Opinion | 27-05-15

Changing tack: The journey from legal to compliance within the financial services sector

The compliance function has become increasingly important as part of the legal business landscape. The evolution of the function has mirrored the evolution of regulation and has, in recent years, emerged very much as a stand-alone service.  In this article our consultant, Ellie Price, explores some market trends and the reasons why more financial services regulatory and product lawyers are actively choosing a dedicated compliance career in-house over legal.


According to a 2014 review by the Institute of Chartered Accountants in England & Wales (ICAEW), regulations continue to grow with enforcement toughening (e.g. the UK Bribery Act, EU data protection laws, FATCA, EMIR, Solvency II and AIFMD).  Interestingly, only seven of the FTSE 100 has a formal Chief Compliance Officer role. Regulatory changes have been most heavily focussed within financial institutions in recent times and we have seen a notable shift in the positioning of, and demand for, compliance professionals within this sector in particular. 


We have noted the following trends:


1. The recruitment market has become increasingly busy and demand is high because of new and constantly changing regulations as outlined above. This, coupled with a greater awareness of identifying and managing regulatory risk, means that businesses realise that they require a dedicated individual or team (depending on the size of the business) to look after this area. 

2. For those in the non-financial sectors, with the Bribery Act in place and well embedded in most businesses, there is no immediate rush to establish a stand-alone compliance function where it has not previously existed. A number of FTSE 100 companies are keeping this under review, but there is a definite tendency to leave compliance under the remit of the General Counsel for the time being. 

3. In financial services however, there is a growing trend, especially amongst larger institutions, to split this role and differentiate between entire legal and compliance divisions.  The importance of compliance departments has grown so substantially that in some larger financial institutions, they are often the same size as in-house legal teams.  

In the past, compliance as a function was often viewed somewhat negatively, with Compliance Officer positions considered to be mundane and simply providing a “box-ticking” service. As the regulatory landscape has evolved in its complexity, compliance is now seen as a challenging and genuinely rewarding career path, where a compliance professional positively influences many key decisions affecting businesses. Over the last 18 months we have seen a notable increase in the number of regulatory and product lawyers looking to take on positions within dedicated compliance departments.  In particular this has been an evident trend within hedge funds, as well as banks and other financial institutions.  

The question therefore remains: what is it about a career in compliance that has become so attractive to lawyers? 

Faster career progression 


Traditionally, the pinnacle of a legal career was to secure a job at a top tier private practice firm.  That mind-set has long since faded, with in-house becoming a popular career option for top talent.  However, there is fierce competition and the flat structures within in-house legal functions often make it difficult for lawyers to reach the very top. For those without previous in-house experience, it is even more challenging. 


A move into compliance therefore is becoming more appealing as it can often provide a faster track to the top.  As financial institutions continue to ‘beef up’ their compliance functions, there has been a cultural shift, with these positions being given a much higher profile, engaging with the broader business. Institutions are looking to fill the top positions with qualified lawyers, who can offer unrivalled knowledge of managing regulatory risk. 


For lawyers, a move into compliance involves a little bit of law and a good deal of working with and advising business clients. Since the role means gaining deep knowledge of the company’s business, there is every opportunity down the line to move onwards and upwards to other departments, such as Operations and Risk.


Increased variety of work


Whilst compliance was previously seen as ‘boring’ and highly administrative in its nature (implementing rules, convincing businesses to follow them and creating more work for individuals), Compliance Officers are now typically undertaking more strategic roles within an organisation, working directly with Chief Executives to achieve business goals in addition to the day to day compliance issues and mapping out future risks.  A successful compliance professional requires a broad suite of skills and lawyers are at an advantage technically as they come armed with a sound understanding of laws and regulations. In addition to avoiding legal challenges there is an opportunity to provide leadership in the industry, bringing compliance recognition to the company.


It can be more lucrative 


It is understood that, as the importance of compliance departments within financial institutions has increased, so has the remuneration. Chief Compliance Officers and compliance specialists often command high salaries, with some pushing Operations executives and lawyers aside for a place amongst the highest paid within an institution.  We have noted that salaries continue to increase and it is has been reported that average salaries for compliance staff within asset managers in the UK, for example, jumped 11% in 2014 (source www.ft.com). As already discussed, compliance is crucial to a business’s survival and getting it wrong can be disastrous for a company or the career of the individual responsible. Top talent, therefore, comes with a rising price tag.  


All of the above has meant a marked trend in lawyers embarking on a journey towards a career in pure compliance. Whilst financial services regulatory and product lawyers remain in high demand within in-house legal functions, we are seeing increased demands for these skill-sets within the compliance departments of our financial services clients.  


If you are a lawyer looking to change tack or an existing Compliance Officer, working within a financial institution, looking to build out your team with qualified lawyers, then please get in touch with Ellie Price on +44 (0)20 7187 7409 or email [email protected]