November 14, 2016 – Recruiting in the financial services sector is once again at a crossroads. As financial institutions emerged from the great meltdown eight years ago, heady times existed for search firms focused on any number of specialized areas within the field. But in the last year to 18 months signs have been emerging of slowing activity, and this has led recruiters to jockey for competitive position with fewer clients. Innovative talent management offerings have sprung up as a result and headhunters are going deeper into targeted market segments. The good news – there will always demand for high impact financial talent. Here’s what a few search specialists are reporting:
“Clearly we are continuing to look for candidates who have real performance history,” said Sandy Gross, CEO of Pinetum Partners, which specializes in finding leaders for hedge funds, investment banks and other securities firms. “In the hedge fund sector our clients are moving away from a focus on younger candidates to those with certain levels of maturity and history on Wall Street,” she added. While the hedge fund market continues to be strong, Ms. Gross is beginning to see it flatten – and senior executives with market cycle experience are gaining an edge over millennials who were once its mainstay.
According to Richard Stein, chief growth of officer at Options Group in New York, there has been a noticeable slowdown on the sell-side in global markets, specifcally in fixed income. “Central bank monetary policy, European risk (Grexit/Brexit) and China’s slowing economy are negative forces impacting hiring,” said Mr. Stein.
Linda Mack, president of Chicago-based Mack International, also sees some shifting due to the slowdown. “Financial services firms are focused on streamlining costs. Personnel and infrastructure costs are very high relative to prospective revenues and this is a key factor driving a flatter hiring cycle.” Ms. Mack is seeing the relocation of non-revenue producing personnel from high cost locations (i.e., money centers) to lower cost regional areas.
Signs of a Slowdown
According to data compiled by The Association of Executive Search Consultants (AESC) there was zero growth in financial services among its member firms in the third quarter of 2015, the trade organization’s last reported filing. Still, financial services remained the second largest sector of activity. Nevertheless, executive recruiters see signs of a hiring slowdown. Bank of America announced job cuts last month, and that comes on the heels of other money center banks and regional lenders that are doing the same. Investment banking groups are most vulnerable, said financial services concern Green Key Resources. “Structural challenges – tougher regulations and a shift toward electronic trading – have combined with a cyclical downturn as choppy financial markets have made clients less likely to trade.”
While investment banks and private equity firms experienced robust staff build-outs in 2014 and partially into 2015, the M&A activity driving that expansion has all but dried up. “In 2016, the banks and buy-side firms want to absorb all their new hires and observe where the world economy is going,” said Holly McCarthy, managing partner at Opus Advisors in New York. “Hiring is now more prudent than it is aggressive,” she added.
The financial services sector continues to be the engine that drives much of the U.S. economy. Hunt Scanlon Media has identified 50 search firms that specialize in the field – covering every area imaginable, including asset and wealth management, capital markets, fin-tech, hedge funds, private equity, alternative investments, commercial and investment banking, risk & compliance, investment management, family of office and venture capital (see accompanying table).
A Silver Lining
So where’s the growth going to come from in financial services? Recruiters report that demand for executive level, ‘high impact’ investing talent is on the rise – and that demand is expected to soar in coming years. But these same search professionals say these roles can be difficult to develop and ultimately recruit for clients, given their multi-disciplinary and evolving nature. In fact, impact investing roles are new to many organizations, they report.
Financial institutions are also facing intense pressure under the current regulatory environment, a result of the Dodd Frank legislation. Leaders who are equipped to deal with risk management and who can foster close collaboration between compliance and other corporate functions (and who can effectively communicate to a more complex and sophisticated set of stakeholders), will be in most need.
“The cost of compliance has ballooned so much that institutions focused on expense control have signifcantly cut back on third party talent acquisition vendors, and have instead moved to building internal recruiting staff,” said Patrick Prout, financial services practice leader at Diversified Search.
Prime Hunting Ground
Quantitative strategy development, which straddles both the buy and sell-side of capital markets, is also seen as an exciting growth area, said Stephen Ozyck, partner of Fairfield, Conn-based InSite Search, which focuses on the capital markets sector.
“It can take a significant amount of experience to gain the necessary knowledge to construct trading strategies that are pro table,” he said. “This process is research intensive and requires specialized skills in finance, mathematics and software programming.” The demand for professionals with this level of expertise continues to increase, he said. One sector Mr. Ozyck sees as prime hunting ground for quantitative developers is in Silicon Valley where they are required to build and support these strategies. “We are now competing for talent against companies like Google, Facebook and Microsoft,” he said.
So where does this leave search firms that specialize in the sector? “Despite some softness, financial services will remain strong in certain targeted areas,” said Christopher W. Hunt, president of Hunt Scanlon. “Even at the largest recruiting firms, financial services is still king.” At Heidrick & Struggles, he noted, 27 percent of the firm’s annual revenue comes from financial services recruiting, leading all of its other practice areas. “That’s a big number and not likely to change anytime soon,” he added.
Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media