Consolidation + Competition = Compensation
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Consolidation + Competition = Compensation
30 Nov 2016

Consolidation + Competition = Compensation

So much of what we see in the banking sector today can be traced back to the financial crisis. Consolidation of departments is no exception. In fact, this is something that was already happening before 2008, the crash simply accelerated it. Today there is still plenty of room for consolidation to take place.

Mergers and acquisitions, the drive for greater efficiency and a sector increasingly defined by regulations; there are many forces driving the middle and front offices closer together. Within the middle office, traditional operations roles have morphed into operations and client services roles; operations and valuations roles; or valuations and financial modelling roles.

A shift in attitudes

The truth is that banks are trying to move away from terms such as middle office. Goldman Sachs refers to this function as ‘The Federation’, while Deutsche Bank talks about ‘infrastructure’ and ‘global functions’. Citigroup have opted for simply ‘non-revenue generating roles’.

Historically, candidates have sought the glamor – and the money – that front office roles bring. These are the trading and sales roles, equity capital market banking roles, and debt capital market banking roles. However, as the industry evolves, so too does the criteria that defines careers in the sector.

Moving with the times

Some larger firms and banks are struggling to evolve roles in line with the industry as a whole. As a result, individuals who 10 years ago would have moved freely from a role in one top bank to another are now relegated to the small percentage of firms still operating with a ‘traditional’ structure.

The burgeoning fintech sector is just one area that’s moving away from tradition. The scale of innovation and expansion of technology is immense. According to data from Fxcompared.com, there were 320 alternative money transfer firms in the market last year.1 While Institutional Investor, calculated investment in fintech start-ups at around $3 billion since 2008.2

Banks are increasingly looking towards today’s tech giants for inspiration. As technology reigns supreme, the big banks aim to ‘Googlize’ their functions. In other words, they want to make these middle office roles even more appealing.

A new breed of candidate

It comes as no surprise that financial sector candidates are taking matters into their own hands. Those working in middle office roles are expanding their skillset far beyond what has long been considered the norm.

Today, hiring managers are looking for talent with a broad range of skills, from general operations (e.g. reconciliations and settlements) and tech skills (e.g. programming) to trade operations (e.g. trade capture) and client services.

As sales and trading functions become more automated and regulatory demands rise, these middle office jobs are rising in prominence. Middle office roles may not offer the glamour of the front office, but that doesn’t mean they aren’t appealing to candidates. Why choose between the front and middle offices when you could work in a role that combines both?

Money talks

One of the main draws for many of today’s candidates is that the rising competition for top talent has had a knock-on effect on compensation levels. Where once there was a marked difference between the salaries within the front office and middle office, the gap is now closing.

According to estimates, the average salary for middle office employees in New York is currently around $77,000.3 In comparison, the average for the front office stands at just over $107,000.4 And while the difference continues to be significant, it is considerably less pronounced than before. Data from 2012 estimates middle office salaries to have been in the range of $60,000 to $64,000,5 while front office salaries stood roughly around $100,000,6 showing a greater increase in the former over the same time period.

Experts in talent

If candidates are able to demonstrate strong client-facing and relationship-management experience alongside asset management skills they could be just what today’s financial institutions are looking for. Add to this the fact that banks are looking to increase their headcount to meet compliance and regulatory requirements, and it’s clearly a good time to be in the middle office.

Contact the team at Selby Jennings to learn more about these rising middle office compensation levels and how to acquire and retain top talent.

 

Sources

1http://www.forbes.com/sites/freddiedawson/2015/07/31/consolidation-sign-of-maturation-in-fintech-sub-sector/#1ec83246652e

2http://www.institutionalinvestor.com/inside-edge/3435331/financial-technology-is-dead-long-live-fintech.html?ArticleID=3435331#.VrD2t7IrLIU

3https://www.glassdoor.co.uk/Salaries/new-york-city-middle-office-salary-SRCH_IL.0,13_IM615_KO14,27.htm?countryRedirect=true

4https://www.glassdoor.co.uk/Salaries/new-york-city-financial-trader-salary-SRCH_IL.0,13_IM615_KO14,30.htm

5http://uk.hudson.com/Portals/UK/documents/SalarySurveys/banking-finance-salary-survey-2012.pdf

6http://oureverydaylife.com/commodity-trader-base-salary-39285.html

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