My newsletter has had a hiatus, I’ve been on holiday to Cyprus taking a break from the heady world of financial services recruitment. I’m not good with the winter, which is ironic given I’m married to a Norwegian, and so I thought it would be a good way to break up the cold dark days. Was it a good idea though? I’m now aware that not everywhere wakes up in the dark, and so I think it’s made my mild SAD worse.

We’re nearing the end of another tough year for financial services firms, and probably the first more difficult year for recruiters since the pandemic. Whilst our headcount has fortunately remained the same, there have been redundancies across the recruitment industry and we have started to see targeted redundancies across the City. Not in huge numbers, but redundancies are happening. 

Post financial crisis, it’s become unfairly fashionable to knock anyone in the financial services industry. However, the reality is that each redundancy affects not only the individual, but potentially their children, their partner, and of course the individual’s self-worth. Some wonderful candidates, with excellent skillsets, have asked me recently if there’s anything “wrong” with their CV. This self-analysis always happens when the job market is difficult, but it’s hard to explain to someone that they have a great CV with really valuable skills when they can’t secure an interview. The reality is that sometimes very good people find themselves on the wrong side of bad luck, but my experience is that all emerge from difficult times in much stronger positions over the longer-term. If you’re in that situation, then really activate your network and speak to all of your past colleagues and contacts to ensure that you stay on top of opportunities, and to keep yourself active and plugged-in. People who work in financial services are normally grafters by nature and being at home all day (without work) doesn’t come naturally to them.

There are some pockets of hiring, but in my newsletters, we like to keep the positivity to a minimum - or at least until later in the story for suspense.

Interest rates and inflation have played havoc with many firms. Wealth and asset managers are seeing clients stay in cash, their margins squeezed by high staff costs and weak markets.

It’s well documented that lenders of all types have been impressed by the resilience of their loan books, and to an extent high rates improve their returns. Next year may of course prove more challenging, and there is nervousness around commercial property and other certain sectors of the economy.

VC and private equity firms are seeing a really difficult market for exits. IPO’s conditions are bad and higher rates have made trade sales harder to come by. The secondaries market is perhaps the most obvious beneficiary. Again, many of these firms made enormous offers to candidates in the post-COVID boom and cost bases have increased. Indeed, some of the most aggressive offers we saw for investment professionals post-pandemic were made by firms in private markets. This filtered into investment banking, who had to fight hard to stop their talent jumping ship.

Investment banks are struggling with a lack of M&A and capital markets work. IBs have always had high fixed costs - those investment bankers don’t come cheap. Ironically, fixed costs rose when the bonus cap came into effect and so it’s tough times for many firms. 

We all know that the industry is cyclical and while it’s quieter now, it won’t always be.

 

What the industry needs is more entrepreneurialism, more traditional finance start-ups, but this has been stifled by regulation and regulatory costs in my view. It’s of course a hard balance to strike. A robust system with adequate protections is essential, I just wonder if we’ve gone way beyond this?

The budget provided some short-term cheer to workers, but not much to service sector employers and in my view not enough of a roadmap of where we want to be longer-term. Not enough positivity on what a great place the UK is to do business. I mentioned earlier in the year that I’m concerned by the brain drain to the Middle East. I think it’s a temporary phenomenon. Most ex-pats soon realise that nowhere is perfect and the lure of family, traffic jams, and beige food is too great to stay away forever. I hope I’m not wrong and it isn’t a more permanent shift of economic focus. We’re all guessing, but my guess is that “higher for longer” will prove to be inaccurate and once rates start to fall, there will be a significant rebound and that will be good news for workers given the long-term skills shortages many economies face. There seems a lot of pent up demand just waiting for slight better conditions before taking action. There are lots of firms with really good ideas for growth, they just need some better news.

Despite all of this, we have seen a real upturn in asset management sales and marketing hiring after a hiatus. Despite challenges, wealth management hiring has remained steady. As have certain parts of the lending industry.  I feel that during the slowdown there has been a period of reflection and a resetting of propositions, and some firms have realised that they need new skillsets in their team to drive their business forwards. Firms with cash are also opportunistically picking up top talent, or individuals who can help them diversify. Again this happened post-financial crisis with firms who invested during the downturn significantly pulling away from their competitors in the recovery years afterwards. The market is down, but it’s far from out. Market growth may be weak, but some churn is still there, most candidates still feel confident (and should feel confident) or moving roles. Redundancies are still historically low and I am sure that the financial services industry will emerge in a good place and good times are ahead for both employers and employees.

Good times maybe sometime away, but hopefully not as far away as some think.