Financial services: Bay Street suffers a talent deficit

Shortage of experienced risk managers is so severe, it’s causing firms to lose business.

This time last year, layoffs were rampant on Bay Street. Cannacord Capital, GMP Capital Trust and AGF Management all cut staff by about 10%; CIBC chopped 700 jobs; more recently, Bank of Montreal announced it would shed 3% of its workforce. Today? Remarkably, the story is about key jobs going unfilled.

Executive recruitment firm Watson Gardner Brown in Toronto conducted a survey of nearly 600 senior business and human resources execs in the financial services sector this fall and found 48% expect a skilled-labour shortage to last for the next two years. “It’s somewhat strange,” says president Colleen Watson of the results. But she adds the positions that need filling require people with highly specialized skills — not your run-of-the-mill stockbroker.

The most difficult jobs to staff are in risk management and compliance, according to the survey, particularly at senior levels where 10 years of experience are required and the base level salary is at least $150,000. Part of the reason is that firms are beefing up their risk management divisions in light of the meltdown in various securities, such as asset-backed commercial paper, and outright scams perpetuated by Bernard Madoff and his ilk. Institutional investors are demanding more risk oversight from asset managers before trusting them with funds. “They want to know the risk policy first,” Watson says. “Then they’ll consider investing.”

That’s bad news for any firm without adequate risk management in place, and 40% of the executives suveyed actually expect to lose business over the next few years because finding talent is proving so difficult. However, companies scrambling to hire now may have simply dropped the ball when it comes to risk management and compliance. Scandals are nothing new, after all. Think WorldCom, Enron and Tyco. But firms that were inclined to recruit talent, even at an entry-level, may have found it challenging. “It’s not necessarily seen as the sexiest business to get into,” says Sylvia MacArthur, president of Madison MacArthur, an executive search firm in Toronto.

Hanging on to employees once hired can be just as tough. MacArthur recently sought out a risk manager for a Canadian client, and found during her search that many Canuck experts in the field have been poached away by U.S. institutions. The encouraging news for companies in need is that the risk managers who are out there are willing to entertain other opportunities, says MacArthur. “[But] it’s incredibly important to showcase the opportunity effectively,” she adds.

Longer term, experts say, firms also should form stronger relationships with business schools to bring students into risk management and groom them for senior positions. The need to develop talent is more urgent than ever, because the search for competent risk managers is only going to get tougher: financial firms around the world are on the hunt. “Canadian banks are now being held up as prime examples of how to do risk well,” MacArthur says, “so our people are going to be tageted even further.”