Compliance Market Report 2016An exclusive look at the Asset Management Compliance Market

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THE LAST TWELVE MONTHS

The last twelve months have been extremely progressive for the compliance market, with increasing movement at the mid to senior end of the market. This has been driven by:• medium to larger asset managers looking to replace senior individuals who have left the

business;• smallerfirmslookingtocreatestand-aloneroles;and• anincreaseinnon-UK(mainlyUSbased)firmslookingtoestablishcompliance

functionsintheUK.

Increase In Movement at Mid-Senior Level

Thejuniorendofthemarket(2-4years’experience)hasseenthelargestvolume of movement in the asset management compliance market, with the majority of new positions coming available due to resignations, rather than internal growth. Interestingly, a small number of companies which have lost senior compliancestaff(non-CFholders)andhavedecidedtoreplacethemwithamorejuniormemberofstaff-thishasoftenbeendrivenbycost.

Significant Increase in Demand for Compliance Professionals at the Junior-Mid Level

Theentrylevel(graduate)marketforcompliancehasbeenveryquiet,withmostfirmsdecidingtocross-trainsomeonefromotherareasofthe business, such as audit or legal.

ThegrowthoftheFScompliancemarkethascontinuedtoattracta numberofgraduatesfromdifferentwalksofacademia,especially graduates with a law degree who are choosing a career in compliance over law. This is a very competitive market with far more applicants than available openings.

These positions are often recruited by internal recruitment teams and HR specialists due to advertising in this space being very positive at the graduateendofthemarket,althoughsomefirmschoosetopartnerwitharecruitmentbusinesstoavoidtryingtofindthe‘needleinahaystack’.Somecompanieshavereportedhavingreceivedover500CV’sforeach graduate compliance vacancy.

Fewer Entry Level Opportunities

Complianceisattractingpeoplefromotherdisciplinessuchaslegal,auditandrisk.Unlikethose professions, compliance has lacked an established and universally accepted professional qualificationandacleareducationalandprofessionalpath.

Growth of Compliance Market Encouraging Movement from Other Disciplines

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GROWTH IN THE UK COMPLIANCE MARKET

Confidenceinthefinancialservicesmarketisatasteadyrateforthemajorityofbusinesses.Moreandmore companiesarenowinvestinginmiddle-officefunctions,althoughmosthiringinearly2016havebeenreplacementhires, rather than internal growth.

Confidence in the Financial Services Sector

Standardsincompliancecontinuetorise,andthereis no doubt that the major constraint is the availabilityandaffordabilityofcompliance professionals with relevant skills.

Compliance has been an ever expanding landscape since2009,withsomecomplianceprofessionals taking full advantage of the growth of this market, the shortage of candidates available, and the financialrewardsofmovingfrequently.

Demand for Competent Compliance Candidates

Anumberoffirmsarenowreluctanttointerviewpeoplewhohavechosentomovefrequently,astheyare looking for candidates who cannot only show knowledge of the market, but also demonstrate employer commitment.Muchisthesameforexperiencedcandidateswhoarelackingqualificationsandaremorereadilyexcluded from interview shortlists.

Over60%ofcompaniessurveyedsaidtheywereexpectingtohireexternallywithintheircompliancedepartmentwithin the next twelve months due to:• growth; • anincreaseinFCAregulation;and• an increase in business volumes, with the latter being the primary driver.

Demand for Candidates Has Led to Higher Turnover in Compliance Teams

Redundancies are now extremely uncommon, and the number of compliance professionals out of work or immediately available are few. This has made it particularly challenging to source candidates for interim compliance positions.Withregulationatitshighestlevelinmanyyearsthepriceofqualitytalenthasincreaseddramaticallyandas a result salaries will continue their upward trajectory.

Shortage of Candidates Available or Interested in Interim Positions

70% of compliance professionals felt the salary was important to attract them to a new position.

Over 50% of compliance vacancies in theUKareforcomplianceprofessionalswiththreetosixyears’experience.

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HOW DIFFICULT IS IT TO HIRE IN COMPLIANCE?

Themajorityofbuy-sidefirmsreportedtheywerefindingitverydifficultrecruitingintheircompliance department,withHRreportingitwasthehardestareaforthemtofindabroadrangeofsuitablecandidates.Most people enjoy having the luxury of choice when making a decision, whether that be deciding on where to go on holiday or having options available when hiring.

