Looking for the best professional services stocks to invest in? Find out some of the top options plus the pros and cons of investing in these well-heeled professional services shares.
From patent attorneys to merger and acquisition consultants, there are many high-flying professionals who charge hourly rates equal to what the average person earns in a week. If that sticks in your craw, don’t despair. You can get your piece of the action by investing in the companies that provide these super-specialised services.
Professional services firms are incredibly diverse, yet they share a common thread, they offer the expertise of their highly educated and skilled employees to clients in need of guidance, strategy or documentation. We’ll highlight the best professional services stocks and discuss some of the advantages and disadvantages of adding them into your investment portfolio.
What are the best professional services stocks?
This sector is ever-evolving, and identifying the premier professional services shares can be like trying to tie a perfect Windsor knot in the middle of a hurricane. To provide you with a starting point, we’ve headhunted the top 10 professional services stocks globally by market capitalisation:
Professional services stocks represent shares of companies that provide expert services across various industries. These firms offer specialised knowledge and skills, ranging from legal and consulting to accounting and engineering. They cater to businesses in need of strategic advice, operational expertise and other professional solutions.
Types of professional services stocks
The professional services sector encompasses a broad range of companies offering expert knowledge and services across various industries. Here’s a breakdown of the key categories within this sector:
Consulting and strategy services. These firms provide expert advice and strategic planning services to businesses across many sectors. An example is Accenture (ACN), offering solutions in strategy, consulting, digital, technology and operations. Another is Aon (AON), known for its broad range of risk, retirement,and health solutions.
Information technology and digital transformation services. This category comprises companies that specialise in IT services, digital transformation and next-generation digital services consulting. Key players include Tata Consultancy Services (TCS.NS), a global leader in IT services, consulting and business solutions. Also, Infosys (INFY), renowned for enabling clients across 56 countries in their digital transformation journeys.
Human resources and talent management services. These companies focus on providing human capital management solutions, including HR, payroll, talent and benefits administration. Automatic Data Processing (ADP) is a notable example, offering cloud-based human capital management solutions.
Legal and regulatory information services. Companies under this category provide analytics and decision tools for professional and business customers, primarily in the legal and regulatory sectors. A top-tier example is RELX (RELX), a global provider of information-based analytics and decision-making tools.
How to invest in professional services stocks
Open a sharing-dealing account. The first step in investing in professional services stocks is to open a share trading account. Choose a platform that suits your needs, whether it’s one with robust research tools, low fees or a user-friendly interface.
Fund your account. Once your account is set up, proceed to fund it. You can do that via a bank transfer, debit card or any other means allowed by your share-dealing platform.
Research and choose professional services stocks. Research the best professional services stocks for your portfolio and then search for them on your chosen platform. You can search by company name or ticker symbol.
Buy shares. Once you’ve found the professional services stock you’re interested in, select the amount you want to invest and hit “buy.” And just like that, you’re now officially an investor in the professional services sector.
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We analysed all popular share dealing platforms in the UK using 35 data points and combined this with our expert insight from using the apps. The platforms we've selected as best for each category offer stand-out features or a unique combination of elements for a specific aspect of investing. If we show a "Promoted for" pick, it's been chosen from among our partners and is based on factors that include special features or offers, and the commission we receive. Keep in mind that our picks may not always be the best for you – it's important to compare for yourself. More details in our full methodology.
Why do people want to invest in professional services stocks?
Investors are attracted to professional services stocks in the hope of robust growth potential due to the critical role these companies play in the global economy.
Revenue generated by the professional services market, encompassing sectors from consulting to IT services, is projected to grow significantly. A recent forecast suggests revenue for the global professional services market could reach an estimated value of over $88 billion (around £70 billion) by 2025, up from approximately $65 billion (about £55.5 billion) in 2023.
Investing in these companies allows individuals to participate in the growth of firms that are integral to business operations across industries. Whether it’s through consulting, technology services, or legal expertise, these companies are at the forefront of innovation and operational efficiency.
Advantages of investing in professional services stocks
Boardroom bonanzas may await those who suit and boot their portfolio with professional services stocks. Below, we look at all the items on the positive side of the ledger.
Market demand. The professional services sector, covering everything from consulting and legal services to IT and financial advice, is in constant demand. As businesses and economies grow, so does the need for expert advice and specialised services, providing a steady stream of revenue for these stocks.
Recession resistance. Professional services firms often offer critical services that businesses require regardless of economic conditions. While not entirely immune to downturns, many professional services are essential for businesses to navigate challenges, potentially offering stability to investors during volatile periods.
