These days, financial firms “need to be really, really on the top of their game when it comes to regulatory compliance,” according to Gwenaël Gavray, partner at Avantage Reply. While these companies certainly have plenty of in-house skills, sometimes they need “niche experts,” as associate partner Ryan Davis put it.

In an interview, Gavray and Davis said that Avantage Reply brings specialised regulatory risk expertise to financial outfits like Banque Internationale à Luxembourg, Pictet & Cie (Europe) and Société Générale Luxembourg.

Avantage Reply has about 50 permanent consultants in Luxembourg, out of a global total of 450, Gavray said. Avantage was founded in the UK in 2004 and opened its Luxembourg office in 2009. In 2011, it became Avantage Reply after it was acquired by Reply Group, which is partially controlled by its founding Rizzante family and partially listed on the Borsa Italiana. The IT services and management consulting group posted €1.48bn in revenue last year and had 10,500 employees worldwide.

“The strategy of Reply is not to be a one stop shop,” said Gavray. Instead the firm is a constellation of “niche players, but by multiplying the number of niche players, you actually are able to [provide] a broad scope of services.” The group has grown by spotting opportunities and either acquiring established players or creating its own internal startups, he said. While each unit operates as a separate business, they often combine efforts on specific client projects.

Avantage, for instance, works closely with Reply Group’s two other subsidiaries in the grand duchy, E*finance Consulting Reply and Business Elements. E*finance focuses on financial operations, while Business Elements is a Microsoft value added reseller. Altogether, the group has around 80 permanent staff in Luxembourg.

Transformation projects

Gavray said that “about two-thirds” of Avantage Reply’s business is in the banking sector, with the remaining third split between the fund industry, insurance and other sectors. Occasionally they take on a non-financial sector project. For example, when a bank CFO moved to an industrial company, he “had some issues with some regulations and he asked us to help him.... but that’s an exception.”

About 20% of Avantage Reply’s work, Davis said, is “providing a temporary resource to the client, because someone goes on maternity leave, paternity leave,” for example. But the bulk are implementation projects where they provide “expertise and guidance on regulatory topics and how to solve regulatory problems.”

These projects are “mainly transformation projects,” Gavray noted. Banks currently “are going through a wave of transformations. Many banks want to get ready for the next level. They want to master their data a bit better. So they are transforming their finance functions and risk functions. And we help them do that.”

Keeping on top of regulatory changes is another key plank of the consultancy’s business. The coming international Basel IV bank capital requirements and the EU’s updated capital requirements regulation, known as CRR II, are fertile ground. “There was a massive change there. We help our clients analyse the impact, and then implement solutions,” and then they advise on “how to deal with those impacts” and how to meet “supervisory expectations”, Gavray said.

Staff development

The executives said their firm has a unique approach to developing its talent pool. Many of its senior advisors are “young retired C-level people.” They could be a former CEO or chief risk officer who stepped down at age 60. “They do not want to put a full stop to their career at the moment that they leave their positions. We have good relationships with them, and we ask them, ‘on top of being independent director, what would you say if you work with us as a consultant for a few assignments?’” They are not providing parental leave coverage, but are furnishing strategic advice on major projects, Gavray stated. “So when we have assignments, we bring to the table the former CEO of a large bank. That has a huge impact for clients. It’s not just because it’s a ‘wow effect’ that you bring a former CEO, but it’s because these guys have huge expertise.”

Likewise, “they’re a really good way to increase the knowledge of our own staff,” Gavray said. He cited the example of a former chief risk officer at a major international bank who was working with a staffer who “had one year of experience.... he actually took five hours of his time just to explain to our junior, why are we doing this?”

At the same time, the firm runs what it calls the “career accelerator programme”. “We take people straight out of business school.... and we place them with our clients” for a month or two at a time. It’s free for the clients on the condition the staffer gets real production experience, and the consultant gets on the ground experience at a couple of different firms.

Growth plans

Looking at the grand duchy’s landscape, the consultancy is keen on the insurance sector. “We had a big influx of insurers who came over to Luxembourg post-Brexit,” observed Davis. “I think that’s one of the biggest growth areas” in the market. “Luxembourg, to some extent wasn’t really ready for it in terms of being able to service them from a consulting perspective.... we want to try and build that here in Luxembourg.”

The firm is currently in the process of kitting out a bigger office in its current building, roughly three times larger than its space, Gavray said. They plan to move “in early August.”

One reason for the expansion, counterintuitively, is the rise in telecommuting. Historically its consultants have primarily worked at client sites. But many financial firms are asking staff to telework one or two days a week. That can be tricky for junior staff who may not have sufficient space to work comfortably at home, and financially punitive for cross-border workers. So the company needs more space for these staffers to work. “Plus the company is growing.”

Indeed, “we have substantial growth ambitions,” said Davis. “We need to grow by about 15%-20%” this year, stated Gavray. The goal is realistic if you consider that “we’ve grown double digits ever since” the company got started.

Taking on the Big Four

Does Avantage consider itself a competitor to the Big Four consultancies (Deloitte, EY, KPMG and PwC)? “I would say we’re not competitors to the whole Big Four, but in our field, definitely,” answered Gavray.

Avantage has nearly “50 consultants focused on regulatory and mainly for banking. If you look at the size of the teams in the Big Four that address these topics, they’re much smaller than us. So, yes, we are very small compared to a Big Four.... but when you really look at the field where we are active, yes, we are really relevant competitors to them.”

This article was published for the Paperjam + Delano Finance newsletter, the weekly source for financial news in Luxembourg. .