Compliance Careers in Finance Might Get Interesting…

We all know financial services firms are under tremendous pressure today to improve their compliance and risk management functions. What’s been less clear is how those pressures are influencing firms when they are selecting chief compliance officers.

Now we have some better insight into that, and it raises some interesting career questions for compliance officers in banking, asset management, and insurance.

Russell Reynolds, a recruiting and management consulting firm, just completed a study of more than 72 chief compliance officers working in those three fields. The good news is that those CCOs are heading compliance functions with more resources. The other news—whether it’s good or bad depends on your point of view—is that where CCOs in financial services get hired from is changing.

The report found that across all three groups, new chief compliance officers tended to be external hires: 54 percent for banking, 56 percent for asset management firms, 65 percent for insurance. What’s more, however, is that those external hires did not tend to be from one group to another. That is, if an asset management firm needed to hire a new chief compliance officer, it was more likely to consider outside candidates from law firms or the regulatory world rather than hire someone already working as a chief compliance officer in banking or insurance.

We have a few implications to consider here. First, if more financial firms are increasing their compliance resources but hiring chief compliance officers from outside the business—that means a fair number of financial firms aren’t happy with the current state of their compliance function or the staff they have on hand. The Russell Reynolds report doesn’t touch on this next point, but my mind immediately goes to all those statements from FINRA and the Securities and Exchange Commission that their examinations this year will focus on firm culture. If a financial firm is hiring an outsider with little corporate experience to be its chief compliance officer, that probably means management wants to give its culture a swift kick in the pants.

Second, we keep hearing all this talk of “Compliance 2.0” where the chief compliance officer is part of the senior management team focusing on culture and ethical behavior as a driver of strategy. If those talked-about trends are actually true—and I sometimes wonder whether that’s really the case—then we should start to see more cross-over of chief compliance officers from one part of the financial world moving to another.

Russell Reynolds’ analysis (from an admittedly small dataset) shows that we haven’t achieved that yet—mostly, the report says, because compliance functions at asset management and insurance firms are still so immature that one can’t easily move from those businesses to be chief compliance officer at an investment bank. That might change over time, especially if we see more mid-sized and large asset management funds split compliance and legal into separate functions and give the compliance officer a seat at the table (of course).

What might all this mean for you compliance professionals polishing your LinkedIn profiles? Quite a bit. Take the most mature financial industry, banking, for starters. If chief compliance officers there need to address tasks ranging from operational risk to cybersecurity to organizational change, then the ideal candidate for a chief-level job will need to have a demonstrable record of delivering change and of working well with other corporate functions (legal, HR, IT, and internal audit, with a dollop of sales & marketing too).

That said, if you’re not at the chief level yet, don’t despair. As the range of compliance risks keeps expanding, so do your opportunities to specialize in one or two (cybersecurity and anti-money laundering, for example) that will make you more valuable as you climb the middle of the corporate ladder. At least that buys you time to hone your leadership skills for the C-level job sometime in the 2020s.

I also wonder if opportunities might increase for compliance officers to move from banking, with its ostensibly mature compliance function, into the asset management world—where firms are still figuring out how to split compliance from legal, and how to embed compliance across the whole firm. If your bank has already mastered the fine art of getting employees to take compliance seriously, or baking compliance needs into your operational risk management, those will be mighty attractive bullet points to include on your resume to the asset managers.

Addendum

For compliance officers in the Boston area who enjoy thinking about all this: Russell Reynolds will be holding an executive forum on this very subject on Tuesday, Feb. 23. The event is a breakfast session, with free coffee and pastries followed by 75 minutes of private, relaxed discussion. The event is free to attend but you must register and, alas, you must be a compliance officer in financial services.

Interested parties can inquire with Cassandra Maynard at Russell Reynolds, [email protected]. Tell her Matt sent you.