Finance

Very few companies have the capacity to hire a specialist for every aspect of its financial dealings. If you need external assistance with payroll, accounting or any other finance-related activity, you’ll want to understand benchmark prices for hourly fees, get to know the major players and see where you have negotiating power. IBISWorld offers a wide range of financial services research so you can make better decisions, faster.

This graphic shows next year’s average forecast price change for the finance category as a whole, along with a selection of specific sub - categories of finance services. Click into each sub - category to see a buying guide that will get you up to speed quickly on the service.


CATEGORY FORECAST     SUB-CATEGORY PRICE FORECAST  
Finance
1.06%
  401(k) Administration Services
0.8%
Accounting Services
2.3%
Audit Services
0.5%
Business Credit Card Services
1.2%
Payroll Services
0.5%

KEY   <0.1% 0.1% - 1% 1.1% - 2% 2.1% - 3% >3%
See All Categories          

The financial services sector has seen significant shake-ups in recent years. From regulatory reform to monetary policy, financial services providers have faced numerous challenges that have affected their ability to operate. Because of these challenges, as well as factors like declining profitability and rising concentration, most markets have undergone considerable structural changes during the past three years.

Policy Changes

The Dodd-Frank Act (2010)

  • The most extensive regulatory bill since the Great Depression
  • Materially altered the operating landscape for financial services providers
  • Created 400+ new laws that increased federal oversight over banks, insurers and other parties to ensure the health of the US financial system
  • Operators have spent tens of billions of dollars on implementation and compliance costs, leading them to raise prices to offset losses

    Key Takeaway: Buyers will benefit from making strategic decisions, such as locking in multiyear contracts at lower rates, when purchasing financial services

The Federal Reserve

  • The Federal Reserve slashed interest rates to near-zero levels for most of the past decade, limiting operators’ ability to earn interest income
  • Profitability for financial services providers has been constrained, especially among insurers
  • Operators have been reluctant to accept lower prices during negotiations

    Key Takeaway: Buyers must find other areas of leverage; for example, many financial services entail low switching costs, making it easier for buyers to move freely among providers until they receive a satisfactory price

Concentration

Consolidation: to combat higher costs and dwindling profitability, many financial services providers have consolidated to achieve economies of scale. This has led to higher concentration in several markets, signaling eroding competition. For example, the number of commercial banks in the United States has trended downward as consolidation has ramped up during the past three years. Because of this, buyers have less power when negotiating with commercial banks, especially for services like Corporate Treasury Services.

New Entrants: conversely, some markets have seen a decrease in concentration as the entry of new operators has outpaced consolidation. For example, competition in the market for Tax Accounting Services has grown as the number of accounting firms has increased, improving buyers’ leverage in the market.

Outlook

During the next three years, IBISWorld projects that financial services providers will receive some relief from policy changes. The Republican-led Congress has indicated a desire to deregulate the financial services sector, and the House of Representatives passed the Financial CHOICE Act to eliminate some of the provisions of Dodd-Frank. In addition, the Federal Reserve has outlined a plan to raise interest rates, with the goal of reaching a 3.0% interest rate during the next few years.

As financial services providers see an increase in profitability from these policy changes, buyers will have additional room to negotiate rates for services, especially as concentration begins to soften in many financial services markets.

 

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