Overview
The European corporate governance market outside of the UK has been a growth area for many firms, largely driven by firms Brexit planning considerations as well as addressing the numerous regulatory changes affecting the financial services industry. With the growth taking place it has also been a story of uncertainty given the political instability and the lack of clear direction on Brexit date or further EU relationship for the industry.
Trends from 2019
With the level of uncertainty around future relationship, firms have taken different approaches to their Brexit planning strategy but there have been some key trends within the industry. Dublin has been the location of choice for many buy-side firms, particularly those wanting to maintain their MiFID passporting arrangements within the EU markets. Frankfurt has seen a large influx of Investment Banking activity while trading desks are largely looking to be in either Frankfurt or Paris. Frankfurt hasn’t been the only German city seeing growth with Munich seeing an increase, driven largely by the FinTech sector. Fund management and fund administration has also seen growth in Luxembourg whilst Amsterdam has also seen a build out of functions, largely from firms who already held licences in the country and have now increased their permissions.
The common trend across all the EU hubs has been the lack of local talent in each of the markets. With these cities traditionally not having institutions of this size, scale and complexity based there, there simply isn’t the depth to the talent pool regarding number of individuals or technical skillsets when it comes to some of the more complex products or industries. Where London has previously held the lure for many European financial services professionals with the promise of significantly more opportunities and higher remuneration this is slowly changing, with more individuals looking to stay locally. Salaries of candidates across the EU but particularly in the likes of Dublin, Paris and Frankfurt are becoming much more aligned to those of their London based peers and as such we have seen a lot of movement of candidates back to their native country where there is the potential to develop their career and take on senior roles whilst staying closer to family roots.
As mentioned, Dublin has been the go-to market for much of the buy-side industry. Within the last 12 months there has been a 28% increase in the number of firms holding MiFID Investment firm licences with the CBI. With the stringent requirements for firms to have significant substance in terms of headcount on the ground, coupled with the licence requirements to have a registered compliance officer in place before trading can begin this has stretched the local market significantly. The regulator is very clear on their fitness and proprietary requirements for taking on these registered functions and as such there has been the need for many firms to be more flexible in their hiring approach. There has been an increase in the number of firms looking internationally to secure talent (particularly where that individual has had exposure to the CBI regulatory regime previously) or having to pay above market rate to secure the best talent. The buy-side isn’t the only sector eyeing Dublin as a location for their future EU hubs with some banks also selecting the Irish city as their location for their regional headquarters. The rationale for this decision has been diverse with firms stating some of the following as contributing factors; the proximity and travel times to London, technical skillset of the local market, benefits of having an English speaking lead regulator and in some cases where smaller firms have been looking at relocations – the preference of senior management due to personal reasons. For the time being the influx of new firms seems to have slowed but those who have established operations within the last 12 months are looking to further embed themselves in the local market. With the significant number of new players to the market, those long-established firms have lost several talented individuals who are now having to back-fill, either with the promotion of more junior staff or entering the hiring market, thus further driving up salaries.
Paris and Frankfurt have seen growth in equal measures, with many large banking firms already holding licences in these markets and it being a smoother process to change these permissions than to set up an entirely new entity in an unknown market. France has faced some challenges in recent times to attract talent to Paris but with most of the French banks relocating global functions to Paris they have been able to attract top talent to take on these senior roles. With French language skills being critical with most hires, and with so many firms building out in the market, recruitment locally has been highly competitive and supplemented by a number returning French nationals and fluent French speakers looking to relocate to Paris. A similar trend is seen in Frankfurt with the German language requirements. Should we see an aggressive Brexit in the coming months then there will need to be more flexibility around the language requirements with there simply not being enough talented candidates out there to supply the demand should hiring increase significantly from current levels, we are already seeing some firms look to utilise translation services more and more as a cheaper alternative to entering the highly competitive corporate governance market.
Brexit hasn’t been the only driver for growth in the EU market, significant fines for AML failures have driven some firms to hire aggressively, particularly in the Nordics. A common theme for these hires has been to bring in the knowledge from overseas, largely from the UK but also other jurisdictions as the local market doesn’t have the depth of technical ability to address some of the challenges faces by these global firms. Much of the senior hiring is now complete but expect there to be a further growth as teams are built out with some of that knowledge needing to come from overseas with the local market already proving to not have the depth of talent.
Hiring processes are typically being long and drawn out, with a number of stakeholders involved in the hire and with the high-profile nature that some of these roles could have there is a need to ensure the right hire is made. This is without factoring in the differing labour laws and hiring practices that we see across different EU nations. It is not uncommon for firms to be having 4-5+ rounds of interviews, even at more junior levels with the firms who are able to speed up their processes putting themselves in the best position to hire top talent. With the competitive nature of each market, candidates are typically having numerous offers on the table at any one time which means there is a greater importance for firms to differentiate themselves. The differential factors are typically surrounding having a clear strategy for Brexit (no matter what the outcome), the brand that the firm has (locally and internationally), senior stakeholder exposure and development potential and in addition to competitive salary demands.
Outlook for 2020 and beyond
Until there is any clarity on the UK’s future relationship with the EU it is difficult to give any certainty as to the future growth of these markets. One thing that is for sure is that given the investment many firms have made in these projects is that all these entities will have a greater prominence within the European structure of these firms.
Written by:
Leading a Compliance recruitment team of 3 people I was the top biller in Asia in 2015 and 2016 successfully placing candidates from Analyst to Director level across the buy and sell side. Following Singapore’s success I made the move to Hong Kong in early 2017 to launch the Black Swan Group Hong Kong office which I now manage and continue to build. Our core focus is the Corporate Governance sector including Compliance, Risk, Audit and Legal.
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