The last year has posed unprecedented challenges that have affected every aspect of our lives, notably our livelihoods. Despite widespread disruption in 2020, fuelled by the US election, Brexit ambiguity and the global pandemic, the financial services industry has demonstrated resilience; with an influx of roles towards the end of 2020 and into 2021, after a mid-year slump. Concurrently, regulatory responsibilities did not diminish, and organisations have worked to prioritise their compliance functions to remain ahead of new regulation amid industry change. Those financial services firms embracing technology by introducing digital solutions experienced growth during the pandemic and will increasingly be the most sought employers by the talent pool – and compliance professionals are moving quickly for the right opportunities.
The below update provides an outline of the latest challenges, news and updates in the compliance recruitment sector.
The announcement of lockdown restrictions in March 2020 necessitated that most industry sectors complete the shift to moving their operations online. Despite presenting challenges, the digitisation of the workplace helped firms to reduce their operational costs and increase business efficiency. In general, technological uptake within financial services has led to innovation and growth, as firms seek to effectively cater to their customer’s evolving expectations.
Equally, the pandemic has perceptibly altered consumer behaviour, with more individuals adopting innovative ways to access and manage their finances. With customers steadily embracing payment apps and online banking, those firms utilising automation within financial services, such as fintechs and insurtechs, have been able to successfully anticipate market trends to drive growth.
Whilst the introduction of remote working practices during the pandemic has led to many unexpected increases in business efficiency within financial services, it has also led to the ingestion of new risks as well as a potential rise in market abuse. Over the last year, regtech has received considerable investment, and many professionals in the compliance recruitment space are now utilising advanced technology to manage operational risks, amid calls from the FCA to implement robust monitoring and surveillance systems.
These combined factors have led to a heightened demand for tech-savvy compliance, legal and financial crime professionals; especially those with data-protection experience.
As the vaccine rollout continues and people begin to return to the office, the desire to work remotely has largely remained. Entering 2021, candidates are increasingly demanding roles that offer flexibility; particularly women, who often face additional pressures in terms of work-life balance. This may prove problematic in the long-term; with more women working out of the office, it could prevent female talent moving into senior roles at the same pace as their male counterparts. However, the impact of hybrid working is yet to be seen and many firms are reluctant to be first-movers, still deciding what their policy will be.
With remote working practices and virtual interviewing quickly becoming the norm, the job market is experiencing a period of liquidity. Facilitated by technology, good candidates in the compliance recruitment sector have more prospective roles to consider and are doing so at a faster rate; often able to get through two or three stages of screening in a week. Market fluidity has been further exacerbated by the influx of roles post-pandemic, especially in Q1 2021, leading to increased competition for candidates and expedited processes, as firms fear they will miss out on top talent if they do not act swiftly.
Main Areas of Demand - Compliance and Legal
The compliance recruitment market in financial services is generally buoyant, with some sectors experiencing more movement than others.
Prolonged market volatility has been profitable for some sectors, namely hedge funds, investment platforms and deal brokers. In particular, macro and quantitative hedge funds have thrived in the instability generated by the US election, simultaneously strengthening their in-house compliance and legal functions. Increasingly, hedge funds are leveraging alternative data provided by third-party research vendors to predict market responses, heightening the demand for candidates with MNPI experience, especially within US facing businesses.
Asset management and private equity firms have also experienced a busy period at the beginning of 2021, with a considerable amount of activity in mergers and acquisitions. After earlier disruption in 2020, M&A experienced an unprecedented second half of the year, soaring by 88% to $2.3 trillion in H2, amounting to the strongest second half in history; this upturn has continued into the new year.
Fintechs have been expanding their compliance functions, recruiting compliance officers of mid-senior level to guarantee their regulatory obligations are identified and met. In general, fintechs are becoming a popular market option for compliance professionals, not only because they often offer greater flexibility in terms of remote working but are sometimes perceived as a more secure career choice than traditional banking firms. Unlike the latter, fintechs have the ability to adapt swiftly to accommodate new consumer demands. Further, regulators have been surprisingly open-minded and engaged concerning innovative finance, making the fintech space an attractive option for compliance professionals.
Crypto asset managements have been hiring significantly, becoming more prevalent in the market space with a plethora of opportunities for compliance officers to offer regulatory screening, guidance and authorisation to emerging crypto ecosystems. Many crypto assets are now outsourcing their compliance and regulatory needs, such as Revolut, who have recently integrated Elliptic’s crypto compliance tools allowing them to broaden their crypto currency offering and mitigate the risk of financial crime.
Currently, the fallout from Brexit in terms of regulation remains largely undefined, with legislation yet to be finalised. Nevertheless, in time Brexit should put compliance firmly back at the top of the agenda for many firms, with opportunities for compliance officers to offer advice on regulatory jurisdictional issues and get involved in early strategy decisions. There has been an increased demand from firms seeking legal and compliance professionals for their European offices, to either bolster or create new functions. At Rutherford, we have been hiring for roles in Budapest, Amsterdam, and Dublin – with firms seeking to effectively manage expenses, traditional hubs such as Luxembourg are being replaced by cheaper locales in Poland, Hungary and the Netherlands. Whilst firms will be advised to approach Brexit with a level of agility, to be able to anticipate and adapt to regulatory developments as they arrive, most firms have prepared themselves by now having assumed the hardest possible scenario.
Despite a turbulent year, there continues to be steady demand for skilled compliance, legal and financial crime professionals. Firms have generally been reinforcing their compliance functions, as they work to ingest the unexpected new risks raised by the pandemic and remote working. This suggests compliance professionals will remain in high demand, particularly those with experience in data protection and monitoring.
Recently the FCA has extended the IR35 rules, which has pushed many freelancers into permanent positions and full fixed-term employment contracts. There are benefits to this that go beyond the exchequer; the candidate pool for permanent lawyers and regulatory professionals has got significantly deeper overnight – with a slight not noticeable deflationary effect on salaries – the trade-off being a significantly less flexible labour market for challenges like regulatory change and projects.
This year, firms will be looking to put diversity and inclusion front and centre of their hiring strategy. The FCA has recently announced it is considering mandatory diversity quotas for boards after only 37 out of 81 firms managed to reach self-imposed diversity targets last year. The regulator has warned that finance companies are not doing enough to improve the number of women and people of colour in senior positions, and that cultural change is needed.
From a compliance recruitment standpoint, this should mean more firms will be asking for changes in the application process to facilitate diverse hiring. In the last few years, we have noticed that companies have been requesting the removal of personal material from resumes, to focus on skills and experience, the rise of portals which require candidates to answer behavioural-based questions in contrast to purely being CV focused, and diversified short and long lists which specify the diversity ratio. While some firms have been making much stricter requirements, asking for diversified shortlists or minority group candidates only to balance-out their departments.
Overall, there is a growing pressure on businesses to prioritise compliance again, to ensure their corporate reputation and boost shareholder confidence. Regulators are now working hard to crack down on governance, market abuse and financial crime, after a slight relaxation of regulatory scrutiny in the middle of last year due to the global pandemic amid other disruptions, driving a demand for skilled compliance officers to mitigate operational risk.