An overview of recent Compliance recruitment trends seen within the financial services sector in 2020.

As years packed with challenges go, 2020 will take some beating.  However, despite a global pandemic, a US election and continued Brexit-related uncertainty, life does certainly go on.  Financial services are needed by us all and firms in this sector cannot simply hibernate until better times appear.  Equally, regulatory obligations do not reduce due to new market conditions or home-working difficulties etc.  Firms have continued to recruit compliance talent and candidates have moved for the right opportunities.

Changing market dynamics / technology

Following the announcement of the first lockdown in March 2020, banks and financial firms adapted quickly and were largely able to continue their operations with employees working from home.  This was made possible by the crucial role of technology, which is being increasingly harnessed across financial services to improve customer experience, maximise efficiency, reduce operational costs and to ensure continuity of service.

Tech-based change can be seen in the accelerated usage of online banking and consumer finance and payment apps during the pandemic, as traditional branch networks closed their doors under lockdown restrictions.  The utilisation of systematic trading models and the increasing adoption of sophisticated algorithms for a range of market-making, investment, trading and clearing services further illustrates the power and benefit of automation to financial services; and roles at firms embracing this technology remain in high demand from compliance and legal candidates alike.

In many ways, the pandemic has ‘brought the future forward’ and this is a thought shared by the regulator.  In Nov 2020, the new Chief Executive of the FCA Nikhil Rathi commented that “transforming the FCA and the way that it works… involve[s] maximising the use of data and technology, making the FCA more diverse and using the lessons of this extraordinary year to build on the best elements of our organisational culture”.  As to what this transformation will mean for the industry, we will have to wait and see.

Key areas of demand

Despite the various challenges above, the recruitment market for compliance and financial crime professionals in financial services has been surprisingly resilient – with some sectors clearly more active than others.   

The busiest sector for our core disciplines of compliance and legal recruitment was the buy-side and I include: asset managers, hedge funds, pension funds, annuity providers and investment platforms.  We have worked with many hedge fund clients this year, with most demand from those with macro and quantitative strategies, strengthening compliance and legal teams following strong performance and increased AUM.  Other funds and asset managers fared less well, with some reducing mid-senior headcount and replacing with more junior resource to rebalance teams and manage costs.

There has also been a steady flow of work from small to mid-size capital markets firms, including prime brokers, prop traders, retail investment platforms, CfD/spread-betting firms and wealth managers.  Sustained market volatility due to the various macro challenges and uncertainties this year has led some firms to register bumper profits and to see growth and increased demand for their services – and contrary to the experience of most.  Not unsurprisingly, this has led many to increase their capacity in compliance generally and specifically in specialisms such as trade surveillance and market abuse monitoring.

Financial technology (Fintech) firms have continued to add and replace headcount, recruiting mid-senior level compliance officers to lead or support the business and ensure regulatory obligations are properly understood and met.  Increasingly, the chance to work for a small, dynamic business with an exciting new market offering is attractive to many compliance officers.  While roles with start-up businesses may have in the past been overlooked in favour of the stability and progression offered at global banking groups, this is no longer the case.  As many of the major banks downsize, restructure and reallocate headcount to offices in Europe, the idea and perception of job security has changed.  Smaller firms can be nimble and move faster than traditional banks and institutions, providing new solutions to customer needs and taking market share with higher levels of tech innovation.

The growth in crypto-assets and in the number of businesses related to the utilisation of this technology has been another driver for compliance officers this year.  The regulator has actively encouraged new firms with crypto asset-related business ideas to join their ‘Innovation Sandbox’ and test their ideas and proposition in a controlled environment.  Over the last 3 years there have been close to 400 firms join the programme, which gives some indication of the potential for this sector to drive demand for tech-savvy compliance officers and financial crime specialists moving forward.  As Therese Chambers from the FCA said in a speech delivered 5 Mar 2020: “as the value and use of crypto-assets have grown, so have the risks for financial crime.  As crypto-assets enable digital value transfer across the globe, they enable a unique set of potential money laundering risks”.   I expect the appetite for compliance, AML and cyber risk expertise in this area will continue to grow.

Finally, the implementation and embedding of regulatory change and best practice codes of conduct have, as is so often the case, resulted in various interim and permanent compliance requirements across financial services.   Whilst demand for AML and broader financial crime specialists continued post-5MLD, the ongoing requirements of the Senior Managers & Certification Regime (SM&CR) and accompanying conduct rules have led to new Co-Sec, corporate governance and related compliance positions – including policy and surveillance specialists.  While the regulations are not at all new, the need to fully embed policies and to ensure that the right conduct and behaviours are demonstrated consistently across businesses continues to be vital.  Currently, the double challenge of ensuring adequate compliance and surveillance under new home-working practices, combined with the difficulty posed by volatile markets – when spotting unusual trading behaviour can be less clear – highlight the importance of skilled compliance officers, their vigilance and an effective culture to manage these risks. 

Brexit plans – EU offices

While the bulk of the Brexit preparations for global banks and major financial firms was completed years ago, many other firms have actively sought senior legal and compliance officers for European offices.  In some cases, this would be to bolster existing teams with extra capacity, while for others, to instead pursue the necessary regulatory authorisations for new offices in Amsterdam, Paris, Frankfurt or Dublin.  As a specialist search firm with international experience in this space, we have this year recruited Chief Compliance Officer mandates for both Dublin and Paris; and recruited Senior Counsel roles in various international locations, including Amsterdam.

We expect demand for compliance talent across European jurisdictions to continue, with the recently announced Brexit trade deal (the UK-EU Trade and Cooperation Agreement) largely excluding financial services from its remit.  The ‘TCA’ does not make provisions for financial services firms in the UK to access the single market and, as a result, from 1 Jan 2021 UK financial services firms will lose their passporting rights.     

Looking ahead

Following the uncertainty of 2020, the recent EU trade deal and further roll-out of Covid 19 vaccination programmes offer two positive developments as we move into the new year. 

Whilst we do expect a stable level of demand in the first quarter of 2021, it may be Q2 before things really get moving.  It will also be interesting to see whether bonus payments (or lack thereof), or the expected changes to IR35 for contractors will have a meaningful effect in the recruitment market.  Many ‘dyed in the wool’ compliance consultants have this year accepted permanent contracts for the first time in many years and this trend may well continue throughout Q1.

We are likely to see further demand from niche market players and entrants with new market propositions (including those in the crypto space), looking to recruit compliance specialists for an initial authorisation process or to add further insight, regulatory and financial crime experience to the business.  Those candidates with experience implementing robust systems and controls for various key compliance risks (e.g. CDD and transaction monitoring) and who have prior regulatory liaison experience, particularly those who have been responsible for previous successful authorisation processes should have options to choose from.    

If you would like any further information on the current market or to discuss any resource requirements, please contact me directly on 0208 106 9346 or via email at matthew.simmons@simmonsandhanbury.com.