Bernardo Santiago doesn’t mince words: “We’re running out of market data people!”

The data veteran—who held market data roles at WestLB, Wellington Management, ITG, RBC Capital Markets and Franklin Templeton Investments before setting up his own market data consultancy, S4 Market Data, in 2017—has spotted a skills shortage among data professionals. Or, more accurately, a personnel shortage: older data professionals—those often seen sharing their knowledge at conferences and industry events—are nearing retirement, and there aren’t enough junior data people with the right experience rising through the ranks at financial firms to replace them, Santiago contends.

S4 provides a range of services to clients, including consulting and project management, as well as performing market data management, compliance and cost optimization services on behalf of clients, and also recruiting staff to fill interim and permanent roles at financial firms. But, Santiago says, that last part is becoming harder because there are fewer experienced data professionals available.

“In the past, we would post open positions and get many more applicants than we’re getting now,” he says. “Now, I get applications from people in procurement roles. They have the skills but need to be educated on the nuances of the data. And they haven’t dealt with this set of vendors before.”

You can’t go to university and study market data. And someone who’s gone to Cornell to get their Master’s in data science isn’t going to want to run data inventory.

Bernardo Santiago, S4 Market Data

Simon Burton, founder of London-based recruitment firm CB Resourcing, agrees. “The data sourcing/market data-type roles are increasingly hard to source for because not enough new talent is being brought in, and when a client has a need, they have a need for someone experienced,” he says, citing the offshoring of junior work as a barrier to entry into this space.

Santiago and Burton aren’t alone in spotting this. “I don’t believe we’re seeing enough junior talent coming through,” says a data management executive at a large UK-based bank. “We talked about this internally three years ago, and realized that current management is aging.”

Some of those experienced managers are now in their 60s and 70s and are ready to retire, while many in their 50s are taking early retirement or being pushed out because they command higher salaries, and those that control the purse strings believe that money could be better spent hiring for more front-and-center roles, says John Ikel, director of products and services at 3D Innovations (3Di).

As a result, a skills gap is emerging. In small- and mid-sized organizations, the procurement business line is taking on more of these responsibilities, and these roles tend to not be high paying. At larger firms, market data teams are being absorbed into procurement functions and tend to focus on vendor management only, with the admin functions that used to sit next to them being offshored, Ikel says.

On top of that, there is a shift from straight cost management to risk and usage tracking, which requires additional skills that are usually not part of a traditional data manager’s skillset. And, at the same time, technology—through the use of market data tracking tools—is making those administrative roles scarcer.

And with hundreds—if not thousands or even millions—of new datasets being created every year in growth sectors like ESG, it becomes “virtually impossible to keep a pulse on sources via straight industry knowledge,” Ikel adds.

Stuart Plane, head of Rimes’ Matrix and Managed Data Services units, agrees.

“Complexity has increased exponentially over the last 20 years, and for one person or a small group of people to manage all of a firm’s data with that complexity is very hard,” he says. “There’s a small pool of talent that understands the nuances of this data world today. And a lot of organizations have struggled to grow and back-fill that institutional knowledge. Experience matters. You need more than just skills.”

And while one may be able to re-train procurement staff, firms can’t simply move market data management under generic procurement functions. While data and procurement functions both perform sourcing and vendor management, the bank data exec says that it’s on the compliance front that procurement is often found lacking.

“You need to be on top of who uses what and be able to reconcile that to your inventory,” he says. “Procurement handles payments, but not inventory management. There’s a whole workflow around inventory management before anything gets to payments.”

Other areas procurement departments don’t handle include request management—setting up access in response to user requests—and handling audits from data suppliers, where it’s critical to know who is using what datasets, how they are using it, and what terms apply to it.

The risks of trying to manage market data without experienced staff could simply be that a firm ends up overpaying for data, the bank data exec adds. More dangerously, though, without the correct management of compliance with data licenses, it’s possible that some misuse of data occurs and a firm gets fined by its data suppliers.

“It depends on your liabilities, and, for example, the number of users of applications with access to the data, but fines by big vendors can be significant—they can run into the millions of dollars,” he says. That’s why it’s so important to have trained and experienced professionals who know to monitor for—and who understand the impact of—any policy changes to data licenses that could result in higher fees.

But who wouldn’t want to work in data management?

Let’s face it: counting who uses what data services and reconciling bills from data providers against what your firm actually used isn’t what most people imagine when they think of the capital markets. The cut-and-thrust of the trading floor, the satisfaction of clinching a trade, and the Gordon Gekko “greed is good” philosophy are all a world away from—yet, rely entirely on—the back rooms where diligent and experienced staff make sure the front office has access to all the data it needs, in the correct systems, and that the firm is properly complying with the conditions of its data licenses.

In short, market data isn’t exactly exciting stuff. And with younger generations more concerned about the ability to work from home and industries that make a broader impact, finance overall is struggling to attract new recruits. So you can imagine how much harder it is to sell the benefits of a career in market data, 3Di’s Ikel says.

“The traditional market data roles and/or industry is not attracting people as it once did. Graduates want to be data scientists or work with AI or work in the alternative data/ESG space.”

In addition, the Covid-19 pandemic threw the industry a curve ball. Wall Street has always been a five-day-a-week, 9 to 5 (really 8 to 6, or worse), in-office industry. While that’s changed to a degree, the largest banks and asset managers still largely require some level of in-office participation. On top of that, some data pros already in the industry have found new passions during the global lockdown.

“They’ve decided that life is too short to perform another vendor declaration run and have instead transferred to other areas, or left to go into something else that is not just outside market data, but out the finance sector entirely,” Ikel says.

