September 22, 2021 –
The profile of modern financial services leaders continues to change amid the sector’s renewed focus on customers for revenue growth, service digitalization, a renewed focus on risk management, and increasing investor and regulatory scrutiny, according to executive recruiters.
The COVID-19 crisis has only heightened the need for top talent that has the ability to pivot and steer businesses through hard times and onto firm ground. So it is that skilled leaders are being sought throughout financial services and across a myriad of functional disciplines. Diverse candidates are in particular demand. Digital and transformation experience is vital. For many, success will hinge on a leader’s ability to integrate remote workers.
Some of the roles that recruiters are being asked to fill include CIO, CDO, CSO, big data, IT audit, customer experience and compliance positions across a number of financial services subsegments. Asset management roles in product and sales in illiquid-assets/alternative investments are also in demand. Financial services organizations are also seeking directors of cybersecurity, chief enterprise architects and chief revenue officers.
The market is highly competitive for top talent across the financial services sector, according to Michael Sarnoff, head of the financial services practice at Diversified Search Group. “This is true for leadership across lines of business and across functional areas such as boards, technology, operations, risk, finance, HR, and legal and compliance,” he said. “In addition, we’ve seen an increased urgency to identify and attract diverse talent in to mid to senior levels across all of our clients in financial services platforms.”
“The COVID pandemic has served as a great accelerator of trends, most notably on efforts around DEI at companies and around the move to a more flexible and virtual work environment,” Mr. Sarnoff said. “Despite some headwinds through the middle part of 2020, the sector has rebounded with real strength over the last 12 months and there are no signs of it slowing down.”
“While we saw a brief pause in our senior executive recruitment processes early in the pandemic, there was a quick recovery as hiring teams acclimatized to the new virtual approach to hiring,” said Lisa Newey, senior managing partner at Newey & Co. “Hiring managers, for the most part, seem to have gained full comfort with hiring and working with colleagues with whom they’ve never been in the same room. In terms of volume, we’ve seen a very steady flow of both recruitment assignments and enquiries across all functional areas of financial markets for almost the full span of the pandemic, and have been operating at full capacity.”
In Ms. Newey’s view, financial services firms have adjusted quickly and effectively to remote work throughout the pandemic, even in situations in which there is a need for constant interaction, such as on a trading desk. “A lot has been learned about how to best manage a remote workplace, and how to stay engaged and focused,” she said. “The key challenge going forward will be to integrate this flexibility into work practices in the long run. Now that employees have had a taste of the flexibility and personal time saving that remote work can offer, the proverbial cat is out of the bag and expectations are that remote work or a hybrid arrangement will be the norm. Employers who don’t continue to offer this type of flexibility for their teams will likely lose their best employees to those who do offer it, or not be competitive in hiring the best people.”
Digital and Transformation
“We see an increasing demand for senior financial executives who have experience/expertise in both digital and transformation topics,” said Joost Goudsmit, managing partner, Netherlands and global practice co-leader, financial services practice at Boyden. “Because of the pandemic, finance executives are under increased pressured to act fast to steer their company into a solid and stable business.”
“Prior to COVID we encountered a drastic change of business with the financial services sector due to digitization,” said Carlos Dafauce, partner, Spain, and global practice co-leader, financial services practice at Boyden. “Traditional banks, for example, were pushed by new fintech start-up and scale-up companies to rapidly transform their structure, product offering, and their pace in innovation and decision making. Some of them are on their way to successfully transforming into a more digitized financial entity, but some of them will not make it due to a lack of investment capability and management potential. They will either cease to exist in the near future or will be taken over by more flexible and agile financial/technology firms.”
“More and more technology firms will step into (or already have) the financial arena, like the Google’s and Apple’s of this world,” Mr. Goudsmit said. Also fintech initiatives will continue to grow in the coming years. They will change the banking, insurance, asset management, etc. landscape enormously. We also see strong activity in payments and open banking where traditional players are investing in order to not lose pace with newcomers. Also PE firms are focusing more and more on new developments and initiatives in the financial services business.”
“Our firm did reasonably well during the pandemic,” said Mr. Dafauce. “Of course we had some loss in revenue but we managed to stabilize that and are trending upwards during 2021. In 2020 we monitored our costs very well and aligned our business on providing leadership solutions with the transformation and digitization needs of our clients,” he said. “Our human capital services expanded with more digital solutions for our clients (e.g., online leadership services and assessments) and we also focused on technology finance positions. We also appointed fintech regional leaders to face the market challenges and worked together in close coordination with our technology practice given that boundaries in certain fields are blurred.”
Mr. Goudsmit notes that in regards to positions and roles that are in demand, “We are seeing CIO, CDO, CSO, big data, IT audit, customer experience and compliance positions across the board of financial services subsegments; for asset management, product and sales positions in illiquid-assets/alternative investments; and in payments, positions to transform traditional business to digital,” he said. “Lastly, we are seeing other positions in the sector such as director cyber security, chief enterprise architect and CRO.”
