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A quarter of a century in the City: How the world of work has been transformed

A quarter of a century in the City: How the world of work has been transformed
Written by Publishing Team

As financial services developed over the past 25 years, some of the main changes have been in the day-to-day jobs those in the City do.

As part of our 25th anniversary special, Financial News spoke to five people whose roles either didn’t exist a quarter of a century ago, or whose work has changed vastly during that time. Here are their first-person accounts, which have been edited for length and clarity.

Twenty-five years ago, the dotcom frenzy was well under way and electronic trading was making its presence known in equity markets. However, a great deal of trading was still done manually. If you were executing a US stock by a UK investor, you would have to call your broker, who called the person on the stock exchange floor, who would then run to the specialist on the floor, who matched the buyers and sellers. Today these orders are done in milliseconds with front-to-back workflows.

Algos gained traction with electronic trading. A significant turning point was smart order routers, which enabled traders to find the best way of executing a trade and to take advantage of opportunities across a range of trading venues through algorithms.

READ Traders see mobile apps, blockchain and AI ‘shaping the future’ of the trading floor

The most popular strategy was VWAP — volume-weighted average price — which helped investors and analysts evaluate the current price of a stock and determine whether it was relatively overpriced or underpriced compared to the average trading price for the day.

Today, there is a much wider range of algos and market participants and a greater focus on the performance of the algo. They are more quantitative in nature and include trend-setting, arbitrage, delta neutral and mean reversion. They have opened different markets and enabled market participants to have access to benchmarks that suit a particular strategy. Algos have become an important part of the broker offering as well as the asset manager’s workflow.

They also help brokers look instantly across these reams of information to get an indication of the price and best place to trade. The greater automation has translated into more efficiency in how we evaluate markets minute by minute and day by day.

Vanessa Vallely, founder and managing director, WeAreTheCity

Ten years ago — never mind 25 years ago — diversity and inclusion were not on anyone’s agenda. There were no female voices at the table or in the boardrooms. Neither did senior women speak about their careers.

A trigger point of change in the UK was the Davies Review, a government-backed commission, which was introduced in 2010 to examine the under-representation of women on boards. The following year, the review published a Women on Boards report, which set a voluntary target of a 25% representation of women on the boards of FTSE 100 companies by the end of 2015. Last year, nearly 40% of board positions of FTSE 100 companies were held by women.

The other catalysts were the #MeToo and Time’s Up movements. There is also now a myriad of networks that support and help women drive their careers forward. When I set up WeAreTheCity in 2008, I had been working in banking for more than 25 years. However, I was working in senior roles in a very male-dominated space — I felt I needed more support and wanted to meet women in similar positions.

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There is still a lot more to be done for women and ethnic minorities. There are still pay gaps and a lack of representation in senior positions. Unconscious bias is still a big issue and the role models to attract ethnic minorities are lacking.

Organizations need to look at the composition of their leadership teams and boards, as well as the pipeline of talent. Role models are crucial, as are mentoring and reverse mentoring programmes, where senior managers change places to give them a better perspective of the challenges that women and ethnic minorities face.

Hortense Bioy, global head of sustainability research, Morningstar

Twenty-five years ago — and even before — people talked not about sustainability but responsible or ethical investing, which was based on excluding companies that were engaged in contentious activities such as weapons, tobacco rights and firearms, corruption or human abuses. After 2000, there was more data about companies because they were publishing corporate social responsibility reports that showed what they were doing in the community. However, the environment was not really in the picture.

Inflexion points were the UN Principles for Responsible Investment, launched in 2006, and the 2015 Paris Climate Accords — the first universal, legally binding, global climate change agreement. They provided a framework for further discussion and ESG is now firmly on the industry’s radar.

We have moved from just looking at exclusions to a much more financial approach in terms of how we can integrate ESG into the investment decision-making process. There is much more data available than there was years ago thanks to the internet and social media, as well as more established, structured sources from company reports. Together, we have a better idea of ​​how these non-financial criteria affect a company’s performance. But there are still challenges in capturing data on the social component.

READ FTSE chief: Green investors can’t just divest from everything

Regulation is also a driver. In the EU, there is the Taxonomy for Sustainable Activities as well as the Sustainable Finance Disclosure Regulation, which aims to reorient capital flows towards sustainable investments and bring transparency on investment products.

In terms of the next phase, I see the focus being not only on the risks ESG poses to companies but also the positive impact companies can have on the planet and society at large.

Adam Toms, chief executive, OpenFin Europe

Twenty-five years ago, the power and awareness of technology were in part driven by the dotcom boom. It was a game changer, with algo trading, the beginning of large data sets, and stronger focus on connectivity and networks. This triggered a real shift in mindset in how technology could develop and address the challenges of the industry.

The global financial crisis in 2008 moved the dial even further with a swathe of regulation that changed the way firms operated. Compliance moved from a tick-box exercise to an integral part of implementing safeguards and controls. Fintechs became household names, as firms looked for sophisticated, highly specialized solutions to not only help them comply with the evolving roadmap but also better service end clients.

They weren’t just turning into the more established tech giants for new ways to deliver financial services. In fact, they often preferred the more nimble and innovative startups and small companies that had entered the scene disrupting the status quo.

READ Sharp fall in fintech share prices could trigger wave of sector deals

Fast-forward to today and the pandemic has driven the next level of innovation and cultural shift. It proved that market participants do not have to be tethered to their desks, and laid to rest the view that people had to be in the same room to be productive.

Twenty-five years ago, working from home would have been impossible — everything was stored in a box on the floor. But then it moved to a large data center and now, thanks to the speed of computing power, information can be accessed anywhere — using a mobile, laptop or desktop, with the cloud playing a significant role.

Fintech, though, has not only changed the face of technology, but also given rise to numerous careers that did not even exist 25 years ago.

Sheila Nicoll, head of public policy, Schroders

The regulatory environment 25 years ago is barely recognisable in today’s financial services industry. In those days, a range of self-regulatory think tanks focused on particular aspects of securities markets. There was the Investment Management Regulatory Organization for asset managers and the Personal Investment Authority for the retail market. Banking and general insurance were completely separate, and there was a whole range of other organizations covering friendly societies, building societies, consumer credit and so on.

That all came together under the Financial Services Authority before being split again, with prudential supervision of banks and insurers under the Prudential Regulatory Authority and conduct and prudential oversight of investment firms under the auspices of the Financial Conduct Authority.

In asset management, overall regulation has developed to reflect changing investment trends. There are ever greater diversification opportunities and more sophisticated risk management techniques, for example, being reflected in rules covering investment funds or the undertakings for the Collective Investment in Transferable Securities Directive.

We have moved a long way from a world where a fund would be invested in UK equities to one where multiple asset classes are available, invested in different geographies.

READ Why the biggest shake-up to financial regulation since the 1980s could end in disaster

The financial crisis ushered in another new regulatory era, with something of the swing of the pendulum to more interventionist regulation. It took us into a world much more focused on conduct and greater accountability and responsibility on a corporate but also personal level.

The result is the world of regulation has become more complex. The same can be said for the way people invest.

This has meant a change in skill sets. When I first started, there was no compliance profession and financial services regulatory policy really didn’t exist. We were working it out and there was more room for generalists.

Today, there are more professional qualifications, and the trend is probably to start with a specialism, whether it is in financial crime, distribution or fund construction. It takes longer to learn about different parts of the business — and more people may stay in a particular specialism for most of their careers.

This feature formed part of Financial News 25th anniversary special. To see our profiles of changemakers who have defined a quarter of a century in the City, click here, or to read our interview with Mayor of London Sadiq Khan, click here.

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