With the ever-increasing regulatory burden and Brexit looming large, FourthLine's Head of Capital Markets Practice, David Croft, has examined the year's hiring demands and skill-shortages in the Buy-Side industry.
2018 is set to be another year of turbulent change within Investment Management firms, driving the market's demand for Regulatory, Risk, and Compliance professionals. These are some of the key areas that I believe will be behind this demand.
Brexit
Whilst Brexit is highly likely to mean that Financial Services firms relocate a number of staff to European cities, as with all large-scale change it is also likely to drive demand for certain types of staff, such as change professionals and lawyers.
We anticipate a spike in demand for contract change professionals across the whole project cycle, with a particular emphasis on the following:
- Passporting
Arguably one of the most prevalent of impact areas, professionals with knowledge of Passporting agreements for UCITs and AIFMD funds will be in demand. Despite there now being less than a year left until the transition deal begins, there a still no concrete arrangements beyond the 2 year easing-in period. Phillip Hammond has signalled that the EU’s ambiguous proposal for ‘improved equivalency’ is “wholly inadequate”, meaning that there is some tough negotiating ahead before we know what access will be on the basis of.
Regardless of the outcome, this type of professional will be in demand as there will be inevitable change requiring SME knowledge.
- Clearing
Another area likely to experience change is derivative clearing. Currently, Euro-denominated derivatives-clearing is largely conducted out of London but this has already become a point of contention, with other European cities vying to be the post-Brexit clearing centre.
Change professionals with experience of MiFIR Best Execution are likely to be useful to Brexit programmes, as they have a knowledge of the current-state regulatory landscape and the intricacies of the European Financial Services infrastructure.
- Legal
As with any kind of change, there will be huge amount of legal negotiations and agreements necessary regardless of the outcome.
There has already been a large spike in demand for regulatory lawyers post-MiFID II implementation and this trend is likely to continue throughout the next few years as a result of Brexit.
MiFIR
Whilst MiFID II implementation on 3rd January seems to have been relatively smooth, there is still plenty of work to do for firms. There are 2 particular areas that I see driving hiring demand over the course of the year:
- Transaction Reporting
With many firms outsourcing their Transaction Reporting requirements to ARMs like UnaVista or TRAX, there is a need to put in place robust oversight functions internally to ensure that the flow of data and reporting is accurate and timely. This will drive hiring demand for professionals with experience of designing and building oversight functions, as well as people with strong vendor relationship management skills.
- Payment for Research
A continued point of contention, professionals with experience and knowledge of the Research Payments area of MiFID are still likely to be in demand across the Buy-Side.
There are on-going challenges for firms in identifying material and services which fit the definition of investment research that falls under the regime. Firms will need to ensure that they are not underpaying and being induced. Research Payment Account (RPA) users will also need to closely manage their evaluation procedures, client disclosures and operating research payment budgets.
In addition, I expect the following areas to also drive recruitment decisions this year:
- Post-Trade Transparency
Although most reporting will continue to be carried out by trading venues and Systematic Internalisers (SI), trades executed off-venue need to be reported by the seller if neither or both of the counterparties is an SI . This regime officially comes into force on 1st September 2018 and so far many counterparties have not ‘opted-in’ despite steps being taken to try and understand whether they will be acting as SI’s.
As a result, it is likely that buy-side firms will have reporting obligations, which will drive demand for contractors who worked on the Post-Trade Transparency of MiFIR prior to implementation.
- Best Execution
The next challenge for firms from a Best Execution perspective is the RTS 28 reporting requirements with reports due on 30th April 2018. Whilst many of the processes will already be in place, there is still likely to be a need for professionals accustomed to this part of the regulation. There will be demand within Compliance Monitoring and Regulatory Reporting functions due to the need for robust and enhanced monitoring procedures to keep track of the vast amounts of execution quality data which SI’s and venues will need to report quarterly.
- SMCR
Despite the FCA’s Senior Managers and Certification Regime being scheduled for implementation in mid-late 2019, it has been noted that the day-to-day workload of the programme will be quite high. This is likely to drive hiring demand for change professionals who have successfully implemented SMCR within banking firms.
- GDPR and Data Protection
With implementation of GDPR set for May this year, the race is already very much on to deliver on time. The demand for GDPR professionals has already been nothing short of enormous this year and last. Data Protection will remain a major topic of focus post-GDPR implementation that will further fuel the demand for practitioners.
