Compliance Market Commentary, Q1 2014

• Article by BRUIN Financial

Compliance Market Commentary, Q1 2014

Market Overview
2014 has started how 2013 finished, with extremely high levels of recruitment and continued demand for Compliance professionals. 2014 has seen the busiest Q1 in recent years from a Compliance hiring perspective, more than doubling the volumes of roles that we were witnessing in 2011, and a 20% increase in Q1 vacancies compared to 2013.

In the last quarter, the Investment Banks have begun to significantly build their Compliance teams. This is due to the increase in reporting requirements that global banks are subjected to. Moreover, London is progressively becoming the hub for Compliance within these organisations. Similarly, whilst other areas of banks are being off-shored, the scrutiny being placed upon banks and the requirement to safeguard against regulation has resulted in a preference towards near-shoring to regional locations.

From an Asset Management perspective, where recruitment has been traditionally consistent, we have also seen a significant rise in recruitment levels. This is related to the increase in the size of Compliance teams and the evolving regulatory horizon, with a particular focus continuing on AIFMD and UCITS. The upturn in the market is also reflected in the current attitude towards bonuses. Although they still haven’t reached the heights of pre-2008, bonuses have been significantly better than previous years and candidates appear to be more content this year in comparison to 2013. As bonus pots grow, there has been an increased emphasis on rewarding high performers, not just rewarding revenue generating areas, which has been reflected in the Compliance space. There have also been some innovative approaches to paying bonuses with some organisations adopting a split bonus scheme; on approach has been for the bonus to be paid out in two (or more) instalments, and is clearly designed to retain strong candidates after the bonus period. In addition, it has been widely reported that total compensation on the buy-side is now rivalling, and in some instances exceeding, that of the sell-side due to an increase in profitability of these organisations, enabling them to attract the best talent

  1. As levels of recruitment rise, the market has become increasingly more competitive and candidate driven. This has resulted in 2 main challenges:
    Salaries within the Compliance space continue to rise. In Q1 of 2014 we have seen an average salary uplift of 24% (where candidates have been moving from one permanent role to another). This is an increase on the 21.6% that we saw in Q4 of 2013.
  2. Companies are doing their utmost to retain outstanding staff members and subsequently candidates are receiving competitive counter offers to remain with their current employers. In addition to this, candidates often receive multiple job offers at any one point.

It is our responsibility to manage expectations of candidates throughout the process, but there is also an increased requirement for a collaborative approach with our clients. The speed and transparency around processes is all the more important. This will ensure we avoid missing out on top-tier talent, and while there is still scepticism around bonuses, it is paramount that candidates are aware of the overall benefits and work-life balance that an organisation can offer.

Role Profiles
Whilst there is an increased demand for Compliance ‘SMEs’ across the Financial Services, there have been specific skill-sets that have been highly sought after in Q1.

  • Regulatory Affairs – As a result of increased scrutiny from the regulator, coupled with a rise in the numbers and severity of fines, organisations have put a greater emphasis on the regulatory affairs space. Due to the constant flow of new regulations, it is increasingly important for organisations to manage the relationship with regulators in order to ensure best practice and to assess and respond to upcoming developments.
  • Financial Crime – At the senior end of the market Financial Crime roles are becoming increasingly specialist. While traditionally candidates have advised businesses and implemented controls across the Financial Crime space, there is greater requirement for candidates to focus on one area. Subsequently, specialist teams are being created to look at specific areas of Financial Crime such as AML, ABC, Fraud, and Sanctions.
  • Product Advisory – There has, and will continue to be, a requirement for product specialists to advise and offer guidance to the Business. Teams that traditionally covered a broad spectrum of products are now looking to focus on specific areas. Similarly, within these areas Compliance professionals are further specialising, for example products such as Swaps, Futures and Options.
  • Conduct Risk – The FCA has outlined its requirements in the Conduct Risk space, and there is a greater emphasis on adopting a customer-centric approach and to ensure that products are designed to protect the consumer. As a result, this space will continue to grow over the next 12 months.

These themes are applicable to both the buy and sell side. As teams continue to grow the roles are becoming more specialist, and companies that traditionally recruited generalists are transitioning towards siloed teams.

The Contract Market
The contract Compliance market has been fluid and incredibly competitive, which reflects the trends we are seeing within permanent recruitment. With an ever changing regulatory climate, organisations across Financial Services have placed a significant emphasis on hiring top-tier candidates. Recruitment within Asset Management has predominantly focused on Compliance Advisory, Portfolio Compliance, Regulatory Developments and Testing/Desk Reviews. This is due to the growth of teams to meet the demands from the business and boost the Compliance presence within the business. On the sell-side, our recruitment has predominantly focused on areas such as Conduct Risk, KYC and AML. This is directly correlated to ongoing projects, staff turnover and regulatory developments. The market remains candidate driven with daily rates soaring as a result. Growing regulatory scrutiny across Financial Services has drastically increased the demand for top-tier candidates with technical Compliance experience. However, cost cutting exercises remain with circa 10% reductions in contractor rates at some institutions. Alongside this, there has been a clear drive to ‘near-shore’ some areas of Compliance with regional hubs such as Bournemouth, Dublin, Chester, Birmingham, Northampton and Limerick growing significantly.

Going forward, we expect hiring in Q2 to continue at the levels that we have witnessed over the past 6 months. In addition, we predict that candidates with experience of Trade Surveillance (in relation to Libor and E-communications), and Emerging Markets Advisory will be particularly sought after.

Predictions for 2014
Q1 of 2014 has proven to be an extremely buoyant period and this will continue into Q2. Whilst the Regulator continues to flex its muscles, we anticipate that these already high levels of recruitment within the Compliance space will continue to rise, and in turn so will competition for good Compliance candidates. As it is a candidate driven market, salaries will continue to inflate, but we will continue to utilise our specialist Compliance researchers to ensure that we are supplying the highest quality candidates. We will also look to work collaboratively to ensure that the speed and transparency of processes will enable our clients to secure the best talent.