Author: James Rust, Partner, Leathwaite

Navigating post crisis waters: The ‘new normal’ for financial services

It has become something of a cliché to bang on about the tumultuous changes in financial services since the 2008-2009 banking crisis. The industry today is obviously very different from the one of six years ago, with legacy issues from the crash, driving far-reaching change in the demand for key skills and personnel and in their supply.

It is perhaps more helpful to think of a transformation occurring as the result of a series of ongoing waves, which are catalysing movement in other professional waters. The ripple effect means the ‘new normal’ created since the crisis has brought about much-publicised skills shortages and rising salaries. By understanding from where these pressures are coming, business leadership will be better placed to adapt to this new environment and meet changing requirements with flexibility, speed and agility.

The reign of the regulators

It is no surprise that the regulatory response to the crash has been a major driver of change. Authorities on both sides of the Atlantic have created or bolstered regulators with much greater powers, which they have shown themselves unafraid to use.

Threatened with punitive fines, financial services firms have had little option but to dramatically increase the resources devoted to compliance and regulatory functions. The result has been a hiring boom. Some large banks have more than trebled the size of these operations, while much greater scrutiny in areas such as private equity and hedge funds has fuelled demand for skills in these sub-sectors too.

With the sector’s talent pool stretched, expertise is being drafted in from other sectors. Hedge funds and private equity groups have been purloining staff from banks and asset managers, who are themselves replenishing their compliance and regulatory workforces with talent from across consultancies such as the big four accountancy firms and even former regulators employees. Some salaries in top positions have more than doubled in the past six years, due to this soaring demand but also the greater risk of personal liability for those in charge.

Grappling with digital

The second major change in the past few years has been technological. Digital technologies which are commonplace in many homes and offices are still in their relative infancy in the financial services sector. Most firms had little or no digital or mobile functionality a decade ago and are now playing catch-up in this area. These firms are now raiding the technology sector for talent.

The three key issues for the financial industry are a) how to access and engage customers in the way to which we are all now accustomed (mobile, web interface, by tablet), b) how to find the technology and skills needed to do so and c) how to design and market the new systems to pull customers into the technology.

Given that this expertise is not widely available in the finance world, leaders need to seek professionals from different backgrounds who might be tempted by a career in finance.

Staying ahead on cyber security

While financial services attacks may not be as high profile, cyber-security is not the preserve of Hollywood studios and celebrity phones. Financial services companies have long been especially vulnerable to fraud and are often under much more sustained and constant attack. Five years ago, the job title of chief informational security officer (CISO) did not exist at many firms. Now it has joined the list of occupational acronyms, alongside CEO, CFO and CIO.

With the need for data security personnel ever more pressing, and the stakes becoming ever higher, the recruitment net is having to be cast much wider to locate top talent. Defence is one obvious sector regularly raided for quality staff, as well as the top tech companies.

Yet, candidates also need to have the right cultural fit. Retention is becoming a measure on which recruitment agents, as well as the financial services firms themselves, are judged. Increasingly, deferred compensation arrangements are encouraging staff to stay for longer.

Bringing Big Data to bear

In the quest for growth, financial services firms are realising the value in turning to their data to help them gain a better understanding of the habits of their customers. However, it is worth noting how far most financial services firms lag behind the top players in big data: major technology firms like Google and Facebook, but also big retailers and telecoms companies. The big retailers, many based in the US, are breeding grounds for talent who carry with them industry best practice which can be a big support to firms in the UK.

Building for the future

Recognising the changing needs of a business, and attracting the right people to address them, is one of the key requirements of chief thinking.

Having been active in the industry since well before the crisis hit, we’ve been able to see the origins of the recent trends and demands on leadership, and we look forward to sharing more of these on our chief thinking site in the months to come. With the sheer volume of new pressures facing CEOs and the competition for talent raging across a wide range of fields, it is safe to say that building teams to address tomorrow’s challenges will weigh heavily on executives’ minds.