Going into 2022, UK professionals began their return to the office post-Covid-19, which had caused immense economic uncertainty. Much like the year before, governance recruitment was resilient meaning Compliance Officers within the alternatives market were still in high demand.
The ample choice of regulatory candidates welcomed within 2022 meant that generalist Compliance Officers who were in the market usually had several enticing options when pursuing a new opportunity. While this made for a candidate-led market, the competitive demand for similar talent saw firms offering large compensation increases at offer stage to attract the best professionals, and many candidates in return were leveraging offers to get more attractive packages.
Buybacks and buyouts were common responses, which can be mainly attributable to the shortage of candidates and overall replacement costs. A significant number of firms have placed a larger emphasis on retaining performing professionals in their roles - affecting the bottom line along the way. In contrast with previous years, many firms responded with uplifts, promotions, and flexibility but this was not always enough.
The UK are in an inevitable recession and that may see an adverse effect on budget allocation and consequent hiring in the wider financial services space. How that impacts regulatory resourcing remains to be seen.
We are likely to be entering a phase where there is more balance between candidates and organisations that are hiring. Although candidates still have expectations and demands when looking for a new opportunity, there may be less to choose from and employers will be particularly cautious over the roles that they look to fill, it will be interesting to see how this evolves in 2023.
A GLANCE AT 2023 TRENDS
The working-from-home model is moving closer to a pre-pandemic structure. Many Firms within alternatives are either transitioning towards a 4-1 (WHO/WFH) model or full-time in the office system.
The lack of hiring in the digital assets market proved beneficial for the alternative investment space. Funds are starting to build crypto offerings, increasing the demand for hiring crypto professionals. Firms are offering competitive compensation packages to attract the best talent. Although the current state of Crypto is still looked upon as volatile, with any “crash” in the market comes a rebirth - which we may start to see the beginnings of in 2023.
Many professionals pressed pause on their job search until the pandemic was over, causing recruitment activity to skyrocket. This largely impacted talent pools as the spike in activity led to a diminished pool of candidates for firms looking to hire at the back end of 2022. Unfortunately, a lot of organisations are still desperate to hire but don’t have the bandwidth or the budget to accommodate. This backlog is set to continue in 2023 but it’s anticipated that the market will start to level out - however, this isn’t completely guaranteed.
Tech-savvy candidates remained attractive to firms Candidates with the ability to code, as well as being able to use software languages can make compliance processes more efficient, and streamline without having to use technology or IT teams etc.
Decrease in M&A activity over the last 6 months may see a slight slow down in the private equity market. However, PE can continue to hire due to less volatility with recruitment budgets - particularly if there is a gear up to sell.
The demand for marketing and distribution professionals was immense with many candidates choosing to push for generalist/broader positions over continuing to specialise. Due to changing regulations and cross-border rules, there was an increase in demand for specialists in the space. We also saw a wider interest in European languages for funds marketing into different jurisdictions.
For the PDF version of Rutherford's 2023 Compliance Salary Survey
Flexible Working Model
The pandemic naturally saw a shift in the working-from-home policy that was adopted by most firms. What we are now seeing is a structure moving closer to a pre-pandemic pattern, with more alternative firms leading the way in going back to full-time in the workplace. This is even more prominent within global macro/multi-strategy hedge funds as well as the more transactional-facing positions.
Currently, this is a sticking point for a greater portion of the candidate market, with many professionals opting to look for roles with flexibility. This will lead to more negotiations at the recruitment and offer stage, as the present trend across financial services seems to be moving towards 4 days in the office and 1 day from home, or full-time in the office.
This will be increasingly apparent as candidates transition from the wider financial services market, like big banking, fintech or asset management, where they are not quite as far along the return-to-office road as alternative hedge funds.
The mismatch of expectations in relation to hybrid working is a driver for movement, as employees who are unwilling to return to pre-pandemic working conditions will seek to leverage the discrepant approaches of employers and test the job market. Employees who have moved to more rural locations due to being granted a remote working option will now have to change their routines and factor in additional travel expenses to adhere to the shift. This, coupled with the cost-of-living crisis, is enough to cause organisations to lose key talent if they aren’t willing to be flexible.
Traditional Finance vs Digital Assets
From late 2021 onwards, we saw an increase in digital asset firms hiring some of the best talent away from the alternative investment space. This was highlighted by some high-profile moves from hedge funds and private equity firms.
The United States, in particular saw a significant trend of compliance and legal professionals moving from some of the leading alternative investment managers to crypto exchanges, market-makers, and investment firms.
Full packages being offered to top candidates within the space include enticing equity offers, large salaries and bonuses, which has seen an interesting shift in not only attitude towards the crypto market but also how many professionals are willing to switch industries - even though crypto is considered a volatile market.
However, it's important to note that during this time traditional firms who implemented a digital asset arm are invested in re-hiring the best senior talent – those who have prior experience working in traditional finance - from the crypto sector with the aim of solidifying the performance of their in-house digital asset function. Firms are increasingly presenting competitive packages at offer stage, proving themselves over the last 12–18 months as strong challengers in the market.
The recent events in the digital assets space have changed the way a lot of the market is viewing it. The collapse of FTX has highlighted why many of the market view digital assets as the "wild west". So many failures of governance have soured the overall appeal of this space for a lot of candidates. Many of the more traditional finance firms, such as J.P Morgan have halted their move into digital assets trading. Fundraising and investment in the space have become extremely difficult leading to a range of redundancies and cuts for firms in the space.
