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Compliance

COMPLIANCE MARKET COMMENTARY, Q3 2019

• Article by BRUIN Financial

COMPLIANCE MARKET COMMENTARY, Q3 2019

MARKET OVERVIEW

Q3 typically is a quieter time for our clients however, this year, Q3 has been rather active for Compliance. Various firms have seen a steady stream of job flow from Q2 as the constant high demand in Advisory and Generalist candidates continues.

The shortage of technical expertise is indicative across Financial Services, and therefore good candidates are not staying in the market for very long. Most firms on both the buy and sell-side are accelerating the recruitment process in order to secure the best talent. This is increasingly important as good candidates often have multiple processes ongoing simultaneously, and as a result the firm that moves quickest will often secure the best candidates.

The quarter has seen a continuation of the trends seen in Q2 but with a positive 19% increase in job volume from Q2 to Q3. We continue to see many of the Investment Banks streamline their Compliance teams with limited growth, particularly in London. Due to the ongoing political uncertainty a European contingency hub has become a necessity for most firms, and the balance of activity has shifted again towards Asset Management.

The Compliance world is ever-changing and new regulation is again around the corner. The SMCR has been in force for banks since March 2016. Now with the extension covering all FCA solo-regulated services firms from December we’ve seen many buy-side firms bring over specialists in SMCR in Q3.

 

ROLE PROFILES

If we were to look at Q3 2018, we noticed that the nature of roles we worked on between buy-side and sell-side heavily weighed towards the buy-side and in Q3 2019 this has shown no signs of stopping. Areas which have seen a lot of focus on include:

Front Office Advisory

A highly sort after area from a client and candidate perspective. Many candidates who have a healthy amount of years experience within compliance start to specialise in Front Office Compliance Advisory as they see this as where most of the technical and sensitive work within compliance is carried out.

What clients demand in this area is not knowledge across multiple asset classes but also the type of personality which is capable of dealing with front office staff and senior stakeholders. Many candidates who have fallen short in this area has been due to their lack of stakeholder engagement which has been a rising trend over the past 2 years. Over Q3 2019, 60% of all the positions we worked within our buy-side clients was Front Office Advisory aligned showing how in demand these candidates are.

Generalist Compliance Officers/Managers

As we alluded to above, many candidates have shifted their focus to Front Office Advisory roles which have created an appetite for generalist compliance officers, and we have noted particular demand from the smaller boutique asset managers.

For the smaller firms it is also encouraging to see that candidates who want to keep their general compliance experience or become compliance generalists are far more attracted to smaller teams that allow for a more “360” approach to a compliance framework. One approach that many boutique firms are always open to pursuing is candidates with a desire to obtain compliance qualifications or want to work underneath someone who can train and develop them.

 

Investment Banking

 

Trade Surveillance

The surveillance space was an area which saw growth within the last 3 months. Bulk hiring within this area in 2016 due to MAR implementation has meant that surveillance has steadily maintained headcount throughout this period. However, over the last quarter we have noticed a recruitment pattern in this department. Similar to their Front Office Compliance Advisory counterparts, surveillance has taken a similar approach into how the teams are structured and we are now seeing teams split across the different product lines within FICC & Equities.

This has meant that candidates with dedicated product knowledge within the likes of Rates, Credit, FX, Cash Equities or Derivatives have become in-demand. This may be one of the reason banks have been open to Ex-traders who possess unrivalled product knowledge in these areas.

Advisory

With increasing pressure from the FCA, the amount of responsibility on front office traders has been monumental, and with the regulatory body handing out astronomical fines to Investment Banks over the years, it is safe to say that Compliance Advisory will forever be a busy area on the sell side.

This has had an impact on the candidate market as individuals are realising that they are highly regarded and, in order for them to move, some firms are having to compensate them in more ways than just a salary increase. At this stage of the year we start to talk about bonus season and many candidates are already not willing to move positions unless they have either been compensated for this loss or guaranteed a pro rated bonus when joining. On average, a VP level Compliance Advisory candidate is now paid £115,000 on the basic salary whereas 2 years ago this was £100,000.

 

PREDICTIONS

For the final quarter we expect to see a buoyant market continue, particularly in the October and November months. However, as is the norm over the festive break there will inevitably be a hiatus in decision making.

Larger buy side firms are being viewed more favourably than over the past few years due to their stability and ability to offer clearer 3-5 year career pathways. Boutiques with a strong record of performance are able to attract high calibre candidates, and we have seen growth in the Private Debt & Infrastructure asset classes which has led to a skills shortage in those asset classes.

With a focus on building headcount in Europe to satisfy the regulatory requirements of the Central bank of Ireland and the CSSF, we will continue to see opportunities for London based candidates to relocate. A lack of practical experience in these geographies will mean competition for talent, and will result in salary inflation and strong counter offers.

The likelihood of firms having a new, post Brexit regulatory handbook being produced in 2020 and implemented by 2022 means there is the potential of firms having to run two separate compliance frameworks which will create increased demand for compliance professionals.

Overall, candidate attitudes will remain the same in terms of appraising roles and firms, those who can offer a competitive remuneration package alongside an employee first workplace culture with a focus on working patterns flexibility and tertiary benefits such as pensions and annual leave will secure successful candidates.

 

TEMP & REGIONAL

There have been no surprises in the Contract Market as demand for good candidates in Financial Crime and SMCR has continued. Whilst there has been a small shift towards Fixed Term Rates rather than traditional Day Rates due the looming IR35 deadline, it has been business as usual across Asset Management, Investment Banking and Fin Tech. Larger firms are continuing to consolidate departments and attempt to move functions abroad in an attempt to cut costs whilst smaller firms are being forced to increase team size to keep up regulatory demands in an ever changing market. Front Office Advisory compliance is still in demand along with Monitoring (Desktop and Thematic rather than the usual Investment Guidelines) and CASS.

Financial Crime has been the dominant area for contractors in Q3 at BRUIN. Most have been low level CDD/AML/KYC with a few assistant manager or manager contracts across both Asset Management and Investment Banking. Compliance Monitoring has also been busy with a demand for experienced candidates in Trade Surveillance, Desktop and Thematic Monitoring at all levels. General Compliance Juniors have also been in demand as smaller firms have needed low level support whilst final SMCR preparations and final stages MIFID II rollouts take place.

We are expecting to see further movement in the Financial Crime space as the FCA ramps up AML investigations. We have seen a few firms reviewing their Financial Crime Frameworks and remediating legacy client files to ensure they are above board and ahead of the curve. General Compliance is also expected to continue to be busy (in smaller firms) as management make final arrangements or last minute changes to their SMCR Framework. Automation is also affecting Compliance as more automated trading alerts systems and automated KYC/AML review systems enter the market. As a result, candidates with experience using Actimise, SMARTs and other similar systems are in high demand.

IR35 is now nearly 6 months away and we are already seeing clients making determinations on whether contracts fall within or outside of IR35 for new and existing contractors. Please get in touch if you need any information on IR35 regulations and how it may affect your contractors.

 

BRUIN News

BRUIN is delighted to have won the Deloitte Diversity & Inclusion Award at the TIARA 2019 awards and were commended by the judges for “incorporating D&I initiatives into their recruitment process, the broad range of diversity & inclusion initiatives they are involved with, and the high level of visibility in their market”.

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For more information about the market or current opportunities please contact one of our Consultants.