How might Covid-19 affect the financial services sector?

Armstrong’s note of March 19th (‘Covid-19 - impact, support, and opportunities’) gave examples of sectors & subsectors that Armstrong believe to be categorised as either resilient, pressured, or snap-back opportunities during the ongoing pandemic.

This note looks at key themes for investors to consider in the financial services sector during this downturn, and the recovery to come. Further notes in the next few weeks will look at Armstrong’s other core sectors: Business Services, Technology, Industrials, Travel, Events and Built Environment.

Analytical framework - how we modelled the likely impact of Covid-19

The Armstrong Framework model accounts for the likely impact of Covid-19 by grading a sector (and then subsector or company or a portfolio) across a range of key metrics. This allows us to generate an initial categorisation of pressured, resilient, or snap-back. From there, we take a more detailed look at a sub-sector or a company’s dynamics, to generate recommendations which maximise opportunities and minimise risks.

For the financial services sector the key metrics are:

Risks and opportunities - how selected subsectors might respond to the challenges

The results of this analysis for selected financial services subsectors are as below;


Red is likely most affected (“underweight”).

Mid green is likely most resilient (“neutral”).

Dark green is most likely to snapback quickly (“overweight").

Note; We are happy to run specific subsectors and companies through our model and share the output and our insight with you. Please get in touch with our financial services sector experts below.

Recommendations for investors – how investors can generate value from financial services during/after Covid-19?

  • Review of the scalability, robustness, and capacity of technology and operations is likely to highlight known issues with legacy technology. This will result in new purchase drivers and a switching trigger.. Technology/technology-enabled service providers could provide an out-of-the-box/easily customisable solution for customers, taking advantage of the structural shift to digital/cloud-first architecture. E.g. digital transformation, data analytics, FS tech.

  • Firms should investigate better, lower-cost ways to serve customers. For example, a digital transformation strategy could deliver front-to-back process automation allowing customers to self-serve. High quality customer service will become even more important. E.g. client lifecycle management for IFAs and investment platforms.

  • Reducing the cost of “running the factory” is vital in the short-term, but management teams need to ensure they have the right capabilities and adequate capacity to take advantage when their market reopens to new business. Targeted cost-base reduction through direct-to-customer service delivery, delivery automation and outsourcing will continue to be a focus. E.g FS tech, BPO.

  • Customer behaviour will change in unexpected ways – for example, tech/tech-enabled businesses should see much stronger purchase drivers/clear triggers to purchase, but demand will likely be pushed out to the right for much of the rest of the year. E.g. FS tech and tech-enabled services.

  • Process integration and workflow redesign is an opportunity. Areas where companies throw money, people, and spreadsheets to fix problems will be exposed by remote working and headcount reduction (e.g. manual processing/“straight to paper” not automated, overnight batches not real-time, silos lack of enterprise-wide view). Businesses will have to improve every manual/unintegrated process. E.g. risk management and regulatory services and software.

  • Covid-19 has shown up which services/technology really are business-critical/needed to meet regulatory requirements. There will be opportunities for financial services consultancies and B2B information providers where businesses need high quality information more quickly in order to make better decisions. E.g. regulatory software and services.

Next steps – do you need support?

Armstrong is working with PE investors and portfolio companies to understand the new normal, identify risks and opportunities, and support management teams navigating this crisis.

If you would like to discuss the themes in the article in more detail and understand their impact on specific companies or sub-sectors, then please contact one of our financial services sector experts:

Simon Hemsley, Head of Financial Services +44 7957 340534,

Peter Cookson, +44 7871 425467,