From Public to Private: Market Overview 2016

"What to Expect When Moving from a Financial Regulator to a Private Consulting Firm"

The demand for regulatory professionals in the financial services (FS) industry has never been greater. This is particularly true in the management and strategy consulting sector, given that Risk and Regulatory pressures continue across all their major banking and financial services clients. Rarely in the last few years has there been a better time for public sector workers in the FS industry to make the move into consulting; a variety of roles await, in an even wider array of firms, be they members of the Big Four, strategy consulting or smaller, boutique companies.

River Partnership has worked extensively with a small group of FS and consulting companies globally to strengthen their regulatory related leadership teams. We hope our findings can prove useful insight to you if planning your own career move or if you are seeking to strengthen your team with candidates from the public sector.

Methodology

In Q4 2015 the River Partnership team surveyed 72 ex FSA (FCA or PRA), Bank of England and European Commission contacts who have made the move from regulator to private sector in the last three years in order to better understand the common themes, expectations and fears in making the move. 

River Partnership consultants also conducted interviews with both candidates* and clients alike – asking for their thoughts on the application process, their expectations based on the points raised above, as well as (in the case of the candidates) their reasons for moving into the private sector in the first place, and what they found when they got there. This paper also includes analysis of existing research and data generated both from within The River Partnership itself, and major organisations and think-tanks such as the Office of National Statistics and the Institute for Fiscal Studies, among others.

Recent hiring trends

Candidate movement from UK regulatory bodies to private sector over the last five years has increased significantly with no apparent weakening in demand. Consulting sector demand exists in two broad areas:

1) Within regulatory change-related consulting teams dealing with intermediate or large scale transformation

Teams are typically larger with similar practices existing in most consulting or advisory firms operating in the financial services sector in the UK. First hand regulatory knowledge or experience is certainly an asset, but focus is typically less on Policy and IP generation, and more on structural reform, and the implementation – and monitoring – of regulatory change and risk management programmes on the first, second and third lines of defence. For example, managing change and implementation for BCBS 239, Solvency II or FRTB where program spend can run to £100M’s in some cases.

2) Within highly specialised advisory teams.

Teams focus on deep regulatory insight, policy analysis, horizon scanning, generation of content and intellectual property. Shining examples include Promontory’s former senior regulators and experienced industry practitioners led by Sir Callum McCarthy and Henry Raine, and Deloitte’s market leading EMEA Centre for Regulatory Strategy, led by ex-regulator big hitters David Strachan and Clifford Smout.

In either case, candidates from public sector backgrounds often raise common themes and expectations when it comes to making, or considering, a move into the private sector.

River Partnership aims to address these concerns and misconceptions in order to manage the expectations of potential candidates. We also aim to give companies some insight into the thought-processes of their candidates, and how they might better communicate with – and reach out to – the best performing public sector contenders

High Profile Hires from UK Regulators to Consulting Firms

Motivations: ‘Why Make the Move?’

Of the candidates River Partnership interviewed from the FCA and PRA, the below were highlighted as beneficial elements of their work environment:

  1. The quality of the training and development.
  2. More flexible working and shorter hours
  3. A less competitive culture.
  4. Altruistic factors

Indeed, training at the FCA was singled out in several conversations, with one interviewee going so far as to say that the “training and development at the FCA is second to none”.

Professionals with young families valued the flexibility of the public sector in terms of leave (up to 35 days a year) and working hours.  Some expressed that their organisation was especially understanding of family commitments and Glassdoor’s 2015 study rated the Bank of England as the second best for work-life balance across all employers in the UK, not just those within Financial Services. Descriptions of the relaxed and warm culture also echoed regularly and the idea that work in a public regulator might have an ‘impact’, or be publically and socially beneficial appeared to be a common motivator. One candidate pointed out that he enjoyed working for the FCA because the organisation is “an international standard setter in many ways”. Indeed, he enjoyed working at the forefront of financial regulation, inventing rather than implementing. This “passion for public service” shone through powerfully in some interviews with these candidates ruling out potential consulting careers in favour of the public sector.

For many respondents, however, the variety, change, challenge and career opportunities within the private sector were extremely appealing. The range of variety and roles in the consulting sector is immeasurably higher than in the financial regulators. As one interviewee put it – “there are many banks, but only one FCA”. From the nature of the role itself, to the development of an individual’s career, a consulting role will open many doors.

