February 13, 2018 / 5:05 PM / in 3 months

INSIGHT: U.S. compliance job market showing signs of significant slowdown

NEW YORK (Thomson Reuters Regulatory Intelligence) - A multi-year U.S. hiring boom in risk and compliance in response to new rules after the financial crisis appears to have come to a grinding halt and salaries and bonuses have stagnated, recruiters specializing in the sector said in interviews.

Traders are pictured at their desks at the Frankfurt stock exchange July 12, 2011.

U.S. President Donald Trump’s push for deregulation, Britain’s plans to leave the European Union, a shift in jobs outside of New York and the rise of new technology were all cited as factors keeping pay levels in check at the entry level, limiting job opportunities at senior levels and discouraging compliance professionals with jobs from switching firms.

Below we share some thoughts and observations on the current state of the job market in the areas of risk and compliance. Most recruiters spoke on condition of anonymity, as they were not speaking in an official capacity for their firms.

TREPIDATION BY EMPLOYEES AND EMPLOYERS

As Wall Street has cut jobs in virtually every other area, the need for compliance and risk grew due to the wave of new rules and regulations in the aftermath of the financial crisis and a need to upgrade and invest in legacy compliance and risk infrastructures.

Early in 2016 the Goldman Sachs’s Chairman and CEO Lloyd Blankfein said most of the firm’s increase in headcount in recent years was from “heightened compliance efforts,” but he saw the effect as temporary. “This has a Y2K feel about it – that is, we have to hire additional people because we have to get ourselves up to speed,” he said. “I think once we catch up and once automated, we probably will be able to reduce that headcount in some of these costs.”

Blankfein’s comment initially raised eyebrows with compliance, legal, and recruiting professionals. However, industry recruiters and compliance professionals now agree that the multi-year, massive investment and build-up of compliance staffing by financial firms is over.

“In the last 18 months or so, firms have become incredibly cautious and selective in their hiring” a recruiter told Regulatory Intelligence. No other recruiter contacted for this article disagreed.

The same holds true for job seekers or candidates. According to multiple recruiters and compliance personnel Regulatory Intelligence spoke with, there is now an unwillingness on the part of candidates to seek new opportunities because pay is stagnant and, as one said, “it’s better to hang on to their current position and not risk the possibility of ‘LIFO’” – the practice of ‘last in first out’ at a new firm if layoffs may be in the cards.

Many compliance professionals consider or ask the question: “am I in a good place, being fairly compensated, or better off elsewhere?”

The answer this year is that there undoubtedly is great fear of moving to another firm. As one recruiter put it, “individuals are content to stay put and deal with the environment, personnel, and regulatory problems they know, rather than potentially risk uncertainty and dealing with the devil they don’t know.”

COMPENSATION IS FLAT WITH A GLUT OF EXPERIENCED “A+ CANDIDATES”

As far as pay is concerned, the lower end of the compliance job market remains under pressure from the younger pool of recent college graduates. “The sub-one hundred thousand per year positions remain capped at those levels with an abundance of candidates.” Additionally, one recruiter added that this section of the market is better qualified today than they were five years ago. “Post financial crisis, the big firms hired plenty of under-qualified people in this portion of the market because they had to, but now they are being much more selective and the candidates we now see here are better qualified today.”

Unlike big bonuses that are sometimes associated with other finance jobs, most compliance department bonuses are more modest. If the firm is doing well, which most have in recent years with the seemingly never-ending bull market, bonuses in the 15 to 20 percent range annually are pretty typical. Raises of up to 5 percent annually are also the norm according to the recruiters.

As the pay scale increases at more senior levels, there are fewer positions available. One recruiter said this is the sector where people are “really sitting tight.” Simply hanging on to their jobs is the priority. In the $250,000 and above range there is “incredible scarcity” of positions like never seen before.

