Investment banking legal recruitment in the UK
2012 was a challenging year for the investment banking sector. Despite restructuring exercises, there were further redundancies within front office departments although these are yet to translate to legal departments.
Compensation remained a contentious issue within investment banks’ legal departments as many institutions have gone through a re-basing exercise, adopting a more 70 / 30 approach to fixed versus variable compensation. For those institutions retaining a bonus led remuneration structure, in some instances lawyers were dissatisfied due to low bonus pools resulting in lower levels of total compensation. Some tier two or less well-known institutions sought to take advantage of this by offering higher fixed compensations to potential hires in an attempt to attract the best talent.
Bonuses remained flat with 59% of respondents within financial services in London receiving a bonus and 39% (the largest proportion) indicating the level of bonus remained unchanged year on year. Many banks adopted the attitude that flat bonuses should be viewed as an uplift, as bonuses are no longer awarded for mediocre performances. Generally speaking, excellent candidates can still command competitive fixed and total compensation within key areas.
Regulations continue to dominate agendas; with EMIR on the horizon. Strategically many investment banks linked the work with established departments like fixed income or prime services where there was a natural fit, whilst others have added headcount and hired lawyers specifically to cover OTC clearing and regulation.
The derivatives and structured products market remained flat in 2012, with mostly replacement hires being made across the board and very few departments making additional hires. Pockets of hiring occurred across FX and rates, whilst limited hiring took place in structured derivatives and structured products as appetite within these markets appeared to be stunted.
Capital markets is another area which saw little movement as calls for increased capital raising and low appetite for risk controlled the market, however some hiring within DCM / ECM and securitisation occurred. The same can be said within corporate and finance departments with limited hiring within these areas taking place.
Prime services remained fairly buoyant with many investment banks looking to bolster their departments as well as make replacement hires. This remains an area of high demand and skill shortages have in turn pushed up salaries. Hiring in cash equities, futures and OTC clearing have occurred within this area. There appeared to be more consolidation within these areas with businesses being pushed into leading institutions.
The ISDA / derivatives negotiation space remained warm throughout 2012. Hiring in prime services was fairly buoyant as well as investment banks bolster their OTC clearing documentation units and teams. There was a gradual trend for departments to hire more qualified candidates into these areas.
Within investment banking legal, similar levels of hiring to those of 2012 are expected in 2013, with increased activity within OTC clearing and regulation as firms behind the curve look to hire to assist with this area. Other key areas such as prime services and derivatives are likely to experience moderate levels of recruitment although some pick up in capital markets, corporate and finance departments is anticipated. Of course a rebound in the market could paint a very different picture but this is unlikely.
Asset management legal recruitment in the UK
Hiring within asset management was steady in 2012 with the biggest concern throughout the year being the incoming regulatory change within the sector, particularly surrounding AIFMD. As a result, legal departments within some asset managers recruited specialist lawyers to assist with the influx of regulatory change.
With a number of leading law firms bolstering their investment funds teams by upskilling associates, a wider talent pool has been created for asset managers to source potential candidates as opposed to competing with in-house institutions.
Salaries remained static during the course of 2012 although investment managers appreciated the need to offer competitive salaries to attract the best talent in the sector. Bonuses did not return to the levels reached pre 2008; however a typical split of 70/30 to fixed versus variable compensation became the norm.
As the industry recognised the slump in traditional investment management products, those that experienced growth in 2012 phased in more simplistic products, providing added clarity to retail and institutional investors. Price is another major contributing factor, as those who are seeking to remain competitive have continued to cut fees especially with popular products such as ETF’s.
Lawyers with experience in regulated funds will remain in demand within this sector. Conversely there remains a real lack of positions available for those with experience in private / unregulated funds as teams slimmed down operations within this area. With some organisations now consolidating EMEA practice directly from London, lawyers with good language skills will become quite instrumental when hiring.
Hedge fund/Private equity legal recruitment in the UK
The private equity market continued to shrink during 2012 as funding dried up, which had significant knock-on effects for lawyers specialising within this market. Firms continued to rely on secondees from private practice where assistance was required, rather than hiring a full time lawyer.
For those within private equity who have managed to weather the storm, salaries stayed consistent. High salaries and bonuses for now are the norm, however the lack of roles coupled with many firms moving to wind down their funds means these salaries are unlikely to stay consistent.
Private equity has been met with a ‘back to basics’ approach with real estate seeing growth in 2012, with some of the larger houses hiring within the legal space and a resurgence seeming to occur in this area.
Regulatory policies such as AIFMD made the demand for lawyers within hedge funds essential, with organisations looking to hire in-house experts to anticipate matters and deal with them accordingly.
Similarly to asset managers, hedge funds have experienced growth by providing more clarity to investors, as well as numerous smaller hedge funds with well regarded investment processes being acquired by larger funds with a strong managed accounts infrastructure. By moving away from traditional fund-to-fund models to Managed Account Platforms, investments have become increasingly attractive as transparency for investors has improved.