As we start to slowly move into a post COVID world, the job market for senior executives is extremely strong, according to Matt Shore, president of StevenDouglas. “While the need for executive leadership existed in 2020, many companies and individuals were hesitant to act,” he said. “The inability to meet in person and the general fear of the unknown put these positions on pause, while we waited for additional information about the future. As we entered 2021, the landscape has started to clear and the pent up demand has required companies to start hiring. The delays from 2020, plus a robust economy, have led to one of the hottest job markets we have seen in our lifetime.
“Additionally, the flexibility to work remotely has opened up candidates to a greater number of opportunities leading to a true talent driven market,” he said. “A previous generation of leaders, who relocated to a company’s headquarters and traveled extensively, is being replaced by a new generation with a true home base and travel as needed.”
Needless to say, the early days of the COVID pandemic was a very uncertain time for all companies but, the impact on the financial services sector was determined primarily by their size and area of focus. “The size of each institution played a major factor in their response and ability to thrive,” said Mr. Shore. “The larger universal banks retrenched the most. The primary cause of this centered on their retail banking exposure to interest rates, their concerns over loan losses and their international reach. Conversely, regional and specialty firms were more nimble and in many cases experience employment growth. Whether it was a hedge fund increasing exposure to tech or crypto, or a region bank with a greater focus on PPP distributions, these firms saw opportunities and added talent to make the most of it.”
The financial services sector also faces several challenges: the potential of increased government regulation, higher interest rates, and geo-political unrest. “Specific to the financial industry’s ability to attract and retain talent, I believe a resistance to changing cultural norms could be the biggest threat,” Mr. Shore said.
“Even before COVID, the predominance of working for a major investment bank or hedge fund was being replaced by top talent looking to tech or fintech as the quintessential dream job. These other sectors’ creativity and flexibility, coupled with cutting edge products, has only accelerated the movement of top talent into the space. Add to this the financial sectors’ post COVID resumption of a four to five day per week office requirement and inflexible work habits, this trend will only continue.”
“We recruit recruitment and executive search consultants with exposure to the financial services sector,” said Nicholas Macdonald, managing principal and head of U.S. operations at Tempting Talent. “When speaking to consultants in this sector it seems that hiring across financial services – banking, alternatives and insurance – has become wildly competitive for hires and a predominately candidate driven market for all major focus clients. The majority of search consultants we speak to who were traditionally focused in financial services have begun expanding into ‘financial technology – payments systems, cryptocurrency, blockchain technology and quant’ due to the increased investment and advancement within these spaces.”
“The financial services industry has come out incredibly strong from the COVID-19 pandemic, with the majority of our clients’ partners reporting record quarters and hiring aspirations,” according to Mr. Macdonald. “COVID has forced technological advancement for many banks so all FS search firms are beginning to expand greatly into building technology practices for variety of reasons,” he said. “Our clients say it is a battle between old vs. new. Traditional banking services are being altered greatly by the rising tide of financial technology – executive search consultants are working tooth and nail to keep up with these changes to stay ahead of the curve. For example, a couple of our search clients have begun building-out blockchain teams for some of the world’s largest banks.”
“Search2Search is the strongest its ever been, but has changed dramatically from a client-driven to candidate-driven market,” Mr. Macdonald said. “We are finding that the most in-demand consultants are those that have exposure to emerging technology companies and can operate functionally as generalists for their client needs. These individuals traditionally have much more control over their clients due to the seed or series funding and lack of infrastructure so the ability to work on all roles offers these VC backed portfolio companies a talent-partner that can help build out functionally in all areas saving time and potentially lost resources.”
A Rare Opportunity
These days, private equity and venture debt leadership also require greater nuance and precision than before the pandemic. “The capacity to discern the myriad ways that COVID and its concomitant disruptions are critical,” said Eric Frickel, managing director for executive recruitment firm BrainWorks. “In the case of analysts and associates, in several industries and sectors, this may be the first time in their careers that tried and true models need to be revised, recalibrated and oriented to the current landscape at the current scale and depth. For portfolio-level leadership, the stakes for making the right call have never been higher. New characteristics will be required including substantive patience, the capacity to impute the impact of paradox and polarity, enhanced risk assessment capacities and a steady hand to keep those assessments in perspective together with a greater capacity to forecast and interpret market signals and activity together with traditional private equity skills.”
During disruption, said Mr. Frickel, the top one or two percent of private equity talent differentiate themselves even further. Polarity and disruption in the economy further accentuate and differentiate expertise in the industry from the high performing nature that industry lore is made of. “It is in these times that the delta on results between first and second tier talent can be measured in deciles rather than a handful of percentage points,” he said. “Identifying and securing this talent will similarly separate the field. During disruption, some of this top talent will seek alpha by looking for those industry players that are prepared to make the investments necessary to capitalize on the moment. Savvy investors will recognize the rare opportunity to secure top talent that otherwise might be unavailable in the market.”
The challenges of the past year have placed an even greater emphasis on the role of the portfolio chief financial officer. The pandemic requires businesses to have exceptional leaders at the CFO level to navigate the challenges the pandemic has created. “It tested whether there have been strong processes in place to allow companies to accurately forecast and have systems and tools that provide critical insights into operations and key value levers,” said Mr. Frickel. “It has been critical that companies can pivot quickly when the data is suggesting that there are potential pitfalls and opportunities.