Training firms in trouble as banks cut their budgets

Bankers with spare time on their hands can choose from a bewildering array of classes, ranging from preparation for technical exams to honing their assertiveness skills, or obtaining tips in voice projection from opera singers.

Banks are under constant siege from a host of training firms trying to sell them these services. For the most part, the relationship is symbiotic. The banks love to say that their people are their greatest assets and that they are determined to give them the best training possible.

But that commitment is severely tested by the economic downturn. The banks are being forced to cut back the amount they spend on training and re-assess how much of it they really need.

For many training companies this spells trouble. They expanded quickly in the boom years of the 1990s to offer courses of unprecedented breadth and depth, including some imaginative ones that no one previously realised they needed.

A training executive at one bank says: "If we wanted to send our staff on a course on how to change a light bulb, there would be any number of companies to choose from. These days I don't think there's room for them all."

One of the biggest trainers in Europe is BPP Hyperion, formed from a merger of two companies in 1999 - a time when banks had money to burn.

Marc King, a director of BPP Hyperion, says: "There's no doubt that fewer people are taking courses. In exam training, we noticed it particularly in the last quarter of last year."

The share price of the firm, which trains people in many industries as well as financial services, is, not surprisingly, 30% below its peak three years ago.

But over the past year it has risen from its lows, suggesting that investors believe the worst is over.

There are signs that a slimmed-down training industry is emerging, offering more relevant subjects at more realistic prices and delivering its training in new ways.

Bruno Curnier, a former banker who is now a trainer at ENB Consulting, says: "The traditional economics of training are changing. Trainers now have to supply courses that are really needed and firms that offer bog-standard quality are being turned away."

Courses in cross-selling are an example of training that is adapted to current requirements, Curnier says. These days a relationship manager can gain an edge if he knows about everything from fund management to corporate banking, the capital markets and even insurance.

Training for graduates is another area still seen as crucial. The banks employ fewer than before and need to get higher performance out of those they do have.

Stephen Sidebottom, head of training in London at Dresdner Kleinwort Wasserstein, says: "We are looking at our training needs with fresh eyes. That means clearly identifying our needs and getting more bang for our buck."

Nowhere is competition between training companies keener than in exams, such as the US-based Chartered Financial Analyst (CFA) qualification and the regulatory exams demanded by the Financial Services Authority (FSA) in the UK.

Though companies say overall demand for exams has fallen, some continue to prove popular. More than 100,000 people worldwide enrolled to take the CFA exam last year, a rise of 18% from 2001 and double the 1998 figure.

Long a staple qualification for research analysts and fund managers, the wide-ranging exam is increasingly taken by corporate finance experts and traders as well. Its popularity is growing in Frankfurt and Hong Kong as well as New York and London.

Anyone studying for the CFA and other exams has two main ways to do it - in a classroom or over the internet. Classroom-based training is still the most popular, but several companies have found a niche by training exclusively online.

One is Absolutely Training, which managing director Paul Fegan set up in London three years ago after leaving BPP. Fegan says competition from online training has driven down the prices that primarily classroom-based trainers - such as BPP - can charge.

"We've cut our own prices because of the economies of scale that the internet provides. We also have better pass rates, because people can study at their own pace and we can monitor their progress as they approach the exam," says Fegan.

Classroom-based trainers concede that their prices are usually higher. But they argue that the brief, intensive courses they offer are more cost-effective and more popular with students, as well as immersing them more fully in their subject.

In the UK, the arrival of a new FSA regulatory regime just over a year ago has been a boost for training companies. The FSA requires banks to prove that "approved" employees - amounting to tens of thousands of people in the City of London - are fully competent to do their job. Sending people on a training course is an obvious way of providing such evidence.

Jan Hagen, sales director at Wide Learning, says: "We're winning a lot of internet training business because of the new regulations. Compliance courses are particularly popular. Anti-money laundering is another big area."

The appetite for such courses could continue to grow. A survey last month by the City Personnel Group, which represents human resources staff in banks in London, found that 24% of firms had not yet begun updating their training standards in response to the new FSA framework.

A further impetus for training is coming from individuals seeking every qualification and skill they can get, to put on their curriculum vitae in a depressed job market.

Renata Wallace, managing director of Wallace CitiTraining, says many bankers see the Series 7 and other US financial services exams as a good way to broaden their appeal to employers.

King at BPP Hyperion says: "Any relevant exam or bit of training is a feather in the cap. In a difficult job market, employees are actively seeking out courses."