Whilst most firms will operate similar teams and businesses - for example, each of the Big 4 firms have Risk & Regulation practices - candidates will find clear differences in working culture, the kinds of clients they will work with, and the types of roles within those practises that are available to them.

On the face of it, it may seem to a public sector worker that the Big 4 are all broadly the same (if not indistinguishable). However, it is very common for consultants at one of these firms to move to another competitor, despite the broad similarity between the two. Sometimes this might be down to a financial incentive – but often the reason is subtle and more nuanced. It could be the improved work/life balance in a particular team or in a given firm, or perhaps the kinds of projects on offer. In any case what is clear is that there is variety even between the very largest firms, let alone the other specialist and boutique companies. Candidates will almost certainly be able to find a style of team, and a breadth of challenge, that will suit them and can be confident that this breadth and range will remain constant throughout their career in the consulting sector.

Another motivating factor can, and indeed should, be financial. Whilst starting salaries in consulting firms – even for experienced professionals – are often less than might be expected (see next chapter) by public sector regulators, there is certainly a long-term pay-off. There is also a huge benefit in terms of future employability, especially in a recovering economy. Candidates with both regulatory and consulting experience become highly employable, whether they wish to pursue roles in industry, consulting or, indeed, returning to the financial regulators.

Managing Misconceptions: Private Consulting vs. Public Sector Salaries

The most common motivating factor leading public sector workers to go into private consulting is increased salary. However, whilst it is invariably true that a private consulting role will secure an improved package for most candidates after a few years, the actual scale of the immediate up-tick is very often grossly exaggerated in the mind of the candidate.

Of the candidates River Partnership polled for this paper, half expected an immediate salary boost of between twenty and twenty-five per cent. Some expected more (as much as 35% in a couple of instances). It is clear that there is very often a broad disconnect between expectation and reality, which needs to be addressed.

As a head-hunter approaching candidates in the public sector, one very often hears a variation of the following when discussing salary expectations: “I know someone in ‘x’ firm and they earn ‘y’ – therefore I can’t move for less than ‘z’”. Whilst on the face of it, this might seem sensible, basing one’s expectations on the experiences of one’s peers, is a logic that has proved to be flawed.

A firm will always address each individual on their own merits – what was asserted to be true for a peer may not, ultimately, be true for you. Much comes down to how the candidate interviews and presents their skill set, even if on paper they appear very similar to their peer. Ultimately, if a candidate feels they are worth a particular salary level, it is up to them to make their business case to the client.

Secondly, there is less flexibility in private sector salary banding than one might think. Whilst it is true that there is more lee-way than the public sector, particularly at the very senior levels, ultimately each firm and team has a recruitment budget and business plan it must stick to.

If a firm assesses a candidate as a Manager, they have made a business decision based on the level of seniority and responsibility this candidate can realistically handle and on their potential for generating profit, running a project, or improving the function of the business. With the relative return on investment assessed, assumed and allocated for, it would therefore make little sense for Firms to pay a Manager a Senior Manager-level salary. Ultimately, a lot comes down to the timing of the opportunity, the level of demand and reasons for it, and the perceived future value of the candidate based on a number of internal and external variables assessed by the employer.

Another important consideration is to recognise that, for professionals with two to eight years’ experience, the average difference in private and public sector wages is comparatively small (certainly much smaller than is generally anticipated). The IFS estimates that, as of 2014, the top 5% of earners in the public sector are paid between six and eleven per cent less than private sector workers in the same 5% banding. Whilst not an insignificant amount, it is considerably less than the 20-25% expected by the candidates interviewed for this paper.

Nevertheless, financial motives should still be a motivating factor when choosing to pursue a consulting career.

Yet, it is important to make the distinction between a starting salary, and one’s potential earnings two or three years down the line. Although consulting firms are keen to take on regulators, as they very often have well-developed and deep subject expertise – the short-term risk lays in their consulting experience.

For this reason, a candidate’s initial base salary might be lower than expected, as the client must take the time to train the candidate, to the point at which they become purely profitable. Once this has been achieved, one can expect a rapid increase not only in potential earning, but also in one’s value on the job market. A candidate with experience at both a regulator and a consulting firm will find a great many doors opening to them.