Even when there is a posting for senior positions in that high range, firms appear to be “making the list of qualifications longer and more detailed than ever so that the perfect candidate simply doesn’t exist.” And, even if recruiters are able to find candidates with almost all of required skills, firms drag their feet and aren’t willing to budge. This leads many to question how motivated is the hiring firm, and it clearly indicates that there is no urgency to fill these top positions.

One recruiter cited the number of what he termed “A-plus candidates for the $250k-plus range” as “greater than he has ever seen before” and the process of filling these scarce openings as “taking considerably longer to fill” than ever before.

RELOCATION RISK

Another observation universally cited by recruiters is that firms are shifting compliance jobs to lower-cost locations. Job cuts in the higher-cost New York metropolitan area are occurring at many of the largest financial firms.

Compliance along with many other “back and middle office” positions at larger firms have gradually and quietly been relocated to other locations. “Many of the compliance and operations jobs are now in North Carolina, Florida, Austin, Phoenix, and Utah,” one recruiter said. Multiple other recruiters agreed on this point.

One recruiter said if one’s job gets moved to one of these other locations, employees should seriously consider moving as the prospects for finding a new job are weak and the relocation trend simply can’t be fought.

A “PLUG AND PLAY” SKILLSET

In a tough job market experience and skills matter. Qualified job seekers who are personable with excellent analytical, technology, and communication skills can still find positions. According to Jack Kelly, CEO of The Compliance Search Group(here), "candidates must now have a 'plug and play skill-set' where they can walk in on day-one, and with virtually no training, possess all of the necessary skills to do the job."

“After the significant growth in hiring in virtually all areas of compliance and risk after the financial crisis, hiring has now become very selective,” Kelly added.

The skills necessary in different areas of compliance are also unique. Whether it’s surveillance, regulations and regulatory change, data analysis, financial crime, AML and KYC, or cyber security, all of the recruiters agreed that specialized skills and experience are essential. They all also agreed that the “generalist” is no longer in demand.

Technical skills, or at a minimum technology understanding, are a must according to all of the recruiters. In more junior positions, technology skills such as VBA (Visual Basic for Applications, the programming language of Excel and other Office programs to create a macro to automate tasks) and SQL (Structured Query Language, a special-purpose language designed for managing databases) are highly sought after, as they allow for the customization and creation of necessary reports. Python, which is often used in machine learning, data science and science computation, and cloud infrastructure also is in demand.

Experience with any other compliance software programs such as order management systems, e-mail review and retention programs, and other portfolio and risk monitoring programs are helpful. Many branded and custom built programs are similar in nature and user friendly, so familiarity with such programs as opposed to expertise can be sufficient.

BREXIT AND TRUMP ERA AND REGULATORY UNCERTAINTY

A push for deregulation by the new administration under President Donald Trump may be limiting the hiring market, regardless of questions over how extensive any rollback will be. Firms began to take a wait-and-see approach after Trump’s inauguration and uncertainty continued over Britain’s withdrawal from the European Union. “These two events whether coincidental, or not, really seemed to mark a turning point in the compliance job market, as it’s steadily slowed down since,” Kelly said.

Another factor that was universally agreed upon by the recruiters was the impact of technology on the industry. Whether it’s the changing skill-set because of technology, or technology’s potential to displace humans, ignoring technology’s impact on the industry is an enormous mistake.

Some of the recruiters also mentioned that due to the softness in traditional financial services compliance, they are attempting to explore other new areas, such as fintech and regtech companies, as well as payment processors and technology companies. Many are finding it difficult to penetrate these companies but see it as a necessity.

(Todd Ehret is a Senior Regulatory Intelligence Expert for Thomson Reuters Regulatory Intelligence based in New York.)

This article was produced by Thomson Reuters Regulatory Intelligence and initially posted on Jan. 16. Regulatory Intelligence provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 400 regulators and exchanges. Follow Regulatory Intelligence compliance news on Twitter: @thomsonreuters

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