VERY MUCH AN EMPLOYER’S MARKET
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Compliance |
Jun 2007 |
Dec 2007 |
Jun 2008 |
Dec 2008 |
Jun 2009 |
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New vacancies |
119 |
107 |
99 |
67 |
64 |
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Closing vacancies |
67 |
76 |
62 |
33 |
23 |
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Candidates registering |
172 |
146 |
165 |
186 |
145 |
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Defensive registrations |
13% |
26% |
32% |
41% |
47% |
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Overall salary increase |
19% |
22% |
21% |
11% |
8% |
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- The number of new vacancies is only marginally down on the previous six months and the fall during the six month period masks an upturn in new vacancies in the last two months.
- The closing number of vacancies is 65% down on the same period in 2008 and 30% down on six months ago. However, the trough was reached in April 2009 and there has been a gradual increase since then.
- The number of candidates registering has fallen, although the number of defensive registrations has continued to rise. Defensive registrations accounted for almost half of the registrations during the period.
- Salary increases fell back to 8% and are now at multi year lows. It represents the lack of bargaining power that candidates currently have in the recruitment market.
MARKET COMMENTARY
The global economy is in recession and the path to sustainable growth in the UK remains uncertain. Whilst green shoots may have been spotted, the financial crisis has a long way to go before we have a clear view of what the future holds. Employment is a lagging indicator and for many it will no doubt feel like a recession until unemployment starts to fall.
The raw statistics in terms of vacancy creation and number of candidates being forced into the recruitment market remain daunting. Vacancy levels are at multi year lows. Redundancies will continue as the financial services industry consolidates and adapts to a smaller economy and more limited business environment.
In the present market, for those who have been made redundant, the major obstacle in finding another job is not simply competition from other compliance professionals, but the lack of vacancies.
However, those companies with vacancies are not necessarily finding it easy to fill them. This is partly due to inflated expectations. There is a recession and, not unreasonably, Heads of Department, after years of candidate shortages, believe they now have the opportunity to recruit their ideal candidates.
They are also working in a corporate environment where any external recruitment is being conducted on a highly selective basis. The authority to recruit externally has to go through higher levels of ratification and is required to demonstrate to a wider audience that they are recruiting people who closely meet the requirements of the job specification.
Whilst there is competition, it is heavily made up of people who are being forced through redundancy, or its threat, into the recruitment market. Their interest is simply to secure another position. Understandably, many good compliance professionals believe it is too risky to change job and are staying with their existing employer. This view is a triumph of perception over reality. Any compliance department that is recruiting is doing so in the knowledge that the economy is in recession. Unlike last year, when changing jobs was considered safe, any potential damage to a company’s business prospects are already clearly visible.
Potential positives
There has been a marginal increase in activity levels during the second quarter of 2009. Whilst we would be reluctant to predict any immediate improvement, it is unlikely that the market will deteriorate further.
Many compliance departments are reporting staff shortages. If effective compliance is essential to business then the point will be reached when external recruitment becomes a necessity.
Further regulation, designed to ensure that the misplaced risks that were taken in the financial services industry cannot readily be repeated, is also likely to boost the compliance recruitment market. The FSA will be granted wider powers and compliance departments will need to respond.
Regulatory and other changes that are likely to impact on the compliance recruitment market include:
- In the retail sector, including banking, wealth management, general and life insurance, the major regulatory initiative which is still gathering momentum is Treating Customers Fairly and Complaint Handling. Although this is not new legislation, there is a realignment of existing in house policies and improvements to their efficiency.
- Within the banking sector, a major development is the scaling down of the Banking Code Standards Board (BCSB) and the subsequent incorporation of the Conduct of Business (COB) legislation into the FSA’s remit. Whilst it is not clear if the FSA intend to make immediate changes to the COB provisions, they will surely come under considerable pressure to ensure that stronger liquidity safeguards are incorporated into these sourcebooks.
- It is clear that the Madoff debacle will ensure wholesale changes to the regulation of the hedge fund sector both within the UK and the US. Although hedge funds have been exempt from the scrutiny of the SEC, it is under pressure for failing to spot the “red flags”. Proposed new legislation in the form of the Hedge Fund Transparency Act will help ensure against future embarrassments. This will likely influence the FSA’s strategy and perceptive hedge funds may soon be making pre emptive hires. However, the European Commission’s proposals to regulate alternative investment fund managers could, in their current format, drive hedge funds out of the EU and therefore from London to Switzerland.
