RDR for Financial Services recruitment
In 2012 Queen Elizabeth II will celebrate her Diamond Jubilee, London will host the Olympics and the FSA will apply the principles set out within the Retail Distribution Review. Despite conflicting thoughts on the implementation process, the overriding feeling from the industry is that improving the quality of advice will develop consistency in standards and ultimately engender a customer perception of professionalism. The RDR addresses three key areas to achieve this:
• Improve the clarity for consumers of the characteristics of different service types and the distinctions between them.
• Reduce the conflicts of interest inherent in remuneration practices and improve transparency of the cost of all advisory services.
• Raise professional standards.
Like many businesses, Financial Services companies are dependent on suppliers to maintain a quality product. In order to provide a ‘service par excellence’ it stands to reason that the firm’s employees/service providers must be, well, par excellent.
As the primary source of experienced hires across the market, recruitment consultancies have become an increasingly integral part of any firm’s employment strategy. Yet in a time where professional standards are regularly high on the agenda, it seems that many organisations are willing to accept a below par recruitment service where neither professionalism nor standards are even considered.
Traditionally financial planning providers and recruitment solutions providers have had many similarities. Quality of advice could vary wildly from company to company, as could the consultant’s experience and technical expertise. As a result, the FSA recognised that financial planning customers were disillusioned and financial planning customers demanded better. Through RDR, the FSA has committed to ensuring that these demands will be met, that customers will have a clear understanding of the services provided and payment structures, and that IFA practices will adhere to a defined code of conduct.
Perhaps it is time for the recruitment industry to follow suit.
Clarity of Services
“The FSA distinguishes between independent advice that offers independent unbiased and unrestricted advice based on a “comprehensive and fair analysis of relevant markets”; a new middle category called sales advice which is non-independent advice and “advised guided sales”; and sales which covers all non-advised services.”
If you were to ask most employers what they were looking for from a recruitment consultancy, the primary desire would be to secure a time efficient service that would add value to the internal process. Rather than acting as a CV sending service, the recruitment firm should pre-screen applications in relation to the role and develop ‘buy in’ to the employer with a view to presenting a shortlist of the most suitable candidates identifying reasons as to why these individuals make the grade. This provisional selection process should ensure that the recruiting organisation will spend a minimum of time on the project, speaking to only the best candidates available.
Unfortunately, providing a value adding service such as this can often prove frustrating for the professional recruiter as many employers use numerous agencies with no service level agreement. By accepting batches of CVs where applicants have been neither pre-screened nor briefed on the role, while working on the basis that first introduction counts, employers are effectively rewarding recruiters who send every vaguely suitable through immediately.
In many cases, a professional and focused recruiter can perform a high quality search and selection service on behalf of their client only to find that their first choice candidate has already landed in the employer’s inbox amongst a batch of largely irrelevant CVs therefore, through the ‘first introduction’ policy of the client, leaving them with no chance of financial recompense. Therein lies a commercial decision, does the recruiter continue to offer a truly value adding service, or simply send as many CVs as quickly as possible in the hope that one will prove useful?
Those who wish to employ the service of a recruitment consultancy must therefore decide prior to instructing potential providers as to whether they would like a “comprehensive and fair analysis” of relevant applicants or a non-advice based CV distribution service.
“Fees or commission?”
As with many IFAs, the common charging structure for most recruiters is based on a percentage commission on completion of assignment. This is often the preferred choice of the customer as the perception is that it is a simple case of you only pay for what you get. This observation is however, not strictly accurate. It is indeed true that through a commission or ‘contingency’ based approach, charges are only applicable when a recruit commences employment, however given the nature of a ‘no win, no fee’ approach, it would be reasonable to suggest that the level of fee applied on a successful assignment would invariably take in to account the costs incurred on an unsuccessful one.
As the traditional method of payment within the industry, and perhaps the most cost efficient when applied to positions where candidate supply is high, recruiters and employers are generally happy with this arrangement and will continue to follow this structure to 2012 and beyond.
For assignments in areas of low candidate supply, perhaps where a specific skill set or less common experience is required, a fee based approach may be more appropriate. In the knowledge that they will receive payment for the work involved, the recruiter can allocate a far greater and pre-agreed amount of time and resources to the assignment. This affords the recruiter opportunity to conduct extensive market research, proactively contact all potential targets within a realistic geographical area, extensively pre-screen (typically through an initial informal meeting followed by a role specific interview) and present a qualified shortlist of the very best individuals available. As the eventual fee levels tend to remain in line with that of contingency based searched, the client effectively receives increased value for money.
A professional recruiter will send an employer copy of their payment terms prior to or on agreement of the assignment and will always be happy to explain the charging structure if any questions arise. In most cases this will be outlined as a percentage of first year remuneration unless a contrary fee structure has been agreed. Terms defined at the outset of an assignment are binding and it is extremely unlikely that any established firm will even consider making amendments to the charging structure once it is underway.
“A pivotal review objective is to have standards of professionalism amongst those who deliver services”.
Any organisation that has used external suppliers for recruitment projects will have no doubt encountered a wide variety of standards in the consultants that they have dealt with or the services that they have received. The reasons for this disparity can include experience, training, specialism and company process, with the result being a poor perception of recruitment companies as a whole rather than a distinction between the good and the bad.
Unlike the Financial Services industry, within recruitment there is no pre-requisite qualification to help define competency in giving advice. This is not to say that recruitment consultants can learn nothing from the FSA’s professionalism proposals. Through the RDR, the FSA has identified that service providers must adhere to a code of conduct or standards of practice to maintain consistency in advice and service levels from company to company. Most perceptive recruiters will recognise that applying a higher standard of professionalism to the industry will be beneficial in terms of both take up and repeat business.
To effectively supply applicants that meet not only the explicit criteria for skills and experience to competently perform the role but also the implicit criteria of culture fit, attitude and motivation, requires a comprehensive understanding of the company, the business needs and what a successful outcome would involve. This can only be achieved through a truly consultative approach which will include an extensive fact find and agreement on an ‘action plan’ outlining steps and processes that the recruiter will follow to provide the ideal recruitment solution.
As many customers will ‘shop around’ to identify an IFA, employers should apply the same principle to securing a recruitment partner that they feel will most likely satisfy their requirements. They must be prepared to spend time with a recruiter in the short term, making sure that they follow these essential discussion points, to save considerable time filtering CVs and conducting unnecessary interviews in the long term. Therefore, when considering suppliers, ensure the recruiter can present a justifiable action plan that, as an employer, you believe will ultimately secure an effective recruitment solution and that the recruiter has shown a level of professionalism that you would wish for as the face of your vacancy on the market.
As with the Retail Distribution Review, the customer, or in this case the employer, is central to our pursuit of improvement; improvements in service afforded to organisations, giving a genuinely value adding outsourced solution; improvements in charging structures, applying the most suitable structure to the assignment; and improvements to the standards that recruiters apply in satisfying client requirements.
How do we bring about this change? As customers you must demand it.
If you don’t want to receive the same CV from five different companies, demand that your providers speak to candidates about the role and receive consent to send their details. Demand that candidates are pre-screened in accordance with the job specification. Demand that the information provided is accurate and qualified. Demand that candidates are fully briefed and prepared for interview. And if your demands are not met? Demand a different supplier.