Lynn Strongin Dodds assesses why skills shortages are the most severe in the UK financial services community.
Although a recession is looming, the financial services industry is still in the throes of a skills shortage. Loyalty is a rare commodity these days and firms need to be more open minded if they want to attract as well as retain the most capable people. This is even more so in a downturn because individuals who can mitigate risks and leverage opportunities are at a premium.
These trends are not unique to the UK or Europe. Across all financial centres, banks and asset managers are competing for highly skilled people. However, the UK has been among the hardest hit. In fact, right before the pandemic hit – in January 2020 – Mark Hoban, chair of the UK Financial Services Skills Commission (FSSC), warned that the sector was facing an “existential skills crisis”.
Fast forward to today and the picture is even gloomier. UK finance firms are experiencing their worst job vacancy rates on record, underscoring the skills shortage caused by digitalisation in banking, investing and insurance. Figures from FSSC shows that there are 55,000 vacancies across the sector which translated according to the Office for National Statistics to more than five vacancies unfilled for every 100 jobs between April and June 2022. That’s the highest since records began in 2001 and puts the sector behind only hospitality and tech firms.
The pandemic was one factor. The serial lockdowns gave the industry a collective pause for thought and made individuals re-evaluate their work/life balance and career path. “Skill shortages existed before Covid, but it did exacerbate the situation,” says Claire Tunley, CEO of FSSC. “We did see many people aged between 45 to 55 and older decide to-leave the industry while others took the time to reflect on their careers and their way of working.”
As a result, the skills picture is different depending on the level of seniority. “We are seeing that there is a lot of competition at the graduate level,” says Rebecca Gashi, a director at consultancy Sionic (part of the Davies Group). “They are looking at multiple avenues because they are worried about the cost of needing to live close to the centre of London or an expectation that they will work the long hours that financial service firms can require. At the next level, some people have been on pause due to the impact of Covid-19 but are now actively looking for their next career move, though we are seeing less movement amongst senior people.”
Although people may be choosing different paths, there is no doubt that they are being lured away by the newer and shinier fintech companies or established tech stalwarts. It is not just that the working days are typically shorter, but the environment is seen as more innovative and vibrant. “We are seeing a surge of talent exiting traditional financial services organisations and into the technology sector,” says Lindsay Jones, chief people officer at Delta Capita. “There is already an acute shortage of talent in technology and as a consequence tech firms are welcoming individuals looking to exit the financial services sector with open arms.
This is because as she notes, “they value their experience and ability to understand business and offer them in return an opportunity to work with an innovative brand with working practices that have evolved to accommodate what employees want – flexibility and autonomy.”
This is reflected in a recent study by Accenture, which canvassed 200 executives at asset management firms between April and May. It found that over 70% saw a significant increase in employees leaving for technology firms in the past 12 months.
The softer side
Technical skills are not the only things that are in short supply, according to Dr Anthony Kirby, EY EMEIA partner and regulatory Intelligence and regulatory reform Lead at EY. “There also needs to be a focus on client facing interactions and the importance that they have in the value chain, especially for illiquid instruments,” he says. “You can automate certain parts of the business via electronic trading, chat, and algos, but that is more applicable to the equity, FX and ETD sides. Other asset classes such as fixed income, OTC-traded options and structured products require people who can have meaningful client conversations, work an order and find liquidity – under blue-sky and stormy market conditions.”
Kirby believes the first step is for firms to ask whether “they have the right skillsets for the right slots – what regulators sometimes refer to as ‘substance’. Regulators are increasingly taking a holistic view of asset management, which covers a wide spectrum of products and services from asset owners, investment management all the way through to asset servicing. The other focus, he believes should be on continuous thematic training and to ensure that firms have the right programmes in place to develop people in the new hybrid working world.”
Tunley agrees that softer skills have become much more significant over the last two to three years. “There is a diverse set of skills needed,” she says. “There are the technical ones for areas such as cyber security, machine learning, digital literacy and data analytics but also, we have seen a need for people to be much more empathetic. This has risen in importance during pandemic when many firms were dealing with customers who were struggling.”
Empathy along with client relationships, teamwork and adaptability were highlighted in the FSSC’s recent report – Mind the gaps – Skills for the future of financial services 2022. It also stressed that behaviours such as creativity and coaching will be vital to deliver what algorithms and machines cannot do.
The report noted that problem-solving and creative thinking will enable companies to overcome challenges and develop innovative ideas. “Coaching skills facilitate people’s development by encouraging their ability to identify solutions independently, making upskilling and reskilling effective and lasting,” it added.
Before the coaching can be developed, companies need to modernise their training and development programmes. “The industry is not keeping pace with the evolving skills needed to operate in the current environment,” says Tunley. “UK firms have one of the lowest rates of investment in retraining and upskilling and as a result, they will have gaps and lose people if they do not develop them.”
The benefits of inhouse training are not only a proficient and dynamic workforce but also a more cost-effective process. The FSSC report revealed that reskilling a financial services employee costs on average £31,800 compared to the redundancy and rehire approach which carries an average cost of £80,900. The research showed over a four-year period a company with 30,000 employees could potentially save between £75 million and £115 million by upskilling current employees into the roles they need filled.
In many ways there needs to be a change of culture and for firms to embrace a much more flexible approach. “Some firms, such as Sionic, are benefiting from being much more open minded,” says Gashi. “For example, focusing not just on getting the ideal candidate with the exact skillset but thinking more laterally and hiring people with experience and transferable skills. This is also opening the door to a more diverse workforce.”
Mary-Patricia Hall, data and reporting manager at investment firm Ruffer, also believes firms should cast their net wider than the traditional universities that are used to screen out potential candidates. “I think it is important to look beyond the red bricks and not have such a rigid approach to recruitment,” she adds. “For example, you do not always have to look for people with a tech background but look at those who may come from the operational side and train them internally.”