Complinet Salary Survey 2008

Complinet salary survey 2008 – what crisis?

By Sandro Buttaci

Credit crunch and sub-prime crisis! We had not heard of either of these two terms 12 months ago when Complinet produced its 2007 salary survey and yet it is now difficult to read the newspapers or watch the news without hearing about the constant doom and gloom. But is it really as bad as the press says it is?

A recent Morgan McKinley survey states that compliance recruitment is holding firm in light of the uncertainty caused by the credit crunch and the volatility of the financial markets — indeed the recent market events have driven up demand for experienced compliance and risk professionals. David Symes, managing director of Compliance Recruitment Solutions, echoed this view: "Having seen two downturns in financial and professional services — the full recession of 1990-93 when there were too few full time compliance officers during a time of regulatory expansion for any to be laid off for economic reasons, and the far less severe downturn of 2001-03 when we did nonetheless see a large number of out of work compliance staff — I am pleasantly surprised by the very few wholesale market redundancies we have heard about."

Duncan Jeffery from Compliance Professionals added: "Salaries have continued to increase in the compliance field but growth has slowed to five per cent. Bonuses for compliance staff seemed to be resilient to the market downturn and the majority of people were satisfied with what they received."

So it is not all doom gloom then? Victoria Alkiviades from Barclay Simpson explained that: "Compliance is one of the last areas to be hit for cost-cutting."

"Credit crunch effects are still impacting businesses and we expect this period of uncertainty in the financial markets to continue," said Alkiviades. Ben Hudson from Badenoch & Clark reiterated that "until the banking world is settled and the credit crunch issues are truly behind us, recruitment levels will be low."

This means that there is some gloom and doom then? Jeffery stated that: "Over the first quarter of 2008 most large investment banks appeared to be waiting to assess the impact of the credit crunch and sub-prime crisis before either lifting recruitment freezes, deciding to replace or, in some cases, expand.

"However, as we now move towards the end of the first half of the year, it appears that the compliance industry has come out relatively unscathed and there were a limited number of people made redundant. We are even beginning to see expansion in some teams within the smaller firms."

Symes also shared this view: "in investment management we are seeing as strong a market as ever," and according to Jeffery: "This growth of teams being focused is in the equities areas as clients bolster their teams in light of the credit crunch issues in the market and ensuring that they have sufficient resource in place — we do not anticipate there being any large scale redundancies within compliance this year."

It is not all doom and gloom then? Alkiviades pointed out that "hedge funds have been taking on good people and there has been a huge upturn in recruitment levels within this industry sector. Very good salaries were being offered that quite frankly trumped salaries being offered in the other areas of banking and financial services." Fergus Hooley, associate director of Joslin Rowe, agreed that "hedge funds are now recruiting at record levels for compliance professionals." It is not just the hedge funds that are recruiting. Richard Aldridge from Robert Walters stated that "the regulator looks poised to take on top candidates; this will inevitably create a slight vacuum in the market over the coming six months."

"Top candidates will continue to receive tempting offers and guaranteed bonuses with top firms taking advantage of unstable rivals." said Aldridge.

Chantel Rademeyer from Michael Page said: "The demand for compliance people remains robust; helped in some measure by the Société Générale trading debacle — it’s sharpened the focus on controls, driving up demand for monitoring staff as well as those with operations, audit and risk experience.

"The asset management sector is extremely fluid…managers are aiming to bolster or upgrade their compliance teams and largely require monitoring capability."

Is everyone resigning and moving? Well not quite. Ben Saunders at Alexander Lloyd said: "In reality we are seeing many people feeling the safer option of remaining in a secure role is far more appealing at this time." Alkiviades shared this view and said that candidates "are perhaps more nervous about moving roles at the moment because of the cost cutting exercises and they don’t want to be last in and first out." Jeffrey added that candidates "are unwilling to take the risk of a move unless the role is a cast iron move — it is a 'better the devil you know' type of mentality." Hooley stated in Complinet’s 2007 salary survey: "Chronic shortages of quality candidates abound." Jeffery said that "the market remained candidate short."

