The financial services sector is facing dual recruitment challenges. On the one hand, it has a workforce that is proportionately older than that of most of other sectors and is not being replaced by young talent. In addition, technology available to the sector continues to develop at pace, and financial services firms need talent with the necessary skills to maximise the possibilities that this technology affords.
Here, Carolyn Blunt, Strategic Talent Adviser for Consulting at Davies, explores the skills gap facing the financial services sector and considers how it can be addressed.
Mind the (skills) gap
According to government figures, around one in six workers aged 50 to 64 years are employed in the banking and finance sector (17.9%). This means that if we assume the vast majority of these people retire within the next 10 years, the sector will have lost up to a sixth of its workforce. Add to that a strong appetite for retiring early; 32% of those working in financial services would opt to retire early (aged 50-55), compared to a 16% average across all sectors, and this leads to a gaping hole in the sector’s talent.
This would not be an issue if the there was a steady stream of new, young talent to fill the void. But unfortunately, this isn’t the case. In fact, the sector which is – rightly – perceived as the domain of older workers and therefore not necessarily attractive – is struggling to attract new Gen Z blood. 80% of financial services recruiters believe the present environment to be “daunting” and the impact of this is being keenly felt, with data from August 2023 revealing that three-quarters of firms reported vacancies, and 65% of those found themselves struggling to fill their open positions. The same survey observes a general reluctance or inability among firms to invest in training new candidates (of any age) with the focus instead on headhunting experienced individuals who already have the necessary skills.
Coupled with this, the financial industry often requires a very specialised skill set, including a grasp of not just finance but also mathematics, analytics, and, increasingly, technology, making the recruitment challenge even more acute. In December last year, Charlotte Crosswell, chair of the government-backed Centre for Finance, Innovation and Technology, warned that the financial services and fintech sectors in the UK face a “critical” year stating, “There is a growing gap between the demand for technology skills from financial institutions and the available supply of talent.”
What this means is that numerous firms are competing for a small number of individuals with the requisite experience. Other candidates from outside the sector, or from within with less or different experience, are put off by the lofty requirements of vacancies and so are remaining in their current positions or looking elsewhere. Indeed, according to research from UK Finance, almost a third (30%) of financial services workers said they need more digital and technological skills, suggesting they don’t feel they are sufficiently skilled to progress in the sector.
And yet, the financial services industry is an ideal place for talent to learn and grow. Significant trends such as AI, open banking, decentralised finance, technological advances in authentication and security, green fintech and the use of data analytics – to name a few – make it an exciting sector with huge possibilities for driven individuals to continually develop and determine their own career path.
A new approach
It’s clear that a rapid rethink of how the sector uses talent is required. How can we change course? As a starting point, instead of focusing on filling specific roles, organisations need to take a much more long-sighted view. What skills might be needed two, five, ten years from now? How can promising talent be developed to gain those skills? Where are they going to look in order to replace those older workers nearing retirement, and what does the development pathway look like? Is succession planning simple or are roles and skill requirements changing for the shifting financial services landscape? These are difficult questions but important questions that organisations must ask themselves.
As well as attracting new talent, firms should also focus on upskilling the talent they already have. There are numerous benefits to developing existing talent. For one, it’s a more cost-effective approach than recruitment but, just as importantly, it fosters loyalty. It demonstrates that a firm has confidence in someone and is willing to invest – not just money but also time – into their future. Not only does it save time and money on expensive recruitment processes, but it also gives the firm continuity. This is not only important for morale but for customer relationships as well.
When analysing their existing talent for potential, firms need to keep an open mind. Just because someone starts their career in customer service, for example, doesn’t necessarily mean they have to stay there. A holistic view of the talent available internally, and a very open conversation with employees about opportunities and possibilities can prevent people feeling unduly siloed. Encouraging employees to share this outlook needn’t be complicated and can start with something as simple as a coaching conversation.
At Consulting at Davies, we run national, government funded Skills Bootcamps for insurance and financial services which are 12-week, flexible programmes developed specifically to upskill workers with vital data skills, in order to meet the growing demands of digitalisation within the sectors. These Skills Bootcamps which are endorsed by the Institute of Analytics (IoA) – the professional body for analytics and data science professionals in the UK and worldwide, enable people from any function to upskill. It means that someone working in HR or marketing, for example, could begin to acquire the data skills to take on a different, more data-driven function or enhance their performance on their current career path.
The financial services sector is not on the edge of a digital skills shortage – it’s very much experiencing it now. As an industry that is constantly developing and that offers so much potential for new technology, this is unlikely to change. New technology will always be deployed, new skills to maximise it will always be needed. Firms need to review their approach to talent accordingly and ensure they have a future looking plan. Innovation is vital for any firm’s success and this starts with the talent within. Firms that don’t have the the right talent strategy to develop the required skills and confidence or to retain their high potential talent will eventually feel the effects in their commercial performance.
