Finding and retaining top talent has become a major challenge for businesses across all industries. However, this issue is particularly prevalent within the financial services sector. As technology continues to revolutionise the industry and consumer demands evolve, financial companies are facing a severe shortage of skilled workers who possess digital skills. According to The Financial Services Skills Commission, an estimated 160,000 workers in the financial services sector require upskilling, which is approximately 16% of the entire UK finance workforce.
There is a growing concern that the industry is facing a number of challenges linked to a severe shortage of talent, combined with an increasing knowledge and skills gap. Failure to address these issues could result in loss of competitive edge, operational inefficiencies, increased regulatory risks and difficulties in customer retention, jeopardising the long-term sustainability of businesses. However, it’s important to note that the scale of the challenge means that these issues cannot be addressed by individual firms alone, they require a sector-wide response across banking, insurance, asset management and also fintech.
Mind the (skills) gap
In a fiercely competitive environment, financial organisations need effective strategies to both attract and retain the very best talent available. Like many industries, financial services is grappling with its aging workforce as many employees near retirement age. In fact, the financial services workforce already struggles to attract younger workers and retain older employees with 55% of the workforce aged between 31-50. By 2035, the sector is estimated to lose over 260,000 highly skilled people through retirement and attrition. This is particularly worrying when high inflation means increasing salary costs across the board, making it harder for firms to then attract new talent.
Coupled with this, the coronavirus pandemic saw many c-suite workers nearing retirement and subsequently deciding to retire early because of the pandemic. As a result, this caused the mid-level management, which are often considered the SMEs within a business, moving into these c-suite roles. The pandemic left a profound knowledge and skills gap due to the need to move senior employees up sooner than planned without sufficient time to train more junior team members.
Why tech skills are ‘essential’ across the financial services industry
It’s no secret that the financial services industry has a frustrated relationship with technology. Quite often many businesses prioritise the frontend of the product before anything else, but the back-office is really the engine that drives any financial organisation. Resistance to new technology is negatively impacting talent retention because firms are not adapting to market changes.
The financial industry often requires a very specialised skill set. It includes a grasp not just on finance, but it is also important that employees are proficient in data analytics, digital technology and risk management. The finance sector is rapidly evolving with technology continuing to develop at pace, and firms need talent with the necessary skills who can adapt to these changes and maximise the possibilities that the latest technology offers. To attract and retain the best talent, firms must upscale their workforce by adopting advanced technologies, such as machine learning, and process automation. For example, investing in technology and automation can help finance professionals to streamline processes, enhance operational efficiency, and reduce the burden on human resources.
Banks, for many years, have tried to reposition part of their businesses as they transform the digital banking experience for customers. But competition for technology and data talent is fierce, and the sector has traditionally struggled to compete. Millennials are being drawn to tech companies by the opportunity to work on groundbreaking and innovative projects, experience a dynamic corporate culture and, in some cases, receive significant equity packages.
Similarly in the insurance industry, almost four in 10 said the availability of skilled staff and process complexity are a challenge at their organisation. It is unsurprising to see availability of staff and process complexity as the two most widespread issues for operations teams. In fact, they are challenges that go hand in hand: highly complex processes are a staple of the insurance industry, which means that skilled and specialised staff are essential to keep business-as-usual services running.
Work in progress
Across the industry, it’s becoming increasingly apparent that repetitive tasks are a crucial reason why people give up their jobs. According to a recent study, more than a third of respondents in the insurance industry still rely on spreadsheets for their reconciliations. Spending excessive time on billing and payment-related tasks – despite the organisational importance of these processes – this can hinder and distract staff from other critical aspects of their roles. We can expect to see the employee retention rate to increase by removing repetitive and time-consuming tasks from employees’ to-do lists.
Technology is a great solution to overcoming this gap. AI can be used to support underwriting, claims processing and customer service. Specifically, AI tools can automate repetitive tasks, helping insurers make faster and more accurate decisions, and free employees to focus on higher-priority items — such as improving the policyholder experience and increasing customer loyalty. Last year, Allianz announced it had developed a machine-learning ‘Incognito’ tool to support growing fraud claims.
The path forward
The financial services sector is at a turning point. In the quest to compete with digital disruptors, organisations within banking, insurance, asset management and fintech have undergone large-scale digital transformation. However, firms must continually evolve to stay relevant, innovative and competitive.
Financial services organisations are faced with a talent shortage, exacerbated by a demographic challenge that makes it critical that they face the problem in front of them – to understand who the millennial generation are and what it takes to attract and inspire the best talent. Financial services need to attract this vital demographic — but that could require some radical change. As the workplace continues to evolve, there is an exciting opportunity for organisations to embrace digital transformation and make their workplace more attractive to younger people.