When hiring, organisations sought excellent lawyers with experience in setting up funds in offshore jurisdictions such as Dublin, Luxembourg and the Cayman Islands, as these regions remain very attractive for alternative investment funds. Lawyers with experience in these areas will remain in demand throughout 2013.
Salaries within hedge funds remain constant and generally lawyers command similar salaries to those in private equity, although salaries in hedge funds are typically higher than those for investment managers who focus on regulated funds.
Commodities legal recruitment in the UK
The in-house commodities market experienced some change over the course of 2012 with some of the smaller trading houses moving operations overseas, in particular to Singapore. Headcount within legal teams in London remained constant with little growth within the trading houses.
Investment banks that previously had been quite dominant within this sector subsequently scaled back operations, with some closing their commodities desks completely. This led to an increased demand for lawyers with experience in trading physical commodities rather than those with only paper commodities experience.
The niche trading houses continue to provide the highest salaries in comparison to the investment banks and large corporates.
Retail banking legal recruitment in the UK
2012 saw an increase in recruitment activity as confidence returned to the retail banking sector. Candidates with consumer credit and payment services experience remain particularly in demand, a reflection of how the regulatory environment continues to impact the sector. The candidate driven nature of the retail banking market has seen a flexible approach to hiring with companies targeting lawyers with secondment experience from private practice as well as recruiting directly from competitors. The outlook for 2013 is positive with the majority of retail banks anticipating headcount growth. It is expected that employers will seek to retain their best staff through paying bonuses and attracting new talent by offering competitive and increased salaries.
Insurance legal recruitment in the UK
The insurance sector remained stable throughout 2012 with hiring trends and salaries broadly in line with the previous year. The three to six year post qualified level continues to see the most activity as disillusioned private practice lawyers make the transition over to in-house employment. Over the course of 2012 there were greater levels of recruitment on the non-contentious side as insurance companies continued to recruit lawyers with corporate, regulatory and general commercial experience. The senior end of the market remains more competitive with a greater number of candidates competing for fewer vacancies. The outlook for the insurance industry is optimistic with companies anticipating headcount growth within the first six months of 2013.
Payments legal recruitment in the UK
2012 was an exciting year for the payments industry, characterised by new companies entering the market and increasing levels of investment, as companies sought to gain a competitive advantage through the use of new technologies. Salaries in the sector remain fragmented with the larger and more established payment organisations finding themselves in a position to pay a higher fixed compensation in order to attract new recruits. Key skill sets in demand include merchant acquiring, payment services and money transmission.
In the future it is expected that companies will continue to grow their legal teams as they strive to outperform their competition in what is a dynamic and fast moving industry.
Compliance recruitment within Investment Banking in the UK
2012 was an active year within compliance. The FSA issued record breaking fines under the new leadership of Tracey McDermott, which led to a feeling of nervousness for many investment banks over the strength of their controls around client money and financial crime. This resulted in the fleshing out of compliance teams, particularly within the advisory, financial crime and client money areas. However, whilst there was a need for increased headcount, this didn't necessarily translate into the UK market as many investment banks preferred to move staff internally into these roles from other teams across the UK, Europe and the US, rather than recruiting externally.
Key areas of growth have aligned with those that have been fined by the FSA such as anti-money laundering and client money teams, with many investment banks looking to strengthen these areas on both an interim and permanent basis at the AVP and VP level. Candidates within certain areas have been able to command higher base salaries due to the market being relatively candidate short, an example of this being client money and fixed income advisory. Hiring within the the control room has remained active with many candidates using it as a platform to move into advisory or monitoring roles, meaning turnover of staff in this area has been rather high. An increase in control room related projects has led to the need for interim consultants.
Within advisory, there has been a continued demand for candidates with fixed income advisory experience at a VP level.
Bonuses in 2012 were fairly modest with few bonus ‘buy-outs’ by the investment banks hiring in the later part of 2012.
Compliance recruitment within Asset Management in the UK
With the changing regulatory landscape and an increased focus on conflicts management, compliance within the asset management space remained challenging in 2012. Compliance functions were forced to examine their headcount and ensure they had adequate teams to meet the FSA regulations whilst trying to keep costs to a minimum. Compliance hires occurred in peaks and troughs during 2012 with most recruitment being limited to replacement hires or small pockets of growth within teams. Again bonuses were modest as the future of the market remained uncertain. Across the asset management space, base salaries remained slightly lower than investment banks with bonuses being a higher percentage of base salary.
2013 will be a busy year across compliance with senior management continuing to sign off roles within the investment banking space, despite there being a hiring freeze across other areas of the business. There are many projects being undertaken to improve systems and controls to ensure processes meet the FSA's standards. Many investment banks have plans to make changes within their compliance teams, with some areas being moved back into compliance whilst others are moved into operations. However, what is clear across financial services is that the world of compliance will continue to be interesting and busy in 2013.