The hard truth about financial services' soft skills problem - and how skills-based practices can help

How serious is the skills gap in financial services?

Multiple studies indicate that the problem is significant - and stubborn.

• 86% of HR leaders at UK financial services firms say they are facing a skills crisis (Visier). 
• More than 80% of financial services recruiters say it is challenging to find individuals with the required skills (Efinancialcareers).
• 65% of financial services institutions expect a shortage of critical workers over the next 2 years (Deloitte).

Overall, the industry-led independent body, the Financial Services Skills Commission (FSSC), estimates that financial services have the second-largest skills gap of any UK sector. 

The skills shortage puts the future of the industry in a precarious position. 

• Business transformation plans are being delayed. 67% say skills shortages are impacting their digital transformation strategy (Visier).
• 93% of senior leaders at financial services businesses report that skills gaps are impacting productivity (Multiverse).
• Ultimately, if the industry closed its skills gaps, it could contribute an additional £555.6 million per year to the UK economy (Financial Services Skills Commission). 

Much of the coverage of the skills gap to date has concerned the dearth of technical skills in the industry, particularly the growing shortage of digital skills at a time when the sector is increasingly tech-focused. 

However, evidence suggests that soft skills are as much - if not more - of an issue for financial services firms. 

Why are soft skills so important to financial services?

Cross-industry awareness of the importance of soft skills to role success has grown in recent years, and an increasing volume of research has highlighted their influence. 

• 89% of failed hires result from a lack of soft skills such as coachability and interpersonal relationship-building rather than technical skills (LeadershipIQ). 
• Around 90% of new hires who haven't been able to integrate into the business do so because of a lack of soft skills (LinkedIn's Global Talent Trends report).
• 85% of job success comes from well-developed soft and people skills, while only 15% comes from technical skills and knowledge (National Soft Skills Association). 

This is reflected in the FSSC's Skills For The Future Of Financial Services report, which polled financial services firms to identify the skills most important to the industry's future. Behavioural soft skills prominently feature in the list of 13 skills that the FSSC's work identified. These include:

• Coaching
• Relationship management
• Creative thinking
• Empathy
• Teamwork
• Adaptability
• Agility 

Not only did behavioural soft skills outnumber technical skills, but the report also indicates they are experiencing higher growth in demand, especially for empathy and coaching.

"Empathy has seen the largest increase in demand and reflects the sector's focus on customers," notes the study. "Members have indicated that demand for behavioural skills has been supercharged by the accelerating need for people leader skills, the shift towards net zero and the introduction of the consumer duty."

With the demand for soft skills outpacing technical skills, the FSSC reports that it now represents the sector's largest skills gap. 

• The demand for soft skills has widened from 10% to over 25%. 
• This compares to a supply-demand gap of 20% for technical skills. 
• Adaptability and empathy have the biggest individual gaps. Adaptability has the highest overall gap, with a 38% difference between supply and demand. 

Gregg Hutchings, Programme Director at the FSSC, explains: "Awareness has really grown around how important these skills are in a workplace. Skills such as relationship management, for instance, are useful for looking after customers, but also looking after the workforce. Businesses have started to realise that these behaviours need to be more central to how we think about our work and our roles."

There's another reason soft skills are becoming more important —the speed at which technical skills become obsolete is accelerating. 

"The half-life of skills - the period of time a skill is innovated, flourishes, and then becomes irrelevant - is shortening," explains Nick Shaw, Co-Founder of Spotted Zebra. "IBM has estimated that for technical skills this has now dropped as low as 2.5 years. In other words, the average worker now needs to learn new technical skills twice as often as they did only a few years ago.

"By ensuring that new hires possess the right soft skills, financial services firms can future-proof their organisations in the knowledge that as technical skill requirements change over time, their team will adjust, learn, and grow in line with business demands."

Book a 1:1 custom lunch and learn skills strategy with Nick here. 

How a skills-based approach can close the gap

However, while awareness and demand may rise, one of the historic challenges related to soft skills has been measurement, particularly regarding which soft skills are most important for specific roles. While managers are reasonably good at identifying the technical skills required for success in a role, they can struggle with soft skills.

Hutchings acknowledges that there needs to be more rigour around some soft skill requirements. 

"There is more awareness of the need for soft skills. So when people are outlining what they need in a role, subconsciously they may be adding agility or adaptability, for instance, because they know if they only describe what they're going to do in the role it will be very technically-focused."

HR leaders, therefore, need to adopt a more robust approach to understanding soft skill requirements. The FSSC recommends that organisations adopt skills-based practices to address the financial services skills gap. Skills-based organisations are well-placed to understand soft skill requirements and tackle the soft skills gap. 

• Skills-based organisations use skills intelligence platforms that pool multiple data sources to create taxonomies determining the hard and soft skills essential for roles. 
• They assess employees/individuals to determine their hard and soft skills. 
• More sophisticated 'depth' skills intelligence platforms also enable organisations to understand the proficiency of skills required by roles and possessed by individuals. 

This data-led approach enables organisations to accurately understand their skills demand and respond through:

Skills-based hiring. 

Having identified the hard and soft skills required for a role, financial services firms can align individuals with opportunities based on their skills fit. The hiring process has historically lacked this rigour regarding skills fit, particularly with soft skills. 

As one Global Head of Assessment at a leading global banking organisation told us: "We get about 5% of the hiring manager's attention at the start of the process when we are trying to define what's required for the role… and they spend 95% of the process evaluating candidates, probably against the wrong attributes, and telling us we haven't sourced the right applicants."  