- In the wholesale insurance sector, the EU’s Solvency II directive will be the major focus of their compliance and risk strategies during the coming year. Based on the Basel II legislation, the 3 pillars surrounding capital adequacy, governance and transparency would suggest that the days of “doubling up” compliance, risk and audit within corporate governance divisions may come to an end.
CANDIDATE AVAILABILITY
Redundancies have increased the number of immediately available candidates to historically high levels. The sectors that have been hit the hardest, with greatest candidate availability, are investment banking and retail financial services.
- Within investment banking, whilst there is only limited recruitment, the banks are demanding candidates with a mix of Policy and Monitoring experience across various product lines and jurisdictions. Those who meet these criteria remain in short supply.
- Candidate availability, with institutional asset management experience, is high, particularly senior level staff. However, within wealth management, there are shortages of Policy and Monitoring specialists.
- There are no shortages of candidates within retail banking and there are readily available candidates for the Anti Money Laundering and Financial Crime positions that have become available.
- With the general insurance sector, there are shortages of Policy and Monitoring (ICOB) specialists. Demand from Lloyds market companies for generalist associate level recruits is exceeding the available supply. Within the life and pensions sector there is good availability of candidates.
ANALYSIS BY SECTOR
Here are some observations and conclusions by market sector:
INVESTMENT BANKING
The investment banking sector was hit hard in the second half of 2008. Redundancies have continued into the first six months of 2009 and many recruitment freezes remain in place. For those who have been made redundant, there are only limited opportunities in investment banking. Those finding it difficult to regain employment are product specialists such as debt, capital market or fixed income compliance officers.
Many line managers wish to recruit additional staff. They are producing the same amount of work, in many cases more, with reduced head counts, which is placing increased pressure on existing teams. There is evidence that some compliance officers working in investment banks have resigned due to stress. Despite these internal pressures and increased workloads, many investment banks continue to reduce costs and apply general recruitment freezes.
Not surprisingly, recruitment in the sector has been limited. In financial crime there has been limited demand for senior AML staff. Any MLRO positions that have arisen have generated significant interest and applicants have faced particularly tough competition. For employers, this is a positive development and has created a large pool of candidates from which to recruit. Unfortunately this means they often seek the perfect applicant, which can lead to a protracted recruitment process.
Candidates have become more flexible in terms of their requirements, particularly with regard to their salary expectations. It is clear that job security has now become more influential. Investment banks are also more interested in generalist compliance staff rather than those with specific product or process specific experience. Those people with a solid compliance CV, with a mix of skills, up to date UK experience and an investment banking related compliance qualification, such as the Securities Institute Diploma, are in the strongest position for re-employment within investment banking.
ASSET / WEALTH MANAGEMENT
The institutional asset management sector had already been badly hit in 2008 by the credit crunch. However, the sharp fall in asset prices in the first quarter of 2009 further diminished revenues and prospects for the sector. Cutting costs has become an imperative, which has resulted in further redundancies and ensured that recruitment remains subdued.
Redundancies have included many senior staff, a number of whom have been forced to enter the recruitment market. It would appear that their roles are being rationalised and often assimilated into other functions, such as legal. Remaining staff have been required to assume additional responsibilities, which in many instances is putting significant pressure on them. Unfortunately, the budgets to recruit do not exist.
There has also been a degree of uncertainty in the sector. A number of financial groups have reportedly been considering the sale of their asset management divisions. This has inevitably impacted any future recruitment plans.
The recent increase in risk appetite and uplift in the valuations of a number of asset classes may bring relief to the sector. However, this will need to be confirmed as a more general trend, rather than a short term bounce, before recruitment in the sector responds.
Retail asset management, including wealth management and private banking, has experienced far fewer redundancies and a number of companies have actively recruited during the last six months. This has included both larger groups and smaller boutiques. They stand to gain from any increases in asset prices and proposed tax increases should also have a positive effect for the sector in helping promote tax efficient saving schemes.
The marketing of products either directly or through IFAs is leading to a preference for compliance staff with good commercial mindsets and an understanding of the process.
Vacancies this year have centred around Monitoring Analysts up to senior manager level and vacancies for Anti Money Laundering and Financial Crime specialists. This has continued a trend that developed in 2008 and, unlike last year, there is now a better supply of candidates with the requisite skills. We anticipate that should the market continue to improve then demand for policy and financial promotions specialists will emerge as companies seek to meet their TCF and marketing obligations.
