Even before the COVID-19 pandemic, the financial services industry was in the midst of a digital transformation. Digital-only competitors were challenging brick-and-mortar banks and insurance companies. Robots were poised to replace 200,000 jobs in banking, and new technologies, such as artificial intelligence and automation, were triggering the need to address skills gaps.
Enter the pandemic, and those challenges remained — along with a cascade of new ones, from COVID-related safety protocols for essential in-person staff to remote work policies for others. After the upheaval of the last two years, workers are tired. According to a survey from global public relations firm Ketchum, 52% of surveyed financial services sector employees say they are more burned out at work than they were before COVID.
“Now is a good time for companies in the financial services industry to take the opportunity to re-evaluate their policies and practices to determine what is working and what might not be working, as the work environment and how work is done has changed,” said Deanna Baumgardner, President of HR consulting firm Employers Advantage.
For Human Resources professionals, all of these new challenges and emerging disruptions demand a new focus on recruitment and retention and renewed efforts to educate employees throughout their career path in this ever-changing sector. Below, we’ll take a closer look at some of the top HR challenges in the financial services industry — and how to address them.
1. Improve hiring and retention.
Like every other industry, this often high-pressure sector has seen its share of hiring challenges. Job openings soared to 538,000 in January 2022, up from 276,000 the year before, according to the US Bureau of Labor Statistics (BLS). To counter this, Human Resources leaders must take a holistic look at their hiring and retention strategies. Here’s how to address the concerns and expectations of today’s financial services workforce.
Make diversity a priority.
Financial services firms have wide gaps when it comes to women and people of color in their workforce. According to a 2021 McKinsey report, women — especially women of color — are underrepresented at every level above entry level. “It’s very male-centric in the higher levels of the financial services industry,” said Kimberly Prescott, founder and President of Human Resources consulting firm Prescott HR.
HR leaders need to broaden their search for new talent beyond internal hires or recommendations from existing employees, said Prescott. “People tend to be friends with people who look like them,” she noted.
To diversify the workforce, work with staffing and executive search firms that specialize in diverse candidates. Recruit from historically black colleges and universities (HBCUs). Bring in new hires from other industries who have transferable skills.
“And then make it good for them,” Prescott said. That means setting up — and broadly advertising — employee resource groups (ERGs) or networking programs, for example, she advised. Mentorship and sponsorship programs are other ways to promote inclusion, according to the CFA Institute, a global association of investment professionals.
Rethink background checks.
Federal rules limit who is eligible to work in the financial services industry. The Federal Deposit Insurance Corporation (FDIC) prohibits FDIC-insured institutions from hiring people who have been convicted of crimes of “dishonesty, breach of trust, or money laundering.”
But the FDIC eased some of its rules in 2020 to help open up the industry to more potential hires. And while credit checks are common in the financial services industry, too, HR leaders should reconsider any blanket policies that eliminate too many people because of their financial past.
Especially during COVID, so many people’s lives were upended amid layoffs, Prescott said. HR leaders should advocate for being thoughtful about job candidates who had financial delinquencies crop up during COVID, but are in the process of addressing them or have resolved the issues. If you don’t, “you’re going to shrink your candidate pool,” she cautioned.
If something does show up on the credit or background check, go through the process to assess its true impact on the role, Baumgardner recommended. Determine how long ago the issue emerged and how severe it is, and then talk to the employee or candidate about the situation.
Frame the right value proposition.
Today’s workers are looking for meaning at work beyond a paycheck. Nearly two-thirds of US workers said the pandemic has caused them to think about their life’s purpose, and close to half of respondents said it’s even prompted them to reconsider the kind of work they do, according to a 2020 McKinsey survey.
That’s why, starting at the hiring process for new employees, organizations must demonstrate their employee value proposition, or EVP, Baumgardner said. According to consulting firm Gartner, a human-centric EVP that focuses on personal growth, shared purpose, flexibility, deeper connections, and holistic well-being boosts employee satisfaction by 15%.
Start explaining what you offer employees beyond a job and traditional benefits, Baumgardner recommended. “It could be culture, flexibility, opportunities to work on innovative projects, nontraditional benefits, or company core values ” that are actualized and expressed on the job daily.
Assess your culture.
Speaking of culture, make sure managers and leaders are creating an environment where everybody is treated fairly and internal policies and procedures ensure team members have access to development opportunities and other resources, said Matthew Burr, SPHR, SHRM-SCP, MBA, founder of HR consulting firm Burr Consulting.
“It starts at the top,” said Burr. “People don’t leave organizations; they leave bad cultures and bad bosses.”
Company culture can have a broad impact across an entire organization, but the seemingly little things matter, too. The financial services industry has a reputation for being conservative, Prescott said. But if your dress code still requires women to wear suits, pantyhose, and heels to work, your organization will have trouble recruiting top talent who prefer a less buttoned-up workplace, she said; candidates have plenty of alternatives where the culture — and attire — is a lot more relaxed.
2. Restart education efforts.
Technology is having a big impact on how we do our jobs and what jobs are available. But transitioning workers to new processes and technological advancements takes time, training, and communication.
Before the pandemic, many financial institutions, for example, were in the midst of rolling out interactive teller machines, an ATM that lets customers interact with a bank representative over live video, Prescott said. But with COVID, priorities shifted from training to responding to the global health crisis.
“The training and education, and building the culture around that, hasn’t happened yet,” said Prescott.
That work, however, is critical, because it educates employees about what’s ahead, helps them understand why the new software and solutions are important, and ensures they know how to implement them. It’s time to restart those efforts, Prescott said.
3. Commit to communication.
Not only did the pandemic upend day-to-day practices, the industry is also experiencing other major shifts that require HR leaders to recommit to communication efforts to ensure workers understand what’s ahead.
Mergers and acquisitions (M&A), for example, is seeing significant increases in deal volume and value in parts of the industry, according to consulting firm Deloitte. As offices or locations close or merge, HR professionals will need to deliver difficult news about layoffs or other job changes.
What’s more, some financial services companies are moving to stock-based compensation, the practice of paying their workforce with shares in the business in addition to a traditional paycheck. The move, however, can add new tax implications for its employees. And while CEOs and senior managers likely have accountants to help them navigate the appropriate Internal Revenue Service (IRS) rules, the average entry-level worker doesn’t.
“It’s an educational issue, and HR has got to step into that,” said Richard Barnes, a visiting Assistant Professor of Business Administration and Accounting at Meredith College in Raleigh, NC and Managing Partner of tax prep and planning and financial consulting firm Carolina Tax Pro.
HR departments must redouble their communication efforts — providing in-person or virtual information sessions, for instance, on the implications of a new merger or benefits package.
That communication should be ongoing — not one-off, Burr said. And if tough announcements must be made, they should be done one-on-one, with plenty of opportunities for employees to ask questions and get answers.
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The finance industry and its workforce is in the middle of a massive transformation. To respond, HR teams in financial services must update their practices to address the expectations of today’s job seekers and employees and the sector’s emerging business needs.
The answers to these challenges, increasingly, involve regular communication, ongoing education, and thoughtful leadership to help everybody navigate the shifts that are ahead. And Human Resources leaders are at the center of it all — in the position to make meaningful change that will drive their organizations and its people forward.
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