Financial Services Industry Report

The other financial services market is a multi-billion-dollar industry that is on pace for continued growth, extreme transformation, and abundant opportunity.

Key Industry Trends

High competition is a challenge in the other financial services space, while the median age of the global population represents an opportunity. This is because the rising median age is around or approaching retirement age, which increases the demand for retirement planning, capital preservation, and estate planning.

Regarding the area of investment management, firms need to focus on:

• Executing a strong vision
• Maintaining talent and employee resilience
• Improving operations
• Aligning with stakeholder expectations
• Strengthening culture
• Implementing artificial intelligence (AI)

The FinTech sector continues to make its mark on the overall financial industry and will be a continually evolving element for finance businesses. It has been the largest funded category globally across private equity, venture capital, and cross-border M&A. There are many opportunities across several verticals and locations in what is still largely an untapped market.

Firms utilizing technology to improve client engagement and meet expectations tend to see more success and better revenue. Investment managers are engaging with clients in new ways through digital channels, intelligent chatbots, virtual meetings, and customized reporting. There is increasing adoption of technologies such as:

• Big data analytics
• The Internet of Things (IoT)
• Data governance of AI
• Digital currencies
• Mobile-first banking solutions
• Buy-Now-Pay-Later (BNPL)
• Point-of-Sale Financing (POSF)
• Embedded finance
• Machine learning
• Cross-border payments

Cybersecurity is also a major priority when it comes to tech modernization. Institutions must prioritize advanced cybersecurity measures to safeguard against evolving threats, such as AI-based security tools to proactively detect suspicious activities, blockchain technology to provide secure data management, and biometric authentication to offer seamless and secure alternatives to traditional passwords. This includes facial recognition, fingerprint scanning, and voice authentication.

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The peer-to-peer (P2P) lending space has become more mainstream, now offering government-backed loans, inflation-beating returns, and new levels of support for small- and medium-sized enterprises (SMEs). These platforms are expanding into new markets and continuing to innovate.

It is important that leadership is able to find a unified strategy and connect corporate vision with strategic execution, customer service, and employee resilience in order to exceed customer expectations moving forward.

In the area of wealth management, there is increasing demand for alternative investments such as:

• Private equity
• Commodities
• Hedge funds
• Real estate investment trusts (REITs)
• Intellectual property

Some of the other key wealth management trends to watch include accelerating growth among independent registered investment advisors (RIAs), more RIA industry consolidation at the top, increasing use of cloud-native computing, and “un-commoditizing” investment management.

The private credit space is also transforming. As banks face regulatory pressures and surging competition from non-bank players, there are opportunities for alternative lenders to bridge the gap. Success will hinge on infrastructure and risk management capabilities, including analytics for credit assessment and portfolio monitoring. For smaller companies, partnering with larger firms and investing in tech infrastructure will be vital to scale efficiently while maintaining strong credit quality standards. 

M&A

In recent years, global markets in the financial services industry have seen significant growth. Much of this growth came as the sector underwent significant consolidation and diversification. Between capital at record highs and interest rates staying low, plus a need to diversify, deal activity is keeping up plenty of momentum in an ideal environment.

The usual players remain active, while new entrants to the M&A market are looking to add to their existing offerings while market conditions are positive. In order for institutions to remain competitive, they will need to stay keenly focused on:

• The digitalization of services
• Operational efficiencies
• Risk management solutions
• Transformation of ways to serve customers
• Reducing costs and improving profitability
• Embracing AI as a key solution for banking innovation

Many of these objectives can be achieved through mergers, acquisitions, partnerships, and strategic alliances.

Community banks have been focusing on internal restructuring and organic growth. The larger institutions seek to expand capabilities and scale efforts by acquiring tech platforms, specialized talent, and robust product portfolios. Firms should assess whether they are better positioned to be potential buyers or targets, maintaining focus on strengthening core operations and strong capital positions.

Consumers also demand that they enjoy a more seamless digital experience when it comes to handling their money. Financial companies must adapt to this demand if they do not want to lose business. M&A will be a key strategy to address these issues.

Our Recent Success Stories in the Sector

Some of Benchmark International’s more recent successful deals in the financial space include:

• The transaction between Silexx Financial Systems, LLC and Chicago Board Options Exchange (CBOE)
• The acquisition of Michael Robb Accountancy and Taxation Services LTD by JM Taylor Accountants & Business Consultants
• The sale of ProStar Adjusting to Team One
• The acquisition of Mabra Management, LLC by Biltmore Insurance
• The transaction between Accountants and Business Advisors, LLC and the Accounting Lab Group, LLC
• The sale of George W. Evans & Associates, Inc. to Nationwide Brokerage Solutions Insurance Agency, Inc.
• The acquisition of Integrity 1st, Inc. by OneDigital, which won an M&A Atlas Award for Private Equity Add-on Deal of the Year

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