Australia’s success as a trading nation is vitally dependent on the expertise of trade financiers and the quality of their products and services. But within the trade finance discipline is a “doomsday clock” which threatens to count down all the way to midnight.
Do the banks have the top trade talent to deliver the services their customers need?
Good trade financing is a vital part of the equation for success for both importers and exporters. Done well, it can cut costs, mitigate risk, and speed up the movement of goods and also payment.
Done badly, and it can frustrate businesses on both sides of the equation, and can leave potentially profitable goods unpaid for in the warehouse or on the loading dock.
Trade is the lifeblood of a business, and – in the words of a leading trade finance executive – good trade products are like giving a customer “a blood transfusion.” Replacing dumb debt with smart and structured trade solutions helps clients with balance sheet efficiencies and frees up valuable working capital.
However in Australia business from Small and Medium Sized Enterprises to Corporates are unable to access some of the specialist trade finance products which larger Institutional businesses are able to take advantage of. Some of this is based on risk assessment, but another reason is that banks do not have enough trade finance executives to adequately service the whole market.
The danger is that the banks’ ability to continue to service their trade finance clients even at current levels could be compromised if the talent pipeline dries up. In the “Doomsday” scenario, the current generation of trade finance leaders could retire before passing on their knowledge to the next generation, creating a memory gap in the trade finance discipline which could years to recover from.
Executive search, professional development and consulting firm Franklin Phillips, along with financial market research firm East & Partners, has just concluded the first round of their Trade Finance Talent Index (TFTI) – a regular look at trade finance staff levels across domestic and global banks.
Already, banks are reporting difficulties in recruiting suitable trade finance experts, and with the forecast headcount forecast to grow by 26.6 percent over the next 12 months those difficulties are only likely to become more acute. At regional banks, the TFTI index shows that headcounts are expected to grow by 40 percent over the next 12 months.
Where all these new trade financiers are going to come from is unclear. Poaching from each other will only go so far, and the top trade finance leaders are not getting any younger.
At the Big Four, for example, the average age of the executive team is 53. Anecdotally, some of these leaders – stalwarts of the discipline for several decades – are hoping to move into retirement relatively soon.
Those stalwarts began their careers learning the stock-in-trade of trade in the back office, but that traditional training ground has been offshored or centralised. The banks need a robust, independent, certified, Asia Pacific focussed professional development program for trade finance and structured trade.
Asia Pacific knowledge is vital to the new trade finance executive. The Big Four and most of the multinational Australian based trade finance teams have direct or dotted reporting lines to Asia, and they, along with their clients, are looking to Asia for growth.
The Australian teams may need to look to Asia to help fill the coming Australian trade finance talent gap.
For the banks, trade is a highly profitable business and delivers significant benefits to other areas of the bank. Trade finance requires less capital for revenue than other products.
Trade brings in revenue in foreign exchange, cross border payment fees, and other transactional banking, and dramatically increases cross-sell. Not only that, but it makes the whole banking relationship even “stickier.”
According to East, primary trade finance customers are 68 percent less likely to “churn” their banking relationship than on other products or relationship areas.
Banking was built on trade, and Australian banks and their clients are looking to Asia Pacific trade for growth. Australia is a trading nation and our businesses need intelligent trade finance solutions.
Yet within the banks trade finance has the reputation as an old, paper heavy and complex area of the bank and in recent years has failed to attract banking’s best and brightest.
This needs to change, and change soon. We need to rebrand trade finance as the sexy, dynamic, international and profitable discipline.
We need to look beyond poaching, look to Asia, and provide a professional development solution. Otherwise, Australia will have a broken pipeline of trade finance talent, and that will be to everybody’s detriment.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
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Vivianne Arnold is a founder and director at Franklin Phillips. She is the former Head of Marketing at EFIC, Australia’s export credit agency, and the former Worldwide Director, Worldwide Business and Marketing Organization at Microsoft.