There is no doubt that the financial services arena continues to evolve and as a result of this changing landscape, staffing requirements have also significantly shifted, leaving many firms struggling, in some areas, to recruit the talent they need. But where are these areas and what are the reasons behind the shortage of available talent?
The availability of specialist legal skill sets for the financial services sector moving out of practice has been impacted significantly in recent years, not least because of the evolving regulatory environment but also because of reduced number joining the legal profession during the credit crunch years when firms slashed their graduate intake for training contracts. Areas such as regulatory and investment management law, in addition to derivatives and structured products, are still being impacted by this talent void and are therefore there it is proving a struggle to recruit individuals with between two and four years’ relevant experience. The problem is compounded further by the fact that many law firms, in a bid to retain top talent, are offering their employees secondments to their financial services clients, thus fulfilling an appetite for more varied experience and exposure without having to change jobs! There is also a growing trend of senior legal professionals within financial services moving back into practice where they can gain a senior counsel or even equity share partner role.
Up until the middle of 2014 the operations arena was enjoying something of a candidate surplus, with more applicants than available jobs. However, since then the skills gaps that were created from an under investment in talent during the credit crunch has come back to bite many firms which are struggling to recruit almost across the board. Particularly sought after are individuals at Associate to VP levels with experience of OTC products, exchange traded derivatives, client money, ops control and fund administration. We’ve also seen the return of positions such as trade finance and loan administration/closing this has been largely driven by hedge funds diversifying into direct lending and smaller corporate banks taking advantage of governmental lending schemes and the ever growing number of SME businesses looking to access finance they are unable to at the larger banks. To worsen the situation, many operations roles have also shifted emphasis, becoming more technically focused, which is making hiring considerably more difficult for firms.
It almost goes without saying that the compliance arena is suffering from significant skills shortages which will only be compounded further as we approach the 2019 deadline for the implementation of the proposals outlined in The Vickers Report. However – and clearly this is a recurring theme – the majority of organisations slowed their hiring down during the global recession, resulting in the current severe shortage of talent. Particular skill sets in demand include regulatory affairs and policy, KYC, financial promotions, advisory work and monitoring – or assurance as it’s now known. Assurance is an area that has become much more holistic over recent months affording the opportunity to get involved not only in the monitoring of policy and procedure, but also the initial formulation. However sourcing candidates with this combination of skills can be challenging. And while it is the investment banking arena that often hits the headlines from a compliance perspective, there is also a continuing shortage of compliance talent within the asset management sector.
There’s a huge junior/middle management skills gap within risk for all the same reasons as we have discussed above – particularly for operational risk roles which need 2-5 years’ experience. There is also the ever growing list of regulatory requirements – there’s a real dilemma here as these positions call for expertise in areas that haven’t even previously existed! There’s also an ongoing shortage of people with market and quantitative operational risk experience – and extensive risk modelling expertise.
The sector is suffering from more of a gap in skills rather than an actual shortage with, again, a real demand for professionals with around three years’ experience – many of whom simply don’t exist. The sector is evolving with a spike in recent months in mergers and acquisition activity resulting in demand for particular niche skill sets. Kidnap and Ransom is a big area with recent changes in the law as well as those with experience of the construction, energy and accident and health fields are also hot property.
The increasingly compartmentalised nature of the audit field within financial services has created a number of hiring challenges. Even as recently as seven or eight years ago, there would have been considerably fewer specialised audit teams than there are today, and banks would have relied on a more general audit approach. Now firms have specific audit functions for almost every area they cover and this has meant they require much greater numbers of specialists. Unfortunately for these organisations, these specialist professionals do not exist, at least not in any significant numbers. As a result, we have seen salaries rise by at least 12% year on year.
Clearly then, many of the skills gaps and shortages have been caused by an under investment in talent during the global recession.In my view firms simply have to continue to look to develop long term talent pipelines in order to identify and attract talent where – and when – it is needed. The sector will also need to do considerably more to attract young professionals into financial services and keep them there- otherwise we run the risk of exacerbating a skills shortage that is already nearing a critical level in many areas.