A Challenge for Buy-Side Firms

Quite often, employers have only two or three good candidates to consider, when ideally they would prefer to seefivetotensuitablecandidatesandmakeaninformeddecisionbasedonthis.Moreoftenthannot,the market for compliance cannot produce this and interviewers are tasked with making a decision based upon meetingtwoorthreecandidates,unlessofcoursetheopportunityinquestionisparticularlyoutstandingandofferssomethingtothetargetaudiencewhichtheywouldn’tusuallyhaveexposuretoorispayingparticularlywell.

Thefinancialservicescompliancemarkethasseenexponentialgrowthforthepast7years;withthishasbrought2majorthingstothetable:1. an increased rate for compliance professionals; and 2. anincreasednumberofrecruitmentfirmsjoiningthe‘compliancegravytrain’.

Expect Shorter Short-Lists

View from the Market Specialist

StuartVineshasworkedinthefinancial servicesrecruitmentmarketsfor16years,specialising in the alternative & institutional assetmanagementmarketforthelast9years.Beforejoiningthecompliancemarketin2007,StuartworkedforaFSexecutivesearchfirmandleadingaFStechnologyrecruitmentbusiness in London. Throughout these years working in the recruitmentfield,Stuarthasneverknownamarketbesoclosely associated(i.e.“Whereeverybodyknowseveryone”)especiallyatthe senior/control function end of the market.

Hiringmanagerswhodon’thaveagood,strongnetworkshouldpartnerwithanexperiencedcompliancerecruiterandbenefitfromtheirknowledgeandnetworktofindthebestcandidates‘in’themarket.Stuartusestheterminology‘inthemarket,’asthemajorityofrecruitersrelyoncandidatesthatare‘onthemarket’and thereforeactivelylooking.Partneringwithanexperiencedcompliancerecruiter/head-hunterwillopenthepooltoeverycomplianceprofessional‘inthemarket’,andshouldmeancompaniesareinterviewingthe absolute best candidates.

How to Operate in this Market

20% of the market are actively looking

72% of the rest of the market would consider a job change for the right opportunity

8%wouldn’tmove for all the tea in China

Over 60% of employers feel recruitment is vital to the success of their department.

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The market is also facing more and more counter offerswhenpeopleresign;infact,itisnowthenorm.Mostcompliancespecialistsarecounterofferedintoday’smarket,especiallythemoreseniorprofessionals and the cost of replacing them is both timeandmonetary-itcanbequitetimeconsumingto source and interview replacement candidates with the added time then for the new candidate to settle in and start to add value. In addition to this, there are the usual costs of losing an employee and hiring a new employee, as well as the recruitment cost.

Beware the Counter Offer

Only8%ofcandidateswhogettothestageof resigning actually stay. There is a very small percentage of people who would use a resignation to get an increase in salary from their current employer, althoughover70%ofpeoplewhoacceptacounterofferendupresigningandactuallyleavewithin6-12months.

Outcome of Counter Offers

It is fair to say that most seasoned compliance professionals are aware that once they resign from their current employer and decide to stay, in most instances, their cards are marked and are unlikely to be considered for a pay rise for the foreseeable future due to them being given a pay rise to stay with their current employer.

“Awkward…”

70% of candidates believe they have to move jobs in order to progress their careers.

75%of employers said they felt candidate salary expectations were too

high, although 85% of the market said they were achievable.

75% of candidates believe they have to move companies to get a salary increase.

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WHAT AREAS ARE SEEING THE LARGEST INCREASE IN SALARY?

The asset management compliance market, generally speaking, lends itself to generalist complianceofficerswhoareinvolvedinallaspectsofcompliance(unlesssomeoneworksforoneofthelargerbuy-sidefirms-youknowwhotheyare-whichhaveaconveyor-beltcompliancefunction.)Themajorityofinstructionsreceivedoverthelast12monthshavebeenforbusinessfacing/advisoryfocusedcomplianceofficersandremaintobeinhighdemandinto2016.

The Head of Compliance and MLRO end of the market is veryreactive,andoftentheresponsetoaCF10/CF11 resignation. This market tends to peak between March and June due to bonus, although with this level of positionbeingofparamountimportancetoanyfinancialservicesbusiness,assetmanagersareoftenrequiredtobuy out expected bonuses to remunerate anyone new joining at this level.