And, again, there’s that issue of technology. In some cases, these “feeder” positions no longer exist, as junior roles have either been automated or outsourced overseas, notes Ed Guy, managing director at Nationstaff, which recruits in the fintech and data spaces.

Guy notes that as more trading platform operators try to make data sales a larger part of their business, they need experienced professionals to set up and manage licensing programs. “But some of these firms may have screwed themselves a bit, because data used to be seen as a commodity, but now it’s a critical part of everyone’s business, and they let good people go to pasture instead of rewarding them properly.”

Education, education, education

Despite being most firms’ third-highest expense, with budgets running into the hundreds of millions of dollars per year at the largest firms, market data management is an area where not enough investment—certainly not commensurate with its cost status—is put into recruitment and training.

While revenue-generating front-office use cases such as data science and analytics have garnered the attention of the academic community, with certificate and Master’s degree programs aimed at would-be quantitative analysts who need to work with data, there aren’t any similar programs for the tedious data management and administration roles that provide those data services.

“You can’t go to university and study market data,” Santiago says. “And someone who’s gone to Cornell to get their Master’s in data science isn’t going to want to run data inventory.”

Thus, the training burden largely falls to consultancies and firms themselves to implement recruitment and training programs.

The data exec at the UK bank, for example, believes the data industry as a whole isn’t doing enough to attract new entrants directly from universities. In fact, when the bank established a center for its operations outside of London in a regional city where market data experience was even more limited, he worked with local universities to attract graduates into data roles and build a fresh team from scratch.

“It became more about finding the right candidates in terms of the caliber of their mindset and ambition, rather than finding those with direct market data experience. Then I put that team through FISD’s FIA Level-1 certification,” the bank data exec says.

But once these new data professionals are sufficiently trained, firms need to work hard to keep them on the payroll. In a niche where there’s a shortage of experienced professionals, their newly-acquired skills are a valuable asset to rival firms.

“After two years, once they had that experience and confidence in their abilities, and they know their worth in a market where there is limited expertise available and where their skills are much in demand, the challenge becomes retaining them,” the bank data exec says, “because they see similar opportunities in vendor management at other firms.”

CB Resourcing’s Burton advocates for firms developing succession plan that looks five years ahead for smaller teams with niche skillsets. Additionally, he says firms should start hiring and training graduate trainees immediately, and—while they’re coming up to speed—”augment” their existing resources with lawyers and consultants. Also, firms should look outside of traditional market data verticals.

“For instance, a good business researcher understands the use of the products,” Burton says.

Are utilities the future of market data management?

However, not all firms will have the luxury of a five-year buffer to create a recruitment plan, and many may not have the resources available to do so.

That’s where some providers are seeing opportunities to turn that “augmentation” into a whole new business line. At one end of the spectrum, you have small providers like S4 offering the expertise of its staff and contractors to provide market data management services on-demand for firms who lose staff. At the other end, you have growing consultancies like 3Di and vendors like Rimes and TRG Screen that see the writing on the wall.

Yes, ‘utility’ is the word. Yes, there have been past attempts. And even though there have been significant failures in the past, I still believe it’s the only way forward.

Stuart Plane, Rimes

S4’s Santiago says he is creating the skeleton of a training program that would deliver practical experience, and is talking to a third party that already provides educational programs about putting it into operation. The certification program would be about how one manages data, rather than training an individual on data products.

3Di’s Ikel says that it’s managed service division is possibly growing even faster than its data compliance and licensing team, and its legal function. 3Di also puts staff through FISD’s Level-1 FIA (Financial Information Associate) and/or Level-2 DLS (Data Licensing Specialist) programs, depending on their focus.

Rimes’ Plane says that the vendor prefers to find people with strong engineering background “and trains them up to deal with the nuances and challenges of data.”

TRG has traditionally offered on-premise inventory management and cost management systems, and has more recently begun providing these services on a managed basis and offering others via its acquisition of UK-based license and compliance specialists Axon Financial Systems. TRG CEO Steve Matthews says it is also seeing strong demand for its managed services offering, and is considering setting up a “TRG Academy” to help train the next generation of market data experts.

As more firms expand their managed-service offerings, the result could be a number of competing third-party providers essentially running firms’ data management and administration functions on an outsourced basis, using their inventory management and cost optimization tools along with experts using their skills across multiple firms—basically competing utilities offering “data-management-as-a-service”.

“Yes, ‘utility’ is the word,” Plane says. “Yes, there have been past attempts. And even though there have been significant failures in the past, I still believe it’s the only way forward. And having multiple providers of utilities is the best arrangement for customers because the customer always gets better results when there’s competition.”

Filling existing skills gaps isn’t the only potential benefit of managed data services. If vendors create utility-style services, that not only shifts workloads off users’ plates; it also shifts some of the compliance complexities, especially around burdensome tasks such as responding to vendor audits.

“I can see an opportunity in creating a market-data-management-as-a-service or as a utility model,” says the bank exec, highlighting that it would be very effective to save time spent responding to exchange or vendor audits if a third-party utility could be audited once on behalf of all the clients it serves, rather than an exchange auditing all those clients separately.

If data staffing levels are in such short supply, it’s possible firms may adopt this model in the short term. Whether they continue it into the long term will depend on how much it can deliver in cost savings, how well it can ensure compliance and avoid penalties, and how well it can find and train suitable professionals to keep it going.

Certainly if firms willingly outsource their staff to third parties and then change their mind, getting them back—or replacing them with candidates of a similar caliber—won’t be easy. And all the while, these growing utility providers are more aggressively hiring and training the kind of candidates that firms would ideally hire and train in-house.

As it stands today, the industry could be just a few key retirements away from a major shift in how data management and administration is performed—that’s just how precarious the key person risk is in this space.