Complinet’s 2007 salary survey foresaw a surge in demand for MiFID compliance specialists. So what did happen? According to PSD, "the anticipated demand for compliance professionals to implement the new regulations, MiFID, TCF and NEWCOB in 2008 did not transpire. Instead businesses redeployed resources and reallocated workload to existing staff."Jeffery and Alkiviades echoed this view. MiFID did not live up to all of its recruitment expectations and perhaps was the biggest damp squib of 2007!

Have there been reports of losses? Yes there have; PSD reported that "the credit crunch has impacted on the market most notably affecting the mortgage companies and investment banks with large credit exposure to the US sub-prime market." Symes concurred: "The only area where I fear long term structural employment issues is the retail mortgage area where those with MCOBS experience are being laid off (or their firms closing altogether) and even if they have broader retail knowledge (frequently ICOBS) the rest of the relatively stable insurance & retail sector doesn't have enough extra need to absorb most of these." On this point PSD stated: "Within the retail financial services market, recruitment has been most active with the general insurance sector. Clients specifically requiring ICOB experience. Life and pensions providers have been consolidating but still recruiting to replace."

If that is the case, where will firms look to recruit from? Saunders said that: "Compliance remains one of the core areas of the financial services industry and through these uncertain times the importance of having a strong compliance function within firms is paramount. This indicates that within the next few months we will see a steady increase of new roles coming to the market and a resurgence in the compliance recruitment cycle. Firms will feel under pressure to bolster their compliance team so to create a secure foundation for the business to move forward unhindered."

Firms will not recruit graduates, according to Aldridge who stated that "graduate recruitment has taken a hit." Will the industry, however, not learn from its previous mistakes? In Complinet’s 2007 salary survey Symes said: "Many budgets were actually cut between 2001 and 2003 resulting in a severe shortage now of compliance managers." A shortage of candidates is not a new issue and if no one is being recruited at the bottom, who will be there in the forthcoming years to fill the positions at junior level and be able to move into mid-level management? In years to come, second jobbers will once again become like gold dust with demands from employers for experienced candidates but if they are not being recruited now, where will these experienced second jobbers come from?

Should candidates, therefore, take the industry exams to further their careers? Marnie Woolf, director at Woolf and Co, said that there is "no demand…no desire for 'regulation-specific' qualifications." Hudson agreed: "Within investment management firms the IMC [Investment Management Certificate] is always desirable but throughout most of the compliance world experience is more important than qualifications." To reiterate the point above, if there is a lack of recruitment or none at the entry level, where are candidates to gain the experience from? Jeffery added that "professional qualifications will have no bearing on the rest of a candidate's package including bonus." This is an area that requires some clarification with an increasing number of industry qualifications being offered on the market. Surely the Financial Services Authority should take the lead on this and confirm an industry standard qualification? This would be beneficial for all industry participants.

So what lies ahead? Woolf said: "There is recruitment activity, but not the frenetic, heady levels of recruitment we have seen in the past, as with all things, this is cyclical and in reality we could not have continued to experience the crazy levels of recruitment which were taking place. In tougher market conditions, individuals make the best career decisions, because they are forced to consider more thoroughly what is right and wrong about a potential role, they don’t just jump ship for the sake of it or for purely financial reasons, so individuals should not be disheartened if they are thinking about moving jobs in the current market."

Hooley added: "The demand from our clients for specifically skilled compliance candidates remains strong, and where demand has been diminished it is likely that it will bounce back in due course. Although some firms may be seeking alternative ways to fulfill their headcount requirements, their underlying need to meet their regulatory obligations remains the same, and if anything will escalate further as the FSA's focus on areas such as market abuse continues to sharpen."

Alkiviades stated that while the UK-based banks/offices are treading more cautiously with their costs such as hiring, they must acknowledge that the regulator is applying pressure to ensure compliance departments are appropriately resourced.

Complinet's 2008 salary survey demonstrates that despite the turmoil and the tightening of belts at firms, compliance departments have weathered the storm and, with the FSA's continued regulatory scrutiny, look likely to escape the worst of the crisis.

A. Investment Banking, Wholesale Markets and Broking

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