Skills-based hiring also enables financial services firms to look beyond their traditional labour pool. Historically, recruitment has targeted talent from competitor firms or has used education and experience as a guideline. With financial services organisations struggling to fill roles, skills-based hiring enables them to hire according to the skills required. This can be particularly valuable when recruiting for roles with a talent shortage, allowing employers to focus on transferable skills and the all-important soft skills.  

Perry Timms, founder of People and Transformational HR (PTHR), explains: "We simply don't know, don't have or can't acquire certain key skills and capabilities - skills that are emerging and even unknown. Who'd have thought that this year you might need a generative AI prompt creator? But if you had someone who is an analyst, a programmer/developer, and a problem-solving type of person, who is alive to AI and aware of how to leverage it, whatever tool comes into being - you've got one. 

"We labour too long over creating a job description for everything, when we could be looking at primary value-creating activities that we form into a role and then the culture and behavioural aspects we'd expect. So skills-based hiring gives you a pool of people to deploy more responsively to work that needs to be done."

Upskilling

The FSSC estimates that 16% of the financial service workforce requires upskilling to meet the proficiency demands of their role. 

If a depth skills intelligence platform has been used to identify a role's proficiency requirements in a highly measured and accurate way, organisations can track their upskilling requirements and identify when L&D is required.

"People used to think that with soft skills such as empathy, you've either got it or you haven't," says Hutchings. "But the dialogue has really moved on over the past 5 years. Organisations understand now that you can upskill people in these behaviours and so they don't have to just recruit empathetic people, or creative thinkers, they can also support people to grow these skills through good management and training."

Reskilling. 

In contrast to upskilling, which involves upgrading an employee's existing skills, reskilling teaches individuals an entirely new set of skills. As reskilling candidates learn new technical skills, their suitability will be determined almost exclusively by their alignment with the role's soft skill requirements.

Spotted Zebra has helped 1 high-street bank fill high-growth digital roles by dramatically improving its reskilling programme. We have achieved this by enabling the bank to:

• Understand the soft skills required for success in a role. We collate skills data from multiple sources, including employee feedback, industry data, and manager insight, to create a Role Skills Profile.
• Understand the soft skills employees possess. We create skills profiles of workers, utilising multiple sources, including online assessment, self-assessment, manager evaluation, and performance reports. 
• Align individuals with opportunities based on soft skills. More than 150 people have been moved from declining roles to vacant high-growth tech jobs.

Your next steps

Soft skills are increasingly sought after in the financial services sector. Evidence demonstrates that they are a better predictor of workforce success than hard skills, so they provide valuable guidance for recruitment and reskilling. 

Additionally, with technical skills evolving rapidly, they also earmark the basic building blocks required of employees, upon which technical training can be layered. 

However, identifying and addressing soft skills gaps can only be achieved with a rigorous approach to skills. The FSSC recommends that financial services organisations embrace skills-based practices to obtain a more granular understanding of skills requirements and enable data-driven responses. 

Spotted Zebra is here to help. Our skills-based solution is used by leading financial services brands to improve recruitment, reskilling, development, and mobility. 

Book a demo to learn more about the recruitment results reported by our partners and the dramatic ROI being achieved.

FAQs

1. What specific steps can financial services firms take to better identify and measure the soft skills required for various roles?

Financial services firms can take several steps to better identify and measure soft skills for various roles:

• Skills intelligence platforms: Utilise skills intelligence platforms that pool data from multiple sources to create detailed taxonomies of hard and soft skills required for roles.
• Employee assessments: Conduct comprehensive assessments of employees' skills, including self-assessments, manager evaluations, and performance reports.
• Role Skills Profiles: Develop Role Skills Profiles that outline the essential soft skills for each position based on industry data, employee feedback, and manager insights.
• Training and development programmes: Implement training programmes focused on enhancing soft skills such as empathy, adaptability, and relationship management.
• Feedback mechanisms: Establish regular feedback mechanisms to continuously evaluate and refine the soft skill requirements for roles.

2. How can financial services companies balance the need for both technical and soft skills in their workforce, especially given the rapid obsolescence of technical skills?

Balancing the need for technical and soft skills involves several strategies:

• Skills-based hiring: Focus on hiring individuals based on their skill sets rather than just educational background or previous job titles. This allows for greater flexibility in adapting to evolving technical requirements.
• Continuous learning and development: Promote a culture of continuous learning where employees regularly update their technical skills through training and professional development courses.
• Soft skills training: Invest in programs that develop soft skills, as these are more enduring and can support the transition and adaptation to new technical skills.
• Cross-functional teams: Encourage collaboration across different departments to foster a diverse skill set within teams, ensuring a mix of technical and soft skills.
• Adaptability focus: Emphasise the importance of adaptability and agility in the workforce, enabling employees to quickly learn and apply new technical skills as needed.

3. What are some examples of successful skills-based hiring practices in the financial services sector, and how have they impacted business outcomes?

Examples of successful skills-based hiring practices include:

1. Reskilling programmes: A high-street bank used a skills-based approach to reskill over 150 employees from declining roles to high-growth digital positions. This was achieved by understanding the soft skills required for new roles and aligning employees accordingly.
2. Diverse talent pools: Financial services firms have expanded their talent pools by hiring individuals based on transferable skills and soft skills rather than strictly industry experience. This has led to a more diverse and adaptable workforce.
3. Improved recruitment accuracy: By using skills intelligence platforms to match candidates to roles based on a detailed understanding of required skills, firms have improved the accuracy of their recruitment processes. This has resulted in higher employee satisfaction and retention.
4. Enhanced productivity: Firms that prioritise soft skills in their hiring practices have reported improved productivity, as employees with strong interpersonal and adaptability skills are better equipped to handle changing job demands and collaborate effectively.

These practices have had a positive impact on business outcomes, including increased innovation, better customer service, and higher employee engagement and retention rates.