The age of the compliance officer arrives

It is one of the hottest areas of financial recruitment, according to headhunters. The age of the compliance officer is upon us.

In times gone by, compliance was seen as a backwater. One senior bank adviser recalls a City of London firm in the 1980s at which the compliance specialist was also charged with looking after the bosses' wine cellar.

Now the job of ensuring financial institutions play by the rules is rapidly growing in importance, driven by the tsunami of regulatory initiatives and substantial fines that followed the financial crisis of 2007-09.

Andy Haldane, head of financial stability at the Bank of England, estimated in a 2012 speech that 70,000 new full-time jobs would need to be created in Europe alone to comply with the requirements of the Basel III regime for banks, while the US Dodd-Frank rules would spawn tens of thousands of full-time positions.

Accordingly, big lenders are busy hiring. Last autumn, HSBC said it was taking on 3,000 more compliance officers. JPMorgan said it would hire a similar number as it tried to stop the flood of fines that have totalled some $20bn in the past year or so.

Some two-thirds of compliance practitioners expect their team's budget to grow this year, according to a March survey by Thomson Reuters Accelus. The growth is not confined to banks: recruiters say investment managers and hedge funds have also been taking on specialists, as they struggle to keep up with regulatory demands.

Where do all these compliance officers come from?

Law is a classic starting point, as are accountancy and industry regulators. For those seeking to prove their credentials a host of qualifications are available, from bodies such as the International Compliance Association and the Chartered Institute for Securities & Investment. The latter body's forum for compliance professionals is its largest by some margin with close to 1,000 members.

With the barrage of regulation showing no sign of easing, there is talk of shortages of candidates with extensive experience. Individuals who understand the details of important regulatory initiatives such as Dodd-Frank or the European Market Infrastructure Regulation are in big demand.

This has led to a frenetic round of poaching within the industry, as banks and other financial institutions attempt to pluck top compliance talent from their rivals, say London-based recruiters.

Richard Pickard, head of financial services at recruiter Oliver James Associates, says some experienced recruits are clinching salary uplifts of between 10 and 20 per cent - or even more.

"In the past two years, most financial services firms have been trying to tempt the talent to move," he says. "Most people have gone through that cycle now. The market is very candidate-short; all the good people will already have been approached."

Philip Charsley, a business director at rival recruiter Hays, says: "It's a very hot part of the recruitment world, and it's increasingly difficult to find people who have had long periods of time in a firm - which is what most employers are looking for."

Hays says permanent vacancies on its database were about a quarter higher in January and February 2014, compared with the same period a year earlier.

In response, firms are becoming more creative as they seek out fresh talent. Some are pulling people out of other functions, such as investment bank trading floors, risk roles or legal. Meanwhile, a steady stream of high-profile officials is quitting regulators to pursue more lucrative roles in the private sector.

The shortage of talent is also throwing up opportunities for graduates from a broad range of subjects, with firms such as Goldman Sachs offering 10-week summer internships in its global compliance division.

The starting point for some in the industry can be the "know your client" function, which runs checks to ensure that new customers are not fraudsters or terrorists, says Mr Pickard.

There are also ample opportunities in the anti-money laundering field: in 2012, it cost HSBC $1.9bn to settle laundering claims in the US.

Within investment banking, candidates can find roles in the central "control room", which monitors communications, ensuring sensitive information does not cross Chinese walls and that conflicts of interest are properly managed.

High up the corporate ladder there is growing demand for individuals with strategic capabilities, experts say.

The brief spell of Sir Hector Sants, the heavy-hitting former head of the Financial Services Authority, as head of regulatory affairs at Barclays shows just how much weight leading institutions put on the compliance division - and how demanding the job can be. He resigned from the bank in November after suffering from stress.

Julie Coates, a partner in PwC's financial services risk and regulation team, says that senior compliance officers are getting involved in the development of products and services at a much earlier stage, as well as advising on broader issues related to direction and business development.

Financial institutions used to make a decision and then check it with the compliance person; now compliance staff members are involved from the start, she explains.

"We are seeing more business people going into compliance," Ms Coates says. The role is not just to be involved in oversight, but also at senior levels to be a "strategic adviser to the business" and part of front-line decision-making.

The money involved reflects the swelling influence of compliance departments. Entry-level pay can range from £25,000-£30,000, but compliance directors at big firms can earn salaries approaching £250,000 excluding bonuses, with some figures with a global reputation commanding far more.

Salaries may well continue to surge, because there is no obvious end to the fresh rules coming down the regulatory pipeline. The EU's Markets In Financial Instruments Directive II, the Volcker rule in the US, and the UK's Mortgage Market Review rank among the initiatives keeping officers busy.

As a result, the jobs market in compliance has at the top level become something of a "carousel", says Mr Charsley. "Firms want to see loyalty and consistency. Those people don't exist any more. The average lifespan in one firm is two years."

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