The following report reflects our insights on the Legal & Compliance employment market in Asia. It highlights the key trends we observed in 2017 and pinpoints emerging themes across the sector for the next 12 months, including identifying the major factors impacting hiring and talent movement.
LEGAL TRENDS - HONG KONG
While 2017 started with much uncertainty and challenging conditions for many of our clients, the year ended on a much more positive note with increased activity reported in all our Asian offices.
Costs were very much front of mind for most General Counsels within investment banking, with many seeking to stretch their recruitment budget as far as possible. We have seen consistent trends across the whole sector over the past 18 months. Senior roles have been replaced with more junior and affordable replacements, hiring at the Vice President level has been the most active and regulatory lawyers have been in high demand, with roles far outstripping demand as banks scramble to keep up with regulatory implementation projects relating to EMIR, Dodd Frank and MiFID II reforms. Increased regulatory scrutiny and investigations have ensured that financial institutions continue prioritising robust governance frameworks and cultivating the right culture; as a result, a greater number of lawyers are moving into corporate governance roles than ever before. In addition, specialist roles within banks have also been reasonably busy with increased hiring occurring within Employment, Litigation & Regulatory Investigations and IT legal teams.
Asset Management firms in 2017 have enjoyed a relatively successful year with hiring across front office and back office at a marked increase over previous years. While Hong Kong and Singapore continue to be regional hubs for international asset managers, China is capturing the majority of attention. Many firms have been encouraged by the moves by PRC regulators to allow foreign firms wider access to onshore asset gathering and, as such, are planning expansion accordingly. Hiring in mainland China does present its own set of challenges as the candidate pool is far smaller and less experienced than in Hong Kong and Singapore. Competition for candidates can be fierce and often includes significant pay increases.
Private equity firms remain the employers of choice for many transactional lawyers, with more and more PRC funded private equity firms hiring lawyers within this space. However, competition remains tough and the work hours are not for the faint of heart.
Innovation in technology and disruption from fintech companies was the big buzz last year, with most financial services firms intently looking into client interfacing, product distribution and data protection as part of their operations. Data security and cyberfraud will be at the forefront of many legal teams' agendas this year, with developing global policy, implementing transfer agreements and training set to keep many teams busy.
Insurance firms are facing a shake-up in Asia like never before. Firstly, M&A activity in Hong Kong is at an all-time high. Secondly, increased regulations are anticipated as the industry faces added scrutiny in Hong Kong, taking the form of the newly established Hong Kong Insurance Authority, and lastly, the increased cross-border activity between Hong Kong and mainland China has created a closer connection between the Hong Kong regulator and the China Insurance Regulatory Commission (“CIRC”).
Insurance firms anticipating the scrutiny are hiring or reskilling their lawyers so that they can take on more regulatory-focused roles that emphasise building relationships with regulators in the region. We have also seen many hires from more highly regulated industries such as investment banking. Data privacy and cybersecurity are valid concerns today with many experts acknowledging that there are still many improvements to be made in this area.
Innovations in technology and increased competition from fintech firms are pushing insurance firms to be more innovative with their sales and distribution channels and lawyers are working at the forefront of this area with the business. We predict greater legal hiring activity in this sector as legal teams face mounting pressure to upgrade and become more business focused.
Within industry, the focus on legal hiring in Hong Kong has been within traditional industries, including FMCG, manufacturing, professional services, construction, pharmaceutical and healthcare. Increased government spending and investment from mainland companies is keeping these sectors buoyant. General commercial lawyers are always in demand within these industries, with exposure to data, IT and corporate governance proving popular. There is also a rising need for fluent English and Mandarin speakers as Hong Kong-based companies look north of the border for business opportunities.
In regards to policy and conduct issues, it would be remiss not to mention the global movement towards greater awareness about what is appropriate and inappropriate in a workplace setting. Our HR teams report that hiring within Employee Relations teams is at an all-time high. Employment lawyers both in-house and in private practice will be kept busy with company policy and training. The global awareness of workplace culture appropriateness has resulted in an increase in investigations and enforcement.
