis.
If you're thinking "That sounds like a lot of different services!", you're absolutely correct. Financial consulting is a loose collection of consulting practices bundled into one.
As Consultancy.org explains:
Unlike the other four consulting segments [HR consulting, tech consulting, strategy consulting, and operations consulting], the main disciplines within Financial Advisory are less related from a functional perspective – the grouping is based on the dependency on financial skills and competencies, in many cases combined with analytical rigour.
As a consequence, the disciplines can, to a large extent, be seen as separate service areas: a corporate finance or M&A consultant, for example, performs substantially different activities than a risk expert ...
In addition, a share of financial advisory services overlaps with other consulting segments and even non-consulting services. For instance, corporate finance and M&A services are also offered by strategy consultants and investment bankers.
Some aspects of financial consulting go hand in hand with strategy consulting. After all, when you're helping a company make big money moves (like a merger or acquisition), you need strategic thinking and financial expertise. That's why EY calls their M&A practice "Strategy and Transactions" and KPMG calls theirs "Deal Advisory and Strategy."
That said, financial consulting is still more technical than strategy consulting, which is more broad. Management Consulted explains the distinction well:
In strategy consulting, you are in pre-CEO training. You face analytical questions about profitability and competition as well as team leadership and leadership development questions. You will face the things you’ll need to have experience in as a CEO, and address the company’s broadest and most pressing issues.
As a financial advisory consultant, you’re training to become a CFO. As a CFO, you will deal with more analytics and skills-focused questions – you’re developing the “how” to the CEO’s “what”. Again, there is a more narrow focus and a higher standard for being an expert in a specific field.
Firms like the Big 4 only hire a small handful of fresh grads into their financial consulting practices.
In particular, deal advisory has a higher proportion of accountants, especially those with a background in auditing, since they have experience analyzing financial documents and are better prepared to do things like due diligence (making sure a company is as financially sound as they say they are).
So it's more common for people to be hired into deal advisory after they have audit experience and a CPA than to be hired directly as an undergrad.
Here are the exit options from different areas within the field, according to two Big 4 financial consultants:
Exit opportunities from transaction services:
- Good fit: financial planning and analysis, deal team in a PE or VC fund, Financial advisor roles in corporate finance firms.
- Maybe: equity research, investment banking
Exit opportunities from Valuation and Appraisal:
- Good fit: In-house finance roles, corporate finance, In house M&A teams, equity research, quantitative analyst
- Maybe: deal team in a PE or VC fund, Investment banking, equity research
Exit opportunities from corporate finance:
- Good fit: Financial advisor roles in corporate finance firms, In house M&A teams
- Maybe: deal team in a PE or VC fund, Investment banking
Exit opportunities from Business Recovery:
- Good fit: Depends on industry exposure
- Maybe: PE fund specializing in distressed debt
We hope this gives you a better idea of what it's like to be a financial advisory consultant. If you're intrigued by consulting, check out our best tips on breaking into the field.
Also check out all the internships we have in the field of consulting!