Why banks are hiring more consultants as automation threatens jobs

In theory, it's not a great time to work as a consultant in financial services. Certain banks such as Credit Suisse are cutting back on both contractor and consultant headcount in a bid to protect their full-time employees, largely because they still need to cut costs.

But looking at the industry as a whole, financial services organisations across the board are taking on more consultants – they increased their consulting spending by more than $1bn last year, up 8.3% to reach a total value of $14.8bn, according to a new survey by research firm Source Global Research. Predominantly, this continues to be on regulatory spend, but consultants are also being brought in to implement technology projects around regtech, machine learning and AI, and cognitive computing.

“There is a greater interest in robotic automation and artificial intelligence, which gives rise to more consulting work,” said Fiona Czerniawska, director of Source Global Research.

“Financial services has been a significant growing market for a long time,” Czerniawska said. “It’s already very big and its growth rate is above average. “Why is it growing? Regulation continues to be a big driver, but much more commonly it’s about business transformation, especially digital transformation, as firms want to find more efficiencies and cut costs internally and finding new ways to engage consumers and deliver customer service."

Thomas Puthiyamadam, U.S. management consulting leader and global digital services leader at PwC was quoted in the report and said that the rise of robotics in financial services, saying that robotic process automation (RPA) in finance is “taking off like a rocket,” completely transforming how the finance function works – potentially leading to fewer jobs.

There's just one problem, particularly if you're looking for a consulting job – automation is hitting the consulting industry itself.

“There’s an extension to consulting firms themselves, because when hiring, they need to get more people in because the market is growing, but they’ll also potentially be hiring fewer people because the consulting firm’s functions are being automated, said Czerniawska.

“It’s going to happen more in the future, and most big consulting firms and many small ones are starting to think about what this automation means for them,” she said. “They might put the brakes on recruitment or at least ask, ‘Should we slow hiring because in five years’ time we’re going to be laying off people?’

The focus for recruitment right now is junior recruits, says Czerniawska. "But if this robotic automation becomes more pervasive, they are going to want to recruit junior people but potentially fewer of them.”

Photo credit: mokee81/GettyImages

Photo credit: mokee81/GettyImages