Placed Legal Professionals by Gender in Hong Kong, Singapore and China for 2016 and 2017
COMPLIANCE TRENDS - HONG KONG
SFC’s Manager-in-Charge Regime
The Securities and Futures Commission (SFC) implemented the Manager-in-Charge regime last year, which increases the accountability of senior management. All licensed corporations are now requiring individuals to be responsible for eight core functions within the areas of compliance, anti-money laundering and counter-terrorist financing. This has increased compliance and regulatory responsibility for compliance teams and has also affected hiring, as some compliance professionals may be reluctant to take the Manager-in-Charge title due to the additional accountability it comes with.
Due to increased compliance pressures, costs have been a key factor for compliance teams when expanding. Strategies adopted by companies to reduce costs include offshoring functions to lower-cost locations, replacing experienced headcounts with more junior options, and in some cases senior positions have been made redundant and not replaced. As a result, candidates are cautious about choosing roles that might disappear to an offshore location. Advisory roles are therefore more popular than surveillance roles.
The majority of hiring within established US and European financial institutions have been replacement headcounts, with many compliance teams at capacity. We are seeing newly created headcounts at PRC financial institutions as well as at start-up organisations, both of which typically seek compliance professionals with experience working in well-structured compliance teams where they can bring their relevant expertise and knowledge to the table.
Job Stability and Al
With the onset of artificial intelligence and automation, candidates are increasingly choosing to leave roles that they feel may be outsourced or automated for roles that are perceived to be more secure. For example, professionals are leaving 1st level trade surveillance and 1st level AML transaction surveillance positions in favour of roles that remain in demand, such as AML Advisory. While some banks are looking to bring these roles back onshore, they may struggle to fill some of the headcounts initially.
Product advisory compliance remains an in-demand area. In particular, equities compliance has been active in the past year - although not due to newly created headcounts. There is perceived lack of talent in this space for people who have a mix of solid technical experience, communication skills and the personality to be based on the trading floor. Compliance testing and assurance has seen some growth as teams have expanded, with this providing a route into compliance for those with internal audit backgrounds. AML and financial crime remains a key focus for financial institutions, with the hiring in this space being more selective and strategic rather than the high-volume hiring which was prevalent in previous years.
Due to an ongoing regulatory focus on the asset management industry, such as the SFC’s consultation to enhance asset management regulation to protect investors’ interests and ensure market integrity, asset managers have been increasing their compliance resources. As a result, compliance consulting firms have had an active year.
AML and financial crime within asset management has not been through the high levels of hiring activity visible within banks. This could be a focal area for asset managers moving forward as most AML and financial crime matters are covered by the general and business compliance teams rather than a specialist person or team. For the asset managers who have established a function for AML and financial crime, their teams are still relatively small.
Placed Compliance Professionals by Gender in Hong Kong, Singapore and China for 2016 and 2017
LEGAL & COMPLIANCE TRENDS - SINGAPORE
Singapore has seen a dramatic shift in the legal & compliance space. We have seen an increase in hiring within the asset management and insurance sectors in line with asset managers who are expanding their operations into new areas or requiring additional headcount to support the new regulatory regime. We have also seen increased hiring within the insurance sector as they come to terms with the changing regulatory landscape.
Although hiring among banks has been largely replacement headcounts as a result of cost pressures, we are continuing to see strong hiring needs in the areas of regulatory compliance, compliance and AML assurance as well as AML/KYC. Clients are far more selective now than before given that headcount is precious, and candidates are being subject to a higher level of scrutiny.
Juniorisation is happening more and more in banks due to cost constraints. For example, a Managing Director might leave and the role is replaced by a Director internally, with no increase in salary for the internal candidate. In many situations, replacement headcounts are not given due to headcount pressure.
There has been some redeployment in banks that have moved out of monitorship and remediation. As the remediation requirements fall dramatically, the resource needs also reduce. Candidates with strong regulatory compliance advisory skill sets remain in high demand both internally and externally in these organisations.
We continue to see demand within the financial crime space for private banks in Singapore, particularly in the aftermath of 1MDB. The areas of AML and KYC, client onboarding, client risk reviews as well as compliance assurance remain in demand. The hires are no longer just junior hires with bums on seats, but team leader roles that require making judgement calls.
