It’s well documented that the pension risk transfer (PRT) market in the UK has a human capital problem, in the sense that there aren’t enough people to fill the vacancies in the space. Greg Winterton spoke to TC Jefferson, Managing Partner at executive search firm The Plenum Group, to learn more about the going on in the space.
GW: TC, there is plenty of coverage in the trade media about this apparent ‘challenge’ that firms in the pension risk transfer market face when it comes to hiring. Just how ‘real’ is this issue?
TCJ: Thanks Greg. I can assure you this problem is very real. You only need to look at the volume of deals that happened last year and predictions for this year to know that there is a challenge. Plenum has been working in the pension risk transfer market for many years, but the last six months has seen us spending almost all of our time in this space to try to fill an unprecedented number of vacancies.
GW: Which firms are more impacted – is it the insurers, or the consulting firms, and why?
TCJ: Both are struggling to find and also retain the right people. However, the problem is probably more acutely felt on the consulting side. This tends to be because individuals that work on the provider side feel more at home executing the deals rather than acting as a broker. Similarly, many on the consulting side see little merit in moving to another consulting team that they think might feel very similar to where they are now. What we often hear from consultants is that they would only consider a move if it was to a provider.
GW: Are there any specific roles that are seeing higher demand than others?
TCJ: There are number of functions that can quite easily scale in this industry, with perhaps investment teams and operational teams having the most to gain here. However, it tends to be the pricing area as well as “deal champion” and business development that is hardest to scale. The demand is not equally spread across levels either. Whilst we typically specialise in more senior hires, we have seen a number of consulting houses repeat requests for individuals at the mid-level, with a few years of PRT deal experience under their belt. Such people are currently like gold dust, with packages rising rapidly, and arguably, unsustainably.
GW: Aside from financial compensation, what are some of the other benefits that hiring companies can offer to sweeten the deal? Is working from home seen to be a plus to job seekers, for example?
TCJ: The financial side is obviously important, but it’s not the only factor. Even within the financial side, it’s not all about pure salary. Bonus plays a significant role as does the willingness of firms to buy individuals out of any accrued bonus as well as offering any stock options or long-term incentive plan. Career development is also incredibly important with many people citing that they would only move for a “head of” position or significant step up in responsibility.
Soft benefits like working from home do make a difference, yes. Whilst much of the pension risk transfer business is in London, there are hubs elsewhere, both in the south and east of England, as well as into the midlands and the north. The ability for those individuals to move up the career ladder without having to relocate to London can be very appealing and smart teams are attracting people by offering this.
GW: Lastly, TC, what is the medium-term reality here for hiring companies? There are a lot of actuaries in this market, but it takes years for new actuaries to become qualified. It’s not like tech where you can learn a programming language quickly.
TCJ: Great question. I think ultimately, the industry is not going be able to have sufficient human capital to deliver on its growing requirements simply by pinching people from each other’s firms! Yes, it takes a long time to train an actuary, but I don’t think that really is the issue. There are a number of actuaries within the insurance sector who are seeing technology disrupt out of date working practices, potentially freeing up their time to spend on higher value tasks. However, probably more significant is the inverse decline in traditional pension consulting that mirrors the boom of PRT deals. As such, employee benefit consultancies have ample pension actuaries in a shrinking part of the business that can be redeployed into pension risk transfer teams; almost every employee benefit consultancy is doing this. The challenge, however, is that it takes time to get up to speed in PRT and get the requisite deal experience so that consultants can fly solo on these deals.
The consulting community has, to date, provided a significant proportion of the insurers’ pension risk transfer talent. We see no real reason why trend would not continue.
TC Jefferson is Managing Partner at The Plenum Group