Asset managers face myriad challenges when trying to hire and retain top legal talent. The asset management sector is incredibly competitive, even during economic downturns. As we have moved into the new financial year, Q2 has epitomised this as there has been an increase in buy-side firms looking to hire permanent and interim funds lawyers. Here are some important challenges and takeaways to consider.
Competition and Financials
There is high demand for the most talented asset management lawyers, with most organisations fighting over the same limited pool of candidates. Hiring is even more challenging for asset managers as they are now competing directly against law firms. NQ/associate salaries have increased exponentially, which somewhat diminishes the lure of working in-house. As a result, more asset management lawyers are remaining in and, in some instances, returning to private practice.
To remain competitive, asset managers should conduct regular compensation reviews to ensure parity of their salaries in comparison to the rest of the market. Whilst there are several compensation surveys freely available, anecdotal information from legal contacts or specialist legal search firms will always provide the most up to date and accurate data.
Whilst it is common knowledge that buy-side roles pay extremely well, this is often due to hefty bonuses and benefits that create a generous total compensation package. However, when asset managers try to lure asset management lawyers from private practice or competitors, the vast majority of candidates (more prevalent amongst more junior lawyers) are interested in what their guaranteed compensation will be, particularly given the market in the past 12 months which has resulted in far lower bonuses.
Interestingly, several leading US and European asset managers pay way below what would be ‘market’ for base salaries, often relying on their brand and prestige to hire and retain the best lawyers. Considering in-house base salaries have increased by 15-20% over the last few years and private practice salaries increasing, such stagnation will result in attrition and the inability to attract the best legal talent.
Employee Retention
It is one thing hiring top legal talent, but another thing retaining them. This can be a significant challenge for asset managers, as increased salaries, better benefits, narrowness of job responsibilities and limited career development are some of the reasons why employees leave. And because it is more difficult to poach asset management lawyers from private practice, it is prudent to know that competitors will always be looking at the top lawyers working within your legal team.
This is one reason why General Counsel and Heads of Legal need to be tapped into the market to understand how their legal team compares to competitors. For example, how many days are your team required to be in the office compared to others? If legal team leads are none the wiser, they are on the back foot.
Whilst counter-offering your employees might seem a good idea, this is a short-term fix, and they will likely remain in their role for another 6-12 months before ultimately moving on. It also raises the question of why did you not give that employee a salary increase sooner? In the long run, it can become more costly and time consuming to find a replacement when considering the competitiveness of the market.
Utilisation of Interim Legal Support
Competition for the best asset management talent means that searches can take longer. This can cause strain on legal teams that are under resourced, with many business leaders telling legal heads to do more with less. With such an emphasis on mental well-being in the working world, businesses can ill-afford to rest on their laurels.
In a previous article I wrote, I explained how permanent searches were taking close to 9-12 months, resulting in more companies using interim legal support to fill department skill gaps. In other instances, hiring an interim lawyer can often be because permanent budget has not been awarded, which is something that we have seen the last 6-12 months and continues to be a trend. This is not a new phenomenon as asset managers have regularly secured secondees from their panel firms. However, depending on your arrangement with your panel law firms, this can be costly (particularly when paying for funds lawyers), and it is becoming harder to secure secondees for a sustainable period of time. Within private practice, there has already been a lot of movement across the private equity space with lateral moves in London, but an increase in the demand for alternative funds lawyers has seen law firms also turn to interim lawyers to keep up work demands. Whilst you can also use law firm consultancies, these too can be expensive and you are restricted to the lawyers they have available on their panel.
Throughout 2023 and early 2024, Major, Lindsey & Africa saw an unprecedented uptick in the requests for interim lawyers across the buy-side, particularly amongst leading asset managers. Just like the permanent market, the interim market is equally as competitive, so asset managers need to ensure that they act decisively and quickly when looking to secure immediate ‘plug-and-play’ interim solutions. Interview processes need to be quick and efficient, which may differ from more traditional permanent recruitment processes. There are only so many UCITs lawyers based in London that are immediately available to start an urgent contract role…
Search Partners
Asset managers have had more success engaging with specialist legal search firms who have prior experience working on buy-side roles. An understanding of legal asset management roles should be a prerequisite. The benefit of retained search is the knowledge, market mapping and the active search for the best legal talent. The benefit of interim consultants is the same market knowledge but with the immediacy of a consultant to start sooner. However, whether retained or contingent, it is important to note that a specialist role require specialist attention.
