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Consultant banks: the new frontier?

Recently I answered a question on LinkedIn regarding the main drivers of growth in the operating models of financial services.

Briefly, the question related to whether there are alternate models for managing the operations of financial services that go beyond the pursuit of efficiency, productivity, etc.

I had then responded that the boutique banks will gradually move toward organizational structures typically found in consultancies / legal firms, i.e., the partnership structure.

Yesterday, I got thinking further on the topic and, like George Bernard Shaw, asked, "why not?!"

Suppose, a group of seasoned bankers with extensive (and close) relationships with the high networth individuals (in a target market, say the UK) come together to set-up a law firm like structure. Each "partner" is responsible for bringing in the money and has to pay for the attendant costs. This will ensure that the partners go beyond the normal course of duties to bring in more revenues for the firm. Moreover, such a partnership can resist competition from the established banks by focussing on a niche area and leveraging their expertise, industry standing, and contacts. Going further, the attendant costs to run such a firm, say the IT costs, can easily be outsourced, say to a boutique IT consultancy.

I understand that the present-day banks do try to follow some of the same principles and that some non-banking finance companies (e.g., private equity firms) may also be operating on similar lines. Further, the current regulations may not allow many of the features that will characterize such "consultant banks".

However, as Samsung claims, "it's not hard to imagine"!

Your views are welcome!! 


Comments: (1)

Paul Penrose
Paul Penrose - Finextra - London 05 September, 2007, 12:00Be the first to give this comment the thumbs up 0 likes Goldman Sachs abandoned its traditional partnership structure and let the public buy pieces of its equity at the turn of the century. The official reason: the old structure was inhibiting prospects for growth and expansion. Unofficially, Goldman's 190 partners stood to reap a bonanza of about $110 million each by owning stock instead of their partnership interests.

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