INTRODUCTION
At year-end 2021, Second Line Advisors conducted research and analysis on
today’s Chief Compliance Officer (CCO) from the top US bank holding companies
(>$50B in assets) as well as the top public and private FinTechs to identify and
assess trends on talent and profile.
The function of compliance has slowly evolved over the last two decades, to the
point in which well experienced compliance professionals are now sought after
for the overall Chief Compliance Officer role for leading financial institutions,
something which seemed like a glass ceiling over the last 10 years. In addition,
the data for Chief Compliance Officers in traditional banking points out strong
and consistent diversity figures over the years as well as a solid footing on tenure
year-over-year.
The COVID era has undoubtedly catapulted the alternate financial services
sector, FinTech and Crypto, forward.
The COVID era has undoubtedly catapulted the alternate financial services
sector, FinTech and Crypto, forward. These two industry categories matured
at a significantly higher rate since 2020 which, in combination with the
additional regulatory steps taken at the state and federal levels, led to growth
and evolutionary steps with clear focus on enhancing governance and controls.
Previous trepidation by experienced compliance executives turned to enthusiasm
and intrigue as FinTechs emerged as market drivers, leading to the need to
hire competent compliance talent to build and drive these functions forward.
Financial crime, consumer compliance and regulatory engagement experiences
are all high on the list of desires by FinTechs and continue to be across the
industry based on the current administration.
BANKING: CHIEF COMPLIANCE OFFICERS
NEW CHIEF COMPLIANCE OFFICER HIRES IN 2021
In 2021, of the top US bank holding companies, there was only 14% turnover in the Chief Compliance Officer role. 50% of newly hired CCOs’ overall experience and previous position was compliance, which was lower than in 2020, with the remaining CCOs having come out of risk or legal functions.
Only 33% of the newly hired CCOs in 2021 were externally appointed to the role, and all directly came out of compliance backgrounds, demonstrating that there may be more flexibility around experience outside of direct compliance for internally appointed CCOs.
Of the prior CCOs who left the seat this year, 66% left to step into a different C-suite role at a bank and 33% went into retirement.
KEY TAKEAWAYS FROM TOP U.S. BANK HOLDING COMPANIES
- Tenure: The average tenure of Chief Compliance Officers at the top US bank holding companies is 6.5 years.
- Overall Experience & Previous Position: Over the last five years, compliance backgrounds for Chief Compliance Officers have slowly become the majority. In 2021, 58% of CCOs overall experience is in compliance, and 58% of CCOs previous position was in a compliance role. The most common backgrounds of CCOs outside of compliance include legal, audit and risk. In addition, 81% of current CCOs came directly into their role from a global, US or regional bank.
- Education: Less than half of the current CCOs have a law degree, demonstrating that as the compliance function has continued to evolve over the years, legal backgrounds are no longer viewed as a requirement among compliance leaders as they were in the earlier evolution of the function.
- External Appointments: Internal appointments to the role continue to be the majority, including for new CCO hires during 2021. In 2021, 42% of Chief Compliance Officers were appointed externally to the role, which is very similar to the past four years (2017 – 2020).
- Women in the Seat: In 2021, 40% of the Chief Compliance Officer roles at the top US bank holding companies are held by females.
- Comparisons Between >$250B and <$250B Banks: Although the rate of external appointments is similar when comparing bigger vs. smaller US banks, the background trends of those hires differ. 67% of external hires at the bigger banks had overall experience in compliance (an increase from 50% in 2020), compared to nearly 80% of the smaller banks.
FINTECH: CHIEF COMPLIANCE OFFICERS
KEY TAKEAWAYS FROM TOP PUBLIC FINTECHS
- Overall Experience & Previous Position: At the top public FinTechs, 50% of CCOs background (previous role and overall experience) was directly compliance. The remaining CCOs came from legal or finance backgrounds.
- Education: Similar to the trend among CCOs at the top US bank holding companies, a law degree does not seem to be a requirement for CCOs at public FinTechs. 50% of CCOs hold a JD.
- External Appointments: Half of CCOs were externally appointed to their roles with direct compliance backgrounds from another FinTech or big tech company. CCOs appointed internally were more likely to have a non-compliance background such as legal or finance.
- Women in the Seat: 50% of Chief Compliance Officer roles at the top public FinTechs are held by women.
KEY TAKEAWAYS FROM TOP PRIVATE FINTECHS
- Overall Experience & Previous Position: It is more common for CCOs at private FinTechs to step into the role directly out of legal, as compared to compliance. 70% of CCOs overall experience at the top private FinTechs is in legal.
- Education: Opposite to the trends among public FinTechs, the majority of CCOs at private FinTech companies hold a JD (80%).
- External Appointments: Likely given the nature of pre-IPO companies and the need to bring in experienced talent, 70% of CCOs at private FinTechs were externally appointed to the role. Previous employers of those CCOs range from global and US banks, to management consulting, to other FinTechs, as well as law firms.
- Women in the Seat: 40% of Chief Compliance Officer roles at the top private FinTechs are held by women.
CONCLUSION
A PIVOTAL YEAR FOR BANKING & VALIDATION OF FINTECH
2021 was a pivotal year in the industry and a time of greater regulatory scrutiny and expectation. Talent was in clear demand across all industries, including banks of various sizes, FinTechs at different evolutionary points, regulators (OCC, CFPB, FRB, States, SEC) and professional services firms. However, in the banking and FinTech space, the needs were very much focused around consumer compliance, bank regulatory, BSA/AML, data analytics/modeling and transformation.
For several years prior, most banks were seeking how to consolidate and optimize the non-financial risk functions and, in many cases, eliminate duplication of effort and coverage by compliance and operational risk. That emphasis has very much waned, however the desire to advance technologies, tools and systems have not and continue to be front and center as priorities. 2021 was also a year of validation of the FinTech sector as a viable market segment and career path, as countless companies went public or continued to raise impressive valuations by VCs.
