05 March 2019 by Caleb Hawkins and Harry Rogers. Sam Turner and Deepan Sakthithasan
As organisations focus on Europe, we look at the risk and compliance recruitment market in London
Brexit didn’t have a major impact on the appetite to hire exceptional compliance talent in 2018. The MiFID II implementation date meant there was huge demand for regulatory professionals with the ability to act as SMEs for regulation who could advise on the potential impacts. Salaries reflected this; two of the highest paying roles seen during the year were Regulatory Advisory and Regulatory Product Advisory.
Whilst the main driver for permanent compliance recruitment tends to be new regulations, political and economic changes influenced hiring in 2018. Brexit has presented opportunities across Europe but not at the expense of UK based jobs. The buy-side has been focusing on Luxembourg and Dublin, whilst the sell-side has placed their attention on Dublin, Frankfurt and Paris. Brexit and EU recruitment will increase as we move into 2019, however many clients are adamant that London will remain their ‘centre of excellence’.
There was widespread uncertainty in the early months of the year for the contract side. The bigger banks were uncertain about how Brexit would influence upcoming, large scale regulatory projects, current projects and hiring.
The majority of employers (83%) envisage the UK compliance market as less attractive because of Brexit – across all disciplines this was 49%, suggesting compliance jobs may be difficult to fill in the post-Brexit landscape than other sectors. Compared to 2017, the number of jobs was down 37% which backs up the belief that 2018 was challenging.
The biggest change to hiring was the way contractors are recruited due to decreased hiring from bigger banks, as well as recruitment from smaller banks/asset management firms and brokerages. Fixed term contracts increased by over 50% compared to the previous year, as firms attempted to reduce costs. Contractors need to change their way of thinking in terms of not utilising their LTD companies.
The most popular compliance roles, skills and qualifications In the past 12-24 months, the industry has seen new key regulations, leading to an increased need for Regulatory Advisory experts, including the Financial Crime Regulatory Advisory. Professionals who are SMEs in MiFID II, Market Abuse Regulation (MAR) and/or The Fourth Anti-Money Laundering Directive (4MLD) have been the most in demand on the sell-side.
Whilst product compliance advisory professionals are experts in key regulations, they are experts within a particular asset class. For example, a fixed income compliance officer may be a regulatory specialist in fixed income products (rates, credit, foreign exchange); an investment banking compliance officer could be an expert in regulatory issues that may affect mergers and acquisitions, equity capital markets and debt capital markets.
“Brexit has presented opportunities across Europe but not at the expense of UK based jobs”
On the temporary side, compliance monitoring was the busiest area of hiring. It grew from smaller tier 2 firms over the first half of 2018 into larger tier 1 banks in Q3. Previous desk/thematic reviews experience is desirable but not essential – where not imperative, candidates with good product knowledge, mixed with different operational experience or an investigative background are sought after.
Throughout 2018, there was an increase in junior level hiring. Even though a small amount of experience is desirable, the CISI and ICA diplomas are still in demand.
Salaries dropped off for a number of roles, due to the increase in fixed term contract hiring. There are also less large scale projects, meaning candidates can’t play projects off one another. In the past, you may have seen two or three large scale remedial projects going on at any one time across the City, causing banks to pay against each other to attract the best talent. It wasn’t the case in 2018.
One of the main trends was the appetite to improve gender/diversity ratios. It is important that shortlists contain diverse candidates, evenly split in terms of gender and other areas, without compromising on quality.
In addition, more organisations are changing their views towards flexible working, whether this be adjusted working hours or the opportunity to work from home.
Due to the ever changing regulatory landscape, technology will always play a massive role in compliance trends – firms need to adapt and keep new technologies at the forefront of their compliance controls in order to swiftly respond to new regulations.
Conversations are always being had about whether computers will replace humans in this area – it is unlikely as human input is necessary to identify false positives in regards to screening, or trade data manipulations in terms of the variety of language that can be used. Advances in technologies will always create opportunities in compliance.
Excluding the increased hiring in the EU during the second half of 2018, Brexit has had little impact on permanent compliance recruitment.