To sum up: consulting firms are investing in their new hires. If they hire straight from a regulator, the chances are they will need to invest time and money in training that candidate. This carries increased risk for the Firm as it is unknown whether the candidate’s consulting competencies can be developed to the desired level or whether the candidate will be motivated and interested in the sales side in practice.

Nevertheless, as quickly as two or three years down the line, a regulator who has moved to consulting can expect a sharp increase in both gross annual salary and employability. Therefore, River Partnership agree that salary should be a motivating factor, as long as candidates acknowledge that their move to consulting should be seen as a longer-term investment that will pay dividends further down the line.

Work-Life Balance in Private Consulting


Work-life balance is, for many professionals, an important consideration both in their current role and in any future position. Certainly amongst the public sector regulators River Partnership interviewed, every one of them identified their work-life balance to be of great importance, along with the work atmosphere itself.

There is little doubt that hours are generally longer in consulting firms, and there is very often more travel involved. However, the extent of this will vary from team to team - some might do a lot of international work (and hence travel frequently), but others will be London and UK-based, and actually will be fairly laid-back in their approach to hours worked/expected.

Working atmosphere can also be important. Most public sector regulators agreed that their regulatory roles offered a “nice” or “friendly” atmosphere, with connotations of a laid-back working environment. These candidates should feel confident that they can enjoy similarly pleasant working environments within consulting firms, but with one key difference – consulting firms are profit-oriented. There will therefore be tighter adherence to deadlines, Key Performance Indicators and a sense of constructive completion. However for anyone seeking a move into a commercial environment, these points are a given – indeed they may even be a reason for seeking a commercial role in the first place! Those who thrive in that kind of environment will find their progress rapid and unchecked, in a way that would be impossible in the more bureaucratic public sector.

Amongst the Big 4 – largely in order to compete for the best individuals – there is an increasing focus on promoting a positive work-life balance.

For example, many teams will offer flexible working, with consultants being able to work a day per week at home. Others will rotate consultants on projects every few months, so that their employees gain broader experience, whilst simultaneously preventing their staff becoming bored or pigeon-holed.

In all likelihood, given the responses of our interviewees, the work-life balance on offer amongst the larger consulting firms is much better than might be expected, and should only be a reason for turning down a role in the most extreme circumstances.

However, from a client’s perspective, it should be recognised that flexible working, maternity/paternity leave and a positive working atmosphere are all important considerations for public sector regulators. Strides have been made to recognise and promote this, and these efforts should be continued in order to attract the knowledge and expertise available in financial regulators.

First Steps: What to Expect from the Recruitment Process

For many people, at any stage of their career, an interview process can be a daunting prospect. This appears to be particularly true for individuals moving from the public sector into consulting: after all, it is a very different type of role, and candidates may well have little idea as to what to expect.

Candidates should rest assured, however, that the process is less intimidating that one might fear. A truth common to all consulting firms (particularly if they are interviewing a regulator) is that they want to establish the depth and breadth of your domain knowledge. Understand that very often they will be interviewing you because they have a need – and will be looking for reasons to hire you, rather than ways to discount you.

Candidates from the financial regulators should hopefully find that their technical knowledge and competencies will hold up well under interview, as long as they are articulated fluently and clearly. Areas to focus on (to secure both the role and as good a starting salary as possible!) is your business case. Why are you worth hiring? And why should they take you on as a Senior Manager, Manager, Analyst, etc.?

Candidates should approach interviews not as interrogations, but more as sales-pitches in which they will have the opportunity to demonstrate their technical competences, and explain to the client why they should be hired, at what level, and with justifiable reasons. Additional insight into what consulting firms and banks are looking for in new hires will be explored in a future River Partnership White Paper. 

Conclusion

River Partnership has explored the reasons why people decide to make the move from the public to the private sector. It has also attempted to address common misconceptions around such a move – from work-life balance to starting salaries. The author hopes that in doing so candidates will be better informed in their decision making and expectations, and will have a better idea of how to market themselves to a client. In turn it is hoped that our clients will gain a better understanding of the concerns and thought-processes of many of the candidates they might seek to hire, and what they can do attract the highly expert individuals working within the financial regulators.

To download and view the whitepaper in full, please click here; River Partnership - From Public to Private white paper.pdf

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