Financial Services Cases 2026: Basis Points on a Stock

The financial services revenue that rides on an asset stock

Write the revenue line the way the business reports it. Revenue equals average client assets times the fee rate. The fee rate is quoted in basis points, and a basis point is one hundredth of a percentage point.

That single equation has three consequences that no unit business shares.

The first is that the assets move without anyone selling. Market return changes the revenue base every day. A manager can lose clients and still report growth, and it can win clients and still report a decline.

The second is that growth splits in two. Net flows are new money less money leaving, and they measure the commercial effort. Market return measures something nobody in the building controls. A case that reports growth without separating them has not said anything useful.

The third is that price and volume are measured in the same currency. A ten basis point cut and a decline in assets both reduce revenue, so they trade off directly. That trade is the whole exercise, and it is arithmetic rather than judgment.

One term sits outside the fee equation and is easy to miss. Client cash gets swept into a deposit or a money fund, and the platform keeps the difference between what it earns and what it credits. That is a spread business bolted onto a fee business, and in 2026 it is large.

Four revenue identities inside financial services

Financial services is one label laid over businesses whose revenue lines have nothing in common. A prompt that says financial services has not yet said which equation applies, and asking which one is the first clarifying question worth spending.

Two properties run across all four. Each prices in basis points, or in points of something large, so a change too small to notice moves a number too large to ignore. And each books revenue on a base that moves with no sale involved: a market level, a rate curve, a claims year, a transaction volume.

One consequence for an interview. The chain worked on this page transfers to the other three with the base and the rate swapped, so a candidate who has drilled a fee chain once can run a spread chain or a take rate chain without learning a second structure. The direction of the risk is what fails to transfer. A fee business loses revenue when its base falls, while an insurance book loses money in a year when the base behaved and the claims did not.

Each sub-sector has its own page here. Lending sits in banking case interviews, underwriting in insurance cases, and take rate businesses in fintech cases. The firms that sell this work, and the practices they organize it under, are in top financial services consulting firms, which answers the other half of the same question: whose desk the prompt came from.

Calloway Wealth, a financial services case from flows to fees

Calloway Wealth advises private clients in the United States. The chief executive wants to know what to do about pricing. Here is the position.

1. Opening client assets. $14.2 billion on 1 January.
2. Gross inflows. $1.40 billion for the year.
3. Outflows. $1.05 billion for the year.
4. Market return. 6.0 percent on opening assets.
5. Fee rate. 78 basis points on average assets.
6. Operating cost. $82 million a year, 70 percent of it fixed.
7. Client cash. 4.0 percent of assets, swept.

Flows first. Inflows of $1.40 billion less outflows of $1.05 billion gives net flows of $350 million. Against the opening base that is 350 over 14,200, which is 2.46 percent of organic growth.

Market return second. 6.0% on $14.2 billion is $852 million. So closing assets are 14,200 plus 350 plus 852, which is $15,402 million.

Now the revenue base. Average assets are the mean of opening and closing, so 14,200 plus 15,402 over two, which is $14,801 million. Then 0.78% on $14,801 million is $115.4 million of revenue.

Read the growth correctly before you go on. Assets grew 8.5 percent, from 14,200 to 15,402. Of that, 2.46 points came from the sales effort and 6.0 points came from markets. The commercial engine delivered less than a third of the headline.

Ten basis points, and what it takes to stand still

A competitor drops to 68 basis points and Calloway is asked to match. Price the request before answering it.

At the new rate, 0.68% on $14,801 million is $100.6 million. The cut removes $14.8 million of revenue, which is 14.8 over 115.4, or 12.8 percent of the top line.

Now solve it backwards, which is where the case turns into a decision. To earn $14.8 million at 68 basis points, Calloway needs 14.8 divided by 0.0068, which is $2,176 million of extra average assets. Against a $14,801 million base that is 14.7 percent more money under management.

Compare that with what the firm actually gathers. Net flows were $350 million. So 2,176 over 350 is 6.2 years of normal net flows to stand still on revenue.

State it in exactly those terms. The pricing decision is not a pricing decision at this firm, because no plausible flow plan offsets it. Either the fee holds, or the cost base changes, or the firm accepts a permanently smaller business.

