Can reskilling bridge the financial service skills gap?

Financial services has a people problem. 

The demand for highly skilled talent is outstripping supply, and if left unchecked, the skills gap will cost the industry hundreds of millions of pounds every year. 

However, efforts to close the gap are being hampered by a combination of workforce attrition and slow recruitment time. 

So what’s the solution?

The Financial Services Skills Commission (FSSC) spoke to Spotted Zebra, and recommends that firms embrace a strategy of reskilling. 

Through reskilling, the FSSC believes that financial services firms can:

1. Create more agile, sustainable workforces.

2. Retain professionals.

3. Solve skills gaps.

Let’s take a look at the skills issues that the sector is suffering from - and how reskilling will solve them. 

What is the financial services skills gap?

In the FSSC report ‘People + Technology: How skills can unlock value for Financial Services’, co-authored by PwC and EY, research reveals that 73% of financial services jobs are now classified as highly-skilled (managerial and professional roles), up from 52% 20 years ago. 

Gregg Hutchings, Programme Director at FSSC, explains: “Low- and medium-skilled jobs have declined as we’ve moved away from the branch model into self-service. Meanwhile, the demands of a more technology-based system have increased the need for more highly-skilled roles.”

However, the industry is struggling to fill these highly-skilled roles. The FSSC, PWC, and EY conclude that this is because: 

• The skills required in financial services are evolving rapidly and becoming increasingly complex. The ‘half-life’ of a skill - the period of time a skill is innovated, flourishes, and then becomes irrelevant - is now estimated to be a mere 5 years.
• Investment in skills is failing to keep pace with the industry’s changing skills needs. 160,000 workers (16% of the workforce) currently require upskilling.
• The industry is losing skilled talent through retirement and attrition. The sector is forecast to lose 250,000 highly-skilled individuals in the next 12 years.

The FSSC has also worked with FS leaders to create a skills taxonomy consisting of 13 hard and soft skills