By Chris Livesey, CEO at AutoRek
The financial services industry is currently grappling with the significant challenge of finding and retaining top talent. With technological advancements and changing consumer expectations, financial companies are struggling to find skilled workers with digital expertise. Research from The Financial Services Skills Commission highlights that around 160,000 workers in the UK financial services sector need to improve their digital skills.
This scarcity of skilled workers and a widening knowledge and skills gap poses serious challenges for the industry. Failing to tackle these issues could lead to a loss of competitive advantage, operational inefficiencies, increased regulatory risks, and difficulties in retaining customers, ultimately putting the long-term viability of businesses at risk. It’s essential to recognise that solving these challenges requires a concerted effort across the entire financial services sector, encompassing banking, insurance, asset management, and fintech, rather than being the responsibility of individual firms alone.
What is the financial skills gap?
In a fiercely competitive environment, financial organisations need effective strategies to attract and retain the best talent available. Like many industries, financial services are grappling with its ageing workforce as many employees near retirement age. 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, to move 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.
The necessity of tech skills in financial services
It’s no secret that the financial services industry has a frustrated relationship with technology. Quite often many businesses prioritise the front end of the product before anything else, but the back-office is 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 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 the 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.
The role of AI
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 –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 importance of digital transformation
The financial services sector is at a crossroads. In order to stay competitive against digital disruptors, banking insurance, asset management, and fintech organisations have undergone significant digital transformations. However, these firms must continuously adapt to remain innovative and competitive.
A talent shortage poses a challenge for financial services, which is further compounded by demographic shifts. These organisations must understand and engage with generation Y to attract the best talent. As the nature of the workplace continues to change, there exists an opportunity for organisations to embrace digital transformation and create workplaces that are more appealing to younger individuals.