Due to an increased focus on the Singaporean core, we are seeing increased preferences of hiring Singaporeans and permanent residents for all roles. The Ministry of Manpower has tightened up issuing of employment passes for non-Singaporeans, making quality Singaporean and PR candidates highly visible within the local industry and, as a result, they are receiving multiple offers.
Placed Legal & Compliance Professionals by Client Type in Hong Kong, Singapore and China for 2016 and 2017
LEGAL & COMPLIANCE TRENDS - CHINA
Since China opened the market for International Asset Management Companies to set up their Wholly Foreign-Owned Enterprise (WFOE) entities onshore in July 2016, many global players selected Shanghai as their point of entry. According to the regulations from the Asset Management Association of China (AMAC), one of the key requirements is to have a General Manager and a Compliance Head registered under AMAC prior to the WFOE framework. With this in mind, all international firms were operating under the private fund License in January last year, with Fidelity notably becoming the first one to receive their WFOE licence followed by UBS, Fullerton, Man Group, Value Partners, Invesco, Neuberger Berman and Aberdeen, all of whom completed their licence registration by early December that year.
There are approximately 50 companies currently waiting for approval to set up a WFOE in China. Thus, global players are in competition with one another for local compliance experts who can help them set up their business. Candidates of choice tend to come from China mutual and private funds and joint venture mutual funds. The candidates targeted tend to be deputy heads of compliance in their current organisations, which means being appointed as a Chief Compliance Officer (CCO) of a WFOE entity is a step up from their current position. The sudden increase in demand has driven up the cost of hiring these candidates. While local candidates are less confident of private fund licensed fund managers in China, they are attracted to the international brand names as well as the opportunity to move into a larger role.
Furthermore, the China Securities Regulatory Commission (CSRC) allows foreign investors to raise up to 51% of shares in joint ventures. It is likely that the CSRC will allow foreign investors to set up WFOE mutual funds and securities in the near future, which means that such companies will be seeking more and more legal & compliance experts.
In relation to the primary market, Chinese financial companies are still very active in cross boarder merger and acquisitions (M&A) and, as a result, M&A experts in this space will be in high demand.
CANDIDATE TRENDS IN ASIA
72% of regional respondents to our 2017 'Working in Asia' survey said they are considering moving organisations in the near future. Below are the main reasons why they are considering leaving their current organisation and what they are looking for in an organisation.
Why are candidates considering leaving their current organisation:
Lack of career growth/opportunities
Lack of appreciation/recognition
What are candidates looking for in an organisation:
Millennials are more likely to be interested in fintech, disruptors and start-ups than more traditional brick-and-mortar firms.
As clients face an increasingly busy recruitment market in both legal and compliance – retaining and managing key staff is crucial!
Across the Asia region, we anticipate increased levels of hiring for lawyers and compliance staff. In particular, China and Hong Kong will continue to see a busy market for regulatory lawyers, buy-side compliance candidates and corporate lawyers. Insurance is an area to watch with regulatory and compliance teams being established and expanding. The focus on technology innovation and data security will impact most industries and lawyers with exposure to these issues will be needed.
As companies and financial services firms in Hong Kong increasingly turn to China for expansion and as PRC firms open and expand in Hong Kong, the requirement for business level Mandarin speakers will continue to be very high. Competition for these candidates remains tight and potential employers will need to streamline their hiring processes to be in the best position to close an offer.
In Singapore, fintech and start-ups will continue to attract lawyers wanting to work in a more entrepreneurial and less rigid environment. The imposed preference for hiring Singaporeans and permanent residents means that local market candidates will be in demand.
In terms of compliance roles, financial crime, AML, KYC and product assurance will be the most active areas. Market optimism is on the up and this will be reflected in increased hiring this year.
In all, our advice to employers is that the employment market is shifting, quickly. In-demand candidates will now be holding more offers than ever and competition will be tough. Streamline your recruitment process, do not allow long periods between interviews, be in ‘sell’ mode and anticipate the potential counter offer.
For more information or individually tailored advice, please do not hesitate to contact our regional Legal & Compliance team:
Singapore Office - please contact Suan Wei Yeo
Shanghai Office - please contact Andy Zhi
Beijing Office - please contact Winni Wei