Fixed cost turns a small cut into a large one

Operating cost is $82 million, and 70 percent of it is fixed. Salaries, compliance and platform licenses do not fall because a fee schedule changed.

Baseline margin first. Revenue $115.4 million less cost $82.0 million leaves $33.4 million, which is 28.9 percent of revenue.

After the cut, revenue is $100.6 million and cost is unchanged at $82.0 million, leaving $18.6 million, which is 18.5 percent.

So ten basis points of price removed 10.4 points of margin. The multiplier is the point: a 12.8 percent revenue cut became a 44 percent profit cut, because 18.6 over 33.4 is 0.557.

Push on the cost lever and see how little it gives. Cutting the variable 30 percent of cost by a fifth saves 0.20 times 24.6, which is $4.9 million. That recovers about a third of the $14.8 million lost, and it does so by thinning the service the fee is charged for.

The cash sweep is a second business

Client cash is 4.0 percent of average assets, so 0.04 times 14,801 gives $592 million of swept cash. Calloway earns the short rate on it and credits clients a deposit rate.

The Federal Reserve put the three month Treasury bill at 4.10 percent on 28 September 2026, checked 30 September 2026 at federalreserve.gov. The FDIC put the deposit weighted national average paid on savings at 0.37 percent as of 21 September 2026, checked 30 September 2026 at fdic.gov. The gap is 373 basis points, and 3.73% on $592 million is $22.1 million.

Hold that against the fee line. The sweep earns $22.1 million against $115.4 million of advisory revenue, which is 19.1 percent of the top line on 4 percent of the assets. Per dollar held, the sweep earns 373 basis points where advice earns 78.

That asymmetry sets up the risk worth naming. The sweep revenue disappears if short rates fall or if clients move cash to a money fund themselves. A recommendation that defends the advisory fee while ignoring the sweep has protected the smaller of the two rates.

The same basis point, read from the client side

One point of fees has been quantified by a federal agency, in dollars, and the arithmetic is worth doing by hand. The Department of Labor writes that on a $25,000 balance over 35 years at a 7 percent average return, fees of 0.5 percent leave "$227,000 at retirement", fees of 1.5 percent leave "only $163,000", and the difference "would reduce your account balance at retirement by 28 percent", checked 30 September 2026 at dol.gov.

Check it. Net of 0.5 points the compounding rate is 6.5 percent, and 25,000 times 1.065 to the power of 35 is $226,600, which the agency rounds to $227,000. Net of 1.5 points the rate is 5.5 percent, and 25,000 times 1.055 to the power of 35 is $162,800, rounded to $163,000. The reduction is 64 over 227, which is 28.2 percent. All three published figures hold.

That is the same basis point Calloway is arguing about, seen from the other end of the contract. It explains why fee pressure in this industry is structural rather than cyclical, and a candidate who can say it with the number attached is arguing from evidence.

Where a fee revenue answer loses points

The weights below are ours, read from the rubric code, and no consulting firm publishes one. Each weight and the argument for it appear on how an answer is assessed.

Drilling the basis point chain

Rework Calloway with the market return changed and watch how much of the answer it moves.

Set market return to zero. Closing assets become 14,200 plus 350, which is $14,550 million, and average assets become $14,375 million. Revenue at 78 basis points becomes 0.0078 times 14,375, which is $112.1 million. Pre-tax profit becomes $30.1 million and the margin 26.9 percent.

So a full six points of market return was worth $3.3 million of revenue this year, because the market moves the base and the base is averaged over the year. Next year it compounds, and that lag is why fee businesses look smooth in a good decade.

Then reverse the pricing question. At 88 basis points, revenue is 0.0088 times 14,801, which is $130.3 million, and the margin is 37.1 percent. Ask how many assets the firm could lose and still match today's profit: it needs $33.4 million of profit, so $115.4 million of revenue, so 115.4 divided by 0.0088, which is $13,114 million of average assets. That is 11.4 percent less money, and it is the number a premium pricing argument has to beat.

Our breakeven calculator handles that threshold algebra, and the structuring drill will time a fee revenue tree and score how cleanly flows, markets and price are separated. Both are free and need no account.

For the two rate version of the same balance sheet logic, see banking cases. For a float invested against claims rather than a fee charged on assets, see insurance cases. For a take rate on volume rather than on a stock, see fintech cases.