We expect this to change in 2019 as there will be increased regulatory hiring across Frankfurt, Paris, Dublin and Luxembourg, as well as the UK. The view from many organisations is that the UK and London will remain their main hub for attracting and retaining the best compliance talent.
The rise of start-up/FinTech organisations provides opportunities for regulatory compliance and financial crime officers; this can appeal to existing compliance officers as it presents them with a new, exciting challenge.
Hiring managers must act quickly when they identify strong potential; the market moves fast and there is always a competitor willing to move quicker.
2019 is likely to be another testing year for temporary compliance recruitment. This said, a number of firms realised they still need to hire for BAU – but what is the answer for large scale project hiring? Will jobs in London make it through another stern test? Firms need to be aware of the IR35 reform – the need for contractors in London will continue, but the landscape is changing.
Compliance contractors should stay aware of market conditions - whilst matters may seem uncertain, it doesn’t mean there won’t be opportunities, but you will need to be flexible and open to changes in rate or even consider a fixed term contract.
The desire for risk professionals with rounded skill sets was evident in 2018. Credit risk clients wanted to see interviewees with extensive leveraged finance experience. Another significant trend was the hiring of risk professionals outside the UK, with Dublin, Frankfurt and Paris seeing sizeable growth. Those with quantitative skills were in high demand; the ability to code in Python or VBA has become essential for all quantitative roles. As the skill set shifted to highly quantitative, daily rates increased – this made it hard to source suitable professionals but it was easier to attract them to positions due to the impressive rates offered.
Establishing roles in European locations was a priority, resulting in a less buoyant market in London. This said, some of the more technical and niche roles continued to be sourced in London and it is unlikely that they will move elsewhere. Hiring managers had a strong pool of candidates to choose from – they would interview everyone before making a final selection. As a result, processes took much longer and counter-offers were prominent. Risk managers highlighted counter-offers as the primary reason they fail to hire.
Professionals looking for roles were generally at VP level within the contracting market or senior AVP and junior directors – competent individuals, who do not need direction or hand holding, were required for projects where their experience adds clear value. The more junior roles are starting to be fulfilled in cheaper locations such as India and Poland. Contract hiring was quiet throughout the middle of 2018, but the uptick in job flow towards the end of the year paints a positive picture for the start of 2019.
The most popular risk management roles, skills and qualifications Credit Analyst – Leveraged FinanceQuantitative Analytics – Multi Asset ClassInvestment Risk – Fixed Income
First class STEM Degrees and the CQF in quantitative fields were desired and the CFA remains a strong option. The more technical the role, the more quantitative skills are required – this resulted in significant pay increases of up to 20%.
For temporary roles, skills across risk model validation were in demand, particularly to IMA and IMM standards. There was also a desire for candidates who have looked at model risk which relates to the risks the model throws up, rather than validating the model by prototyping and documenting changes. The biggest hires towards the end of 2018 were from US banks which have been beefing up their teams in London. This desire for quants was driven by the regulators requiring more models to reduce capital by gaining or maintaining IMM and IMA waivers.
Risk management trends
There has been a drive towards gender equality that will continue; it’s an ongoing concern within risk, which is a male dominated discipline – the balance is gradually improving and we have seen some high quality female professionals.
Brexit was a prominent concern that could get worse as trades being booked in a particular location might require the risk management division to sit there - even if traders are operating in the UK, the risk will be seen as outside the UK and between jurisdictions. Ultimately, this could have knock-on effects on hiring in the City.
Over recent years we have seen how technology is wiping out many of the less complex roles like risk reporting, excess management or VaR reporting and MI focused roles. 2018 was no exception to this.
Risk management predictions
The Brexit deadline makes it impossible to predict how 2019 will pan out. There are two schools of thought – either the UK economy will be obliterated or the turmoil will create a lot of opportunities. Employers need to move quickly when interviewing quality candidates and be prepared for strong counter-offers – they will also need to offer better rates; 44% of risk professionals outlined earning more money as their key career goal for 2019.
Sam Turner is manager of temporary risk recruitment and Deepan Sakthithasan is manager of permanent risk recruitment at Morgan Mckinley