Regulation in Retail Financial Services

The Financial Services Practice at Per Ardua Associates focuses on Board and senior executive appointments across Insurance and Consumer Financial Services as well as Asset Management. The Insurance Practice covers the major market segments including, General & Life Insurance and Specialty/Reinsurance/Lloyd’s markets. The Consumer Financial Services Practice covers retail banks, building societies, credit card and payments companies. Per Ardua’s consultants discuss how regulation is impacting the Financial Services sector hiring.

Simon Hearn

Simon is Chief Executive of Per Ardua. His experience across the Financial Services sector includes Board and senior-level hiring in Insurance, Reinsurance, Consumer Financial Services and Asset Management.

Deborah Howard

Deborah is a Director at Per Ardua. She is the firm’s Insurance Practice leader where she carries out Board and senior executive level searches.

Jamie Risso-Gill

Jamie Risso-Gill is a Director at Per Ardua. He is the firm’s Consumer Financial Services Practice leader where he carries out Board and senior executive level searches.


Simon Lowndes

Simon is an Associate at Per Ardua. He supports the firm across the Insurance, Consumer Financial Services and Asset Management sectors, with a particular focus on finance and corporate officers.


Are we seeing a different type of leader within Financial Services?


How does regulation balance with trying to create diverse Boards?


Despite the increased regulation and focus on risk, is Financial Services still able to attract the best talent?

Jamie: We aren’t seeing a completely new type of leader because regulators won’t sign-off a senior-level banking role if the individual has no banking experience. However, those ‘challenger’ banks that want to be very customer-focused, and have a very different approach, are looking for someone who understands the changes that have happened and can adapt.

In an ideal world, you would find someone who has worked in a very customer-focused environment, outside of Financial Services (FS), but has also got banking experience. But those individuals are very few and far between – there aren’t a lot of them around.

It is about finding people who can adapt. This emphasis can be seen when ‘challenger’ banks are hiring, as their first meeting with a candidate will be devoted to assessing cultural fit and whether the individual will be able to operate in their environment. This is likely to be completely different to the one in which the candidate has come from, both in terms of the entrepreneurial nature of ‘challenger’ banks and the emphasis on the customer.

But it isn’t easy to find people that can fit that environment – partly because these banks are growing so fast that the role they come into becomes much bigger six months to a year later. Therefore people with breadth to stretch and develop further are very much in demand.

Simon H: Chairman and Boards have changed demonstrably across banks, insurance and asset management firms, due to the focus on Risk and Audit.

These Boards now consist of a lot more specialists, not just in Risk and Audit, but other functions such as Marketing. But what this means is that Boards contain a lot fewer generalists, and the consequence is that Chairmen don’t necessarily have a successor – because the role of a Chairman is by nature a generalist one.

There are very good, focused, highly-able people that can ask the right questions sitting on these Boards but there are less future Chairman and this is a result of regulation.

Deborah: One area where we are delighted to see serious focus is in recruiting senior women. The Davis Report, and other Groups like the 30% Club, have had a real impact, not just on getting more women onto Boards, but on getting women into ExCo roles to provide a much bigger pipeline of “Board ready” women for the future.

Simon H: There is a difficulty surrounding the SIF (Significant Influence Functions) interview process. Because the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) demand individuals that are relevant to FS Boards, they will interview people around their knowledge of the business and the sector that the business operates within and if they don’t know enough they won’t get through.

However, the dilemma is that this means that there is just a regurgitation of the same ideas and the same people coming on to Boards. There are less imaginative hires getting on to Boards.

Jamie: This is the same for executive hiring. There is less imaginative hiring at the executive level because there is a constraint there. Hiring individuals who do not have relevant sector experience into approved roles is unlikely to happen. It may over time, but right now it’s a remote possibility. This inevitably means you aren’t getting new ideas from outside of the FS sector.

Simon L: It is certainly an issue at executive level within positions like Risk, Finance and Audit. And it’s not just about hiring outside of the FS sector; it can be very difficult for a client to look outside of their specific areas within FS. They are much more likely to appoint someone with their specific industry experience and therefore have limited choice because of the other requirements to fulfil.

Jamie Overall you might see a more diverse Board, from a skillset perspective, in a ‘challenger’ bank but with the larger banks you would struggle to find people who didn’t have a long relevant track record. Where you do see more scope for creative hires is in certain functions such as Marketing. You might potentially see it in HR as well, but with the complexities around compensation that is becoming quite unlikely.

Simon LIn a broader, longer-term sense this limitation on creative hiring isn’t a good thing. There needs to be a steady trickle of new thinking in FS, but it does need to be done carefully because these appointments can be a risk for the business. A business needs to be careful if they are going to bring somebody in from outside of FS; those individuals will need to have significant support around them to ensure their understanding is where it needs to be.

Deborah: Not necessarily at the Group Board level. There are some very good Executives who now prefer to sit on subsidiary boards, slightly out of the limelight. The sheer volume of Board papers weighted towards Risk and Compliance can be very off-putting. That said, many talented Executives have a lot left they want to give and fortunately are happy to take on the work and get stuck in.

Simon H: We conducted a Board survey which found that 90% of Chairman said they still really enjoy the role, which is surprising given the regulatory issues, and the huge time requirements as a result. You would think that this would frighten people off, but apparently not.

However, there is an underlying view that they are not being paid enough for the reputational risk and time spent doing the role. Previously, a Chairman would be needed for one day a week in the FTSE 100 – now it is up to four days. Therefore, if the CEO is being paid £4million why is the Chairman only receiving £400,000. Right now it isn’t something they will raise, with remuneration being a hot topic at the moment, but that is something that will come up in the next couple of years.

Nevertheless, Chairman and Non-Executives overall seem relatively happy. The problem is there are not enough in the pool. This is because there are not enough executives in the executive pool to service the Non-Executive pool. And so we need to improve one before we can improve the other.