The collapse highlights the need for the creation of frameworks for the supervision of the space. This may lead to an increase in hiring compliance professionals.
We have been here before; a decade ago pulling Compliance Officers from banks to hedge funds saw similar candidate concerns about stability, commercial sustainability, and culture. It will be fascinating to see if digital assets look like the now-established alternatives sector in another decade.
As this relatively new market matures and regulation begins to come into effect, it has been interesting to gauge the difference in candidate experiences between working in traditional finance in contrast to a firm operating within digital assets. Reportedly, for a portion of the compliance industry, imbuing a digital asset start-up with regulatory cultural maturity has felt like pushing water up a hill.
Many regulatory professionals and management support lack the authority and backing to make meaningful cultural changes and improve behaviours firm-wide. “Move fast and break things” meets the less catchy “A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.” MiCAR will be the first stepping stone in the evolving direction of the European crypto market, thus encouraging those within it to adhere to specific practices to ensure integrity and consistency.
The term Crypto Winter has been used to describe the poor performance and downturn of the cryptocurrency market. The change in the value of popular cryptocurrency tokens such as Bitcoin, Ethereum and Cardano are key indicators in highlighting the nosedive of the market. The Crypto Winter was upon us in H2 of last year and is emerging into a period of recovery in 2023.
At the backend of 2022, economic instability and global inflation were rising at a persistent rate, affecting the value of the cryptocurrency market. As a result, we saw hiring in the digital assets space slow down.
The lack of recruitment within the crypto industry helped with hiring for the alternative investment sector. The excitement and implementation of digital assets within traditional firms meant hiring crypto professionals quickly became a critical business need for those trading/investing in the space.
Several funds are starting to look at crypto within their offering, which has translated into a strong interest in candidates that have covered it elsewhere. Surveillance and AML professionals from the top exchanges - such as Coinbase, Binance or Kraken - have been in demand, with hedge funds willing to pay top dollar to lure them across.
The impending crypto regulation the FT reported means “The new powers will enable the FCA to oversee crypto more broadly, including monitoring how companies operate and advertise their products” This includes “limits on foreign companies selling into the UK, provisions for how to deal with the collapse of companies and restrictions on the advertising of products.”
Many crypto firms are starting to look light in terms of the depth of their compliance teams and are not yet ready to fully build out the function. We anticipate that these changes will see hiring pick up for the affected firms now that they will be required to meet regulatory standards.
More traditional finance firms such as hedge funds will continue their push for specialists and knowledge in the space but they will also be competing for talent here against larger brokers and banks.
The Recruitment Backlog
Due to the backlog of recruitment activity over the pandemic, the last 24 months have seen unmatched levels of hiring, with many professionals waiting for the end of COVID-19 to move jobs. This has largely impacted talent pools as the spike in recruitment has led to a diminished number of candidates for firms looking to recruit at the back end of 2022.
In 2020 a lot of firms cut their workforce back significantly - arguably too much; this led to them doubling down on hiring post-pandemic to keep up with business and market demands.
The remaining professionals that moved during the active segment last year have been understandably reluctant to move again this year. For a fraction of the market, many have seized the opportunity to jump at large increases in compensation or levels of seniority by making two, occasionally three moves since the start of 2021.
Marketing and Distribution
2022 saw a huge demand for strong Marketing and Distribution professionals. Post-Brexit, the rules for marketing funds into Europe shifted. This meant candidates with language skills, coupled with multi-jurisdictional compliance knowledge, were of high value. The Marketing & Distribution space continues to be a particularly unpredictable and tricky space for firms to recruit in. For specialists, the space is incredibly tight, with many candidates preferring to push for broader positions over continuing to specialise.
Tech Savvy Talent
Tech-savvy Compliance Officers remain highly sought after, specifically coding and comprehending various software languages such as Python and SQL is seen as highly desirable. Candidates with the ability to code and use software languages to make compliance processes more efficient and streamline without the ability to use technology/IT teams at a firm are very attractive to employers.
Looking ahead to 2023, it is challenging to accurately predict the shape of the hiring market. The effects of the political and economic instability the UK faced this year, coupled with external socio-political factors, including the war in Ukraine are perhaps yet to be seen, but the predicted recession is causing a significant downturn in headcount and hiring.
Goldman Sachs recently opined that the UK will be facing a deeper recession than initially anticipated going into 2023 which makes for a rather unappetising read. While governance recruitment is usually resilient in the face of uncertainty, it would be unwise to not tread with an element of caution.
Now is an excellent opportunity to build teams and attract talent with fewer players in the market. Discrepancies in the performance of alternative firms also create opportunities for those who have had good years to leverage that and pick up top talent from their peers.
With an increase in regulation incoming - the need for strong regulatory knowledge/comprehension will be paramount. Upskilling those within your organisation will generate better returns and improve your retention, whilst still giving you the bandwidth to hire should you need to do so.
Are Your Salaries Market-Leading?
You can gather more insights and information about hiring and salary trends within our previous compliance salary surveys and market reports. Alternatively, you can get in touch with the Rutherford team for a confidential discussion around your potential legal and compliance recruitment needs.