The development of the hedge fund industry was a source of significant demand for compliance staff up until the middle of 2008, as was the growth in innovative and alternative investment products. The hedge fund industry has contracted sharply since then and innovation is taking a back seat to more traditional investment products. Demand for compliance staff has suffered accordingly. However, it is clear that this previously unregulated sector, particularly in view of the Madoff scandal, will be receiving regulatory attention. We anticipate this as being a source of future demand for compliance staff.
RETAIL BANKING AND INSURANCE
Retail banking
The retail banking market remains subdued with redundancies still emerging from the lending and mortgages sectors. Compliance staff in these areas have suffered badly. There have been limited vacancies generated and further rationalisation looks set to continue. Many who have been redundant for several months are now actively considering alternative careers.
Demand from the retail banks has centred on monitoring managers in the £50-£70,000 salary range. They have generally been seeking candidates with strong retail banking backgrounds and proven success in monitoring. They have not been considering candidates with transferable skill sets from the mortgage or insurance sectors. The number of redundant retail banking candidates and the elevated expectations from employers is ensuring that competition for the limited number of vacancies is high. Only those candidates who meet all the necessary criteria are receiving offers.
Insurance
Insurance is proving to be the strongest sector with greater demand for staff and fewer redundancies than other areas.
Within general insurance, several senior or associate level vacancies were released during the first six months of 2009, only for a number of them to be withdrawn or put on hold. However, redundancies have been low and the pools of redundant compliance staff that have developed in other sectors are not a feature of the general insurance market. Experienced general insurance staff are finding demand for their services, although vacancies that might have been filled externally are often being filled by internal promotions.
The core skills in demand are a strong understanding of TCF/ Complaints Handling, Financial Promotions and Sourcebook Monitoring (ICOB).
The Lloyd’s market is in comparatively good health. Many companies still have to put in place compliance and corporate governance structures comparable with their general insurance counterparts. However, both Lloyds Managing Agents and Syndicates have been recruiting and, unlike other areas of compliance, skill shortages remain common. Solvency II is becoming an immediate concern and this has and will promote increased levels of recruitment for the rest of 2009 and into 2010.
Within the life and pensions sector, there has been some rationalisation, particularly amongst those companies that are part of a larger financial services group. Whilst some compliance staff have been made redundant, employment has been broadly stable. Demand has come primarily from larger groups who have come under additional scrutiny from the FSA during the last six months. Demand has been at all levels for generalist and financial crime specialists.
INTERIM STAFF
After a strong start to the year, the interim market, the usual retreat for those who have been made redundant, slowed significantly during the second quarter of 2009. The number of contract vacancies has now followed the number of permanent vacancies down to historically low levels.
Not surprisingly, with increased numbers of candidates entering the market as a result of redundancy, the competition for generic compliance vacancies is at an all time high and rates have suffered.
Unfortunately and somewhat ironically, many of the interim roles becoming available have been niche specialist roles. Even with the increased numbers of compliance staff that are readily available, these roles are not necessarily easy to provide staff for.
Whilst the market is currently flat, we would expect it to pick up on the back of the excessive workload that a number of compliance departments are reporting and any new regulatory requirements. As with MiFiD, applicable firms will need to have the Payment Services Directive and BCOB regulations implemented by November and TCF remains an ongoing concern.
Fixed term contracts, primarily as a result of maternity cover, are increasing. Historically, these have been a slight anomaly in the interim market as career contractors have not wished to be remunerated via the payroll and permanent staff will not move for a contract role. However, redundancies have resulted in more candidates willing to look at fixed term contracts and they are becoming increasingly popular amongst employers.
SUMMARY / PREDICTIONS
Given the unprecedented contraction in the UK economy, far fewer jobs have been lost in compliance than might otherwise have been anticipated. That said, the fall in demand has been acute.
It is likely that there will be further redundancies as the financial services sector consolidates and any rebound in the economy will take time to filter through to employment.
In our view, the compliance recruitment market is at or possibly past its nadir. It is quite possible that in the next six months compliance recruitment will gather momentum, as the widely publicised calls for enhanced financial regulation translates into employment.
However, it is necessary to appreciate the unprecedented fiscal and monetary stimulus applied not only to the UK economy but others around the world. The cost of this has not even begun to be recognised or met and the way ahead remains uncertain.
Other sections
To view further sections of this report, please visit:
- Executive summary
- Compliance – salaries
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