In January 2020, Mark Hoban, chairman of the UK’s Financial Services Skills Commission (FSSC), warned that the sector was facing an “existential skills crisis”.
At the time, the former jobs minister chaired the Financial Services Skills Taskforce, an independent body formed by the Treasury to explore how the UK could maintain its status as a world leader in the sector. He identified key issues, including a lack of diversity (see panel, xxxx) as well as the skills gap highlighted by Hoban, that were jeopardizing the country’s competitiveness in financial services.
The FSSC was duly created in the spring of 2020 to address such challenges but, just over two years later, the industry still appears to be struggling. Recent research from Talent.com suggests that the difference between the number of vacancies and the number of professionals trained to fill them increased by 40% in 2021.
One of the main reasons for this is the combined impact of Brexit and Covid on international recruitment in a sector which has traditionally relied heavily on overseas talent. But so does the fact that the pandemic has prompted many employers to start offshoring jobs, especially those related to technology, to address concerns about security and operational resilience.
That’s the view of FSSC chief executive Claire Tunley, who notes that another Covid-related problem is that older employees are leaving the industry at a higher rate than normal.
Moreover, wage inflation induced by the growing shortage of labor in the sector is fueling an increase in staff turnover, which further aggravates the situation.
Last year, 92% of FSSC member companies struggled to fill vacancies, according to its March research report, Mind the Gaps – skills for the future of financial services 2022.
The document also indicates that the industry is particularly lacking in five key skills. Three of them are technical: digital literacy, which must be developed throughout the workforce; and more specialized expertise in the form of data analysis and software development. The other two are “soft” skills – coaching and creative thinking – which the FSSC believes are crucial to fostering innovative problem solving and staff retention.
But Dennis Khoo, author of Driving Digital Transformation: Lessons Learned from Building ASEAN’s First Digital Bankbelieves that process design skills should be added to the list.
“You can’t apply technology effectively if you don’t have good underlying processes,” he says. “Understanding how processes support outcomes is paramount.”
Whether or not the FSSC agrees with Khoo’s assessment, it is widely accepted that the main factors driving all these skills gaps are, as Tunley puts it, “technological change and digitization due how people interact with financial services, especially since the onset of the pandemic.” . This produces more data, which creates a need for more analytics, which in turn leads to more digital products and services. And so on. »
In banking, there’s another problematic factor, according to Simi Dubb, director of colleague experience and inclusion at Metro Bank. She says the ongoing branch closures mean customers expect more from their online banking services at a time when competition for digital skills in the wider market is already fierce.
As a result, “we’ve all had to take a data, digital and customer view when looking at roles, as the future of banking will be less about traditional relationship management and more about predicting products and services.” self-service digital devices that customers will use. need,” says Dubb. “This is where the idea of retraining and upgrading comes in.”
His opinion is shared by the FSSC. He believes that, given the significant change in the types of skills required, the industry cannot solve its shortage by recruiting alone.
Tunley notes that before the pandemic, the industry failed to provide people with much training beyond basic topics such as regulatory compliance. As a result, it has fallen behind other sectors at a time when intense competition for digital skills, in particular, is beginning to become a ‘blocker’ to innovation and growth.
To drive home the need for more training, the FSSC released a report earlier this year titled Requalification: A Business Case for Financial Services Organizations. The paper says companies could save up to £49,100 per head by retraining employees at risk of redundancy for new roles that would have required external recruitment. Despite this compelling business case, the industry has tended to lay off and hire new, rather than retain and retrain.
“With 1 million people working in financial services in the UK, you can’t make the whole workforce redundant,” says Tunley. “Around 80% of the industry’s current workforce will still be employed in 2030. Since only 20% will be new entrants, employers will need to retrain existing staff to obtain all the new skills required.”
In other words, the core competencies of the profession are no less valuable than they have ever been. They “just need to be improved if you want to add new digital services”, explains Tunley, who adds that “if you only recruit externally, you don’t get all the knowledge you need in terms of internal processes, which is why you need both approaches.
Tunley acknowledges that recycling will not offer a silver bullet, as it requires a “clear, well-structured plan and long-term commitment”. Nevertheless, she believes that a significant change is underway.
“We said a few years ago that there was an existential crisis and the industry needed to act – and it’s starting to do that,” she says. “While it’s too early to tell what impact this is having, things are moving in the right direction.”
How to improve diversity, equity and inclusion
One approach to solving the skills shortage in financial services is for employers to seek talent in pools they have not traditionally explored.
Almost 80% of workers in the sector are white, according to the Financial Services Culture Board (FSCB), an industry body formed from the Banking Standards Board in April 2021. Although data from the Office for National Statistics suggests that only 14 4% of people in the UK are members of an ethnic minority, the percentage rises sharply in cities. In London, for example, it’s closer to 40%. This means that financial services firms often fail to reflect the diversity of communities in the urban areas where they tend to operate.
“When we asked them what could be done about it, they suggested, ‘Hire more diverse people and make sure there’s more staff who look like me,'” reports Pollyanna Wardrop, senior analyst at the FSCB for evaluation and information.
But the industry also faces other, less immediately obvious challenges regarding its lack of diversity, equity and inclusion. For example, although women from all walks of life make up 52% of the total financial services workforce in the UK, the proportion of senior managers who are white women is only 29%. Meanwhile, women from ethnic minorities occupy 6.5% of operational positions, but just 2.7% of management positions.
Even Metro Bank, where 45% of employees are from ethnic minority communities, acknowledges that they are not as well represented in the upper echelons of the organization. According to Simi Dubb, Director of Colleague Experience and Inclusion at the bank, this tends to be due to changes at key “life transition points”, such as raising children.
“The challenge is to ensure we have the right infrastructure and an inclusive culture to support people through these transitions. We also need to continually retrain them so they can advance in their careers,” she says. This is essential not only to ensure that “diverse talent has the opportunity to flourish”, but also to promote staff retention.
Kate Coombs, Head of Analytics at the FSCB, agrees. The council’s research found that female employees from ethnic minorities feel less included than respondents from any other category, she reports, adding that literature from the London Business School indicates that people’s sense of belonging to their employer – or lack thereof – is a predictor of their attrition rates.
“Additionally, anticipation of belonging indicates a willingness on the part of a potential candidate to apply,” Coombs says. “From there, you can extrapolate its importance to the hiring pipeline.”
Equally vital is that people feel heard, she notes. It’s “super important to enable culture change”. Also, “listening and ‘psychological safety’ – where line managers create a constructive and sharing environment – are strongly correlated”.
All of these factors push line managers to up their games. Coombs believes this will require “a change at all levels in how they are trained, developed and supported. It will require a lot of investment because you can’t just assume they will pull through.