HeadsofComplianceandMLRO’saretypicallydrivenbymoney,brandandsizeofthebusiness.SincebeingaCF10and/orCF11holderisthemostseniorcompliancepositionavailableintheUK,financialcompensationisusually the key driver when prospective candidates are consideringtheiroptions.Complianceofficersatthisleveltypicallymoveforanincreaseofbetween20%to25%ofbasesalary,plusanyadditionalbenefits/bonuswhich may need to be considered.

Heads of Compliance/CF10 & CF11

The mid to senior end of the asset management compliance market is one of the most competitive and challenging areas from a recruitment perspective. This is due to more senior candidates being in a position to demand20%to30%upliftinbasesalary.Themajorityof compliance professionals at the middle end of the scale are interested in business facing roles, and want to move away from the more administrative elements of compliance,suchasfinancialpromotionsandreviewingmarketing materials.

Over70%ofhiringmanagersquestionedsaidthatthiswas the most challenging area of compliance in which to findtalent,duetothemoreseniorcandidatesdemanding a huge increase in salary or the middle end of the market having strong monitoring and reporting experience, but lacking in the advisory experience and therefore needing training in this area.

Mid Level and Senior Market

The junior end of the market has, unsurprisingly, seen the largest volume of hiring in the asset management space. Thereis,however,agapbetweenthosewithnoexperienceandthosewith18monthsexperience,duetofirms opting to hire compliance professionals with at least some experience rather than none at all, even with the additionalcostofhiring,includingtherecruitmentfee.ThismeansthosefinishinguniversitylookingforacareerincompliancehaveveryfewjobopportunitiestoconsiderandoftenundupstartingoutinKYCandCDDtogetafootin the door in the hope they can make the move once they have been employed.

Junior End of the Market

Over 35% of compliance managers believe theyareunder-resourced.

COMPLIANCE BREAKDOWN DEPENDING ON EXPERIENCE

COMPLIANCE MARKET STATISTICS

Only 10% of compliance jobs in the UKareforcomplianceprofessionalswithlessthanthreeyears’experience.

PermanentpositionsfaroutweightemporaryopportunitieswithinCompliancefunctionsandjust30%ofemployerssurveyedhavetemporaryorcontractstaffintheirteams.Manyfirmsarestrugglingtorecruittemporaryorcontactemployeesasthereisageneralashortageofskillsetinthecurrentmarket.Furthermore,companiesarereluctantto employ temporary workers, preferring to delegate extra work to current employees until a permanent position has been approved.

65% of all compliance hiring in London are sourcedthrougharecruitmentbusiness-only15%issourcedinternally.

Over 60% of the asset management market are likely to hire in compliancein2016,withnewbusinessanddemandinregulationsbeing key drivers for this.

58% ofemployee’sreceivedasalaryincreasein2014.

Less than 50% of employers feel their company remuneration is in line with market rate.

30% of candidates believe progression is dependant on market conditions and company performance.

Over 30% of candidates believe an internal promotion will result in a significantincreaseinsalary.

75% of candidates use LinkedIn to search for a new job.

Average hours per week worked by Compliance employees:

62% Less than 40 hours 31% 40 to 50 hours 7% 50 to 60 hours

Theaveragesalaryincreaseachievedbycomplianceprofessionalschangingjobswas17%against5%achievedbythosestayingwiththeirexistingemployer.The5%wasachievedbythosewhohadbenefitedfromapromotion.16%ofemployersreportedtheybelievedsalaryexpectationsintherecruitmentmarkettobeexcessiveandbeyondtheirbudget.However,84%atleastconsideredthemaffordable.Inourexperience,providedcompaniesare offeringmarketrate,decisionsmadebycomplianceprofessionalsintherecruitmentmarketaremorelikelytobedrivenbytheperceivedqualityoftheopportunityandnotonlysalary.

The Money

The Hours

The Job Opportunities

The Tenure60%ofmanagersandHeadsofCompliancehavebeenwiththeiremployerfortwoyearsormore-40%havebeenwiththeircurrentemployerforfourormoreyearsand75%havebeenwiththeircurrentemployerforlessthanayear; this is indicative of the considerable movement at the mid to junior end of the market. These results suggestthatthisareaofthemarketchangesmorequickly,perhapsinordertoachievehighersalariesand progression within compliance functions.

If you would like to discuss the compliance market in further detail, please contact:

Stuart Vines, Managing Director - CompliancePh. 020 8305 2837stuart@graffsearch.co.ukwww.graffsearch.co.uk