This post is contributed by Burtch Works’ analytics recruiting team.
Over the past few years, in response to the 2008 financial crisis, the regulatory risk function within lending institutions has grown significantly. Because of the passing of the Dodd-Frank Act in 2010, the extensive regulatory requirements for banks created a need for analytics professionals (modelers and model validators), as banks amassed enterprise risk management functions on a larger scale than they ever had before.
As the regulatory climate continued to spell out specifically what these banks had to do to protect themselves from huge financial loss in the future, over the years, many financial firms opted to beef up internal capabilities instead of relying on management consulting firms to handle this for them. For the past three to four years I’ve been able to comfortably advise analytics professionals that if you wanted a job that was stable, financially prosperous, and secure, regulatory risk analytics was the place to be. With the high need and technical requirements for these professionals, combined with the already low supply of them, regulatory analytics was a good option for many in the industry.
But what now? Through the political changes there have been hints about a loosening of the regulatory environment and obviously some volatility as the new administration transitions into place. With shifting political and economic policies, I believe we could see some substantial changes in terms of regulatory priorities.
From my perspective as a recruiter that has specialized in financial services for over 10 years, I think there are a few important areas we have to consider if there is in fact a loosening of the regulatory risk function in lending institutions:
- Teams could be pared down
Although there is a possibility that some of the regulatory risk teams could be let go altogether, what I believe is far more likely is that these analytics professionals might be moved to other teams within the organization. Banks might want to reorganize and add this regulatory risk analytical talent to their acquisition risk teams to focus on growth , or other areas of the organization where they see future revenue potential.
- Teams could move back to consulting firms
Depending on how many regulatory requirements we’re left with (some? any? does anyone really know at this point?) companies may decide to nix their internal teams entirely and elect to go back to management consulting firms handling the responsibility.
- What happens to FinTech?
Many, including myself, have been watching these startups with growing interest. Not only because it’s a bit like the “wild west” in the financial services arena, but also because they touch areas of the population left off-limits to the banks by regulation. As the industry has grown, it has capitalized on the confusion surrounding legislation of its technology, and with the changes sure to come, the uncertainty has only grown.
What happens to the FinTech industry if these regulations are loosened (or walked back completely!), and banks are able to target these consumers once again? It’s possible that some companies could be bought by the banks to secure their technology – or even personnel, in a so-called “acqui-hire”. I hope there is space for everybody- as the FinTech space has provided innovation and creativity to the industry that has been sorely needed in the last 10 years. However, I could also see some of these firms possibly leaving the US, or growing additional business internationally to explore emerging markets like China or India, where there seems to be a growing appetite for FinTech products .
Banks looking to explore the sub-prime space again would have to grow that portfolio and product, which could also open up opportunities for FinTech analytics professionals interested in doing that for a larger organization.
Obviously until we know more about what is happening with the regulatory environment, I can’t do much beyond speculate, but I wanted to share my thoughts on where I could see this going from here.
As for the advice we give so often here at Burtch Works, I would suggest that financial services analytics professionals already in this space keep an eye on the market, keep your analytical and communication skills sharp, and continue to make an impact on the portfolio or section of the industry that you are already contributing to. You can ensure success for yourself by being sharp technically, on top of the new technologies and analytical techniques, and continuing to build on understanding the business and industry you are in.
What do you all think? Are there other scenarios you think should be included here? Let me know in the comments, and keep an eye on the blog for additional insights as we learn more in the coming months!