High profit margins. Due to the knowledge-intensive nature of their offerings, professional services firms can command high fees, leading to attractive profit margins. This expertise barrier creates a competitive edge and can result in strong financial performance.
Scalability. Many professional services firms have the potential to scale rapidly with minimal capital expenditure. Unlike manufacturing or retail, professional services can expand their client base and service offerings without significant physical assets, which can lead to higher returns on investment.
Recurring revenue models. Firms in this sector often operate on retainer or long-term contract bases, leading to predictable, recurring revenue streams. This can provide investors with more stability and visibility into future earnings.
Global expansion opportunities. With the rise of digital platforms and remote work, professional services firms have unprecedented opportunities to serve clients globally, opening up new markets and growth avenues.
Disadvantages of investing in professional services stocks
Beneath the polished facade of boardrooms and business deals, investing in professional services stocks carries its own set of drawbacks to weigh up.
Market sensitivity and regulatory changes. The professional services sector is closely tied to the broader economic environment and regulatory landscape, which can shift suddenly due to political changes or global events, affecting firms’ operations and profitability.
Talent retention and acquisition. The success of professional services firms hinges on the ability to attract and retain top talent. Competition for skilled professionals can impact service quality and costs, influencing company performance and stock value.
Client concentration risk. Some professional services firms may rely on a limited number of large clients for a significant portion of their revenue. Loss of a major client or changes in client needs can pose financial risks.
Technological disruption. Rapid technological advancements can render existing service models obsolete, requiring continuous investment in innovation and adaptation to maintain competitive edge.
Billing and utilisation rates. Professional services firms’ revenue often depends on billable hours or project-based work, making them susceptible to fluctuations in demand and efficiency in service delivery, impacting earnings predictability.
Expert comment - Which country is the leader for professional services stocks?
Believe it or not but the UK is a force to be reckoned with in this sector as we now have a largely service based economy. However, across most sectors and stocks, the US is always primed to be a huge money-maker.
What's interesting about professional services stocks is that you can find these companies in countries around the world. However, most of the biggest firms tend to come from the UK , the US and Europe - and then they outsource and control operations in other regions.
Alternative ways to invest in professional services stocks
Other than investing in individual stocks of companies in the professional services sector, there are other alternative ways of gaining exposure to this industry. Here are some of your options:
Index funds and exchange-traded funds (ETFs). Investing in ETFs or index funds focused on the professional services sector is a viable alternative to buying individual stocks. These funds represent a collection of various professional services-related stocks, providing broader industry exposure and potentially reducing risk through diversification.
Investment funds. Here, a company pools money from individual investors and then invests it in a diversified portfolio of stocks. Investors have to pay a fee, however, for having someone else manage the investment for them.
Investment trusts. These work in a similar manner to funds, with one major difference. While funds are open-ended, allowing continuous trading of stocks and investor withdrawals, investment trusts are closed-ended. The funds are locked in, which allows a more long-term approach.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Pros and cons
Pros
Steady and diverse demand across various sectors
Resilient during economic downturns
High profit margins and easily scalable
Cons
Vulnerable to market and regulatory shifts
Competition retaining top talent
Risk of technological obsolescence
Bottom line
Whether you’re aiming to broaden the horizons of your investment portfolio or seize the lucrative high profit margins and expansive global opportunities that professional services stocks offer, there’s a reserved seat for you at the boardroom table.
However, it’s crucial not to become dazzled by the sweeping, panoramic views afforded by the towering corporate skyscraper of this investment landscape. Even the best professional services stocks frequently face challenges and headwinds. So take plenty of time to think about whether you want to promote these stocks into a key position in your portfolio.
Yes, investing in professional services stocks can lead to profitable returns, particularly if you focus on firms with solid business models and effective management strategies. However, as with any investment, there's always a risk you could get out less than what you put in.
The primary risks include: market sensitivity to economic fluctuations, challenges in retaining talent, regulatory changes, and the potential impact of a narrow client base on revenue. All of which can influence a professional services firm's financial health and stock price.
Professional services stocks can be a solid choice for long-term investors, especially those focusing on companies with robust business strategies, consistent performance, and adaptability to market trends. Nevertheless, diversification across various sectors is key to mitigating investment risk.
George is a deputy editor at Finder. He has previously written for The Motley Fool UK, Nasdaq, Freetrade, Investing in the Web, MoneyMagpie, Online Mortgage Advisor, Wealth, and Compare Forex Brokers. He's focused on making personal finance and investing engaging for everyone. To do this he draws from previous work and his Level 4 Diploma for Financial Advisers (DipFA), sharing what he’s learnt. When he’s not geeking out about money, you’ll find him playing sports and staying active. See full bio
George's expertise
George has written 192 Finder guides across topics including:
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