The future of regulation in the banking and financial services industry remains a clear challenge for many organisations. However, there can only be speculation about how far regulators will go to ensure that the oversight of financial services organisations is sufficient to avoid or prevent future breaches of the law.
As I see it, the key issues that will continue to face compliance and regulatory functions across the industry are the continued strain on the compensation of regulatory and compliance professionals, and where future professionals will come from. These two issues are intrinsically linked and this will become more apparent if we look at them separately.
There are only a finite number of experienced compliance professionals in the marketplace. Seven or eight years ago you would only see one or two compliance roles in the market at any given time. Now, however, almost every organisation is recruiting for multiple roles, and invariably many of these are at senior level. This means that when the merry-go-round has started, the price pressure has a considerable effect on a firm's cost base.
This is not to say that senior compliance professionals can write their own cheques, but as a general trend, compensation is certainly creeping up. The challenge is that as many of these roles require significant gravitas when dealing with regulators, even a rising star with six or seven years' experience may not be operating at the right level, internally or externally.
Secondly, with the increase in the number of roles and their seniority, organisations must look beyond lateral-hire professionals to cope with rising salaries and competition for talent in the market. But with a limited pool of candidates, where are these people going to come from? This is where many firms have to broaden the scope of individuals who could fulfil these roles, even if there is a perceived timeframe to train or integrate them. This leads to situations where they are overpaying for experienced individuals from other functions with no compliance experience, or paying even more to utilise consultants.
We have seen candidates move into compliance or regulatory roles from many other governance roles - the second port of call after lateral hires. These include operational risk, compliance, audit, litigation or operations, but also senior figures from business, COOs or business managers. A litigator from a top-tier investment bank with 10 years' experience would have significantly higher remuneration than a compliance professional with 10 years' experience, so where is the breaking point in the equation?
Naturally, many organisations are also hiring more junior professionals to train up through graduate programmes or to redeploy them from other business lines, so another question could be the sustainability of compliance as a profession longer term.
Let's assume that intense regulation eases with the global economic recovery. Will these future leaders in compliance reach glass ceilings pretty quickly in their careers when there is no further room for the team to expand and grow? Perhaps this is a pessimistic longer-term view, but it underlines the need for all compliance professionals to ensure they have transferable skills, just in case.
As the regulatory strain that firms are under remains in full force, banks and other institutions will find themselves looking further outside the box and paying for talent from other disciplines if such talent can show they will add value to regulatory liaison, oversight and control.
Nick Lambe is the managing director of Morgan McKinley Hong Kong and has over 14 years’ experience across executive search, contingent and contracting recruitment. Morgan McKinley is a global professional services recruiter connecting specialist talent with leading employers across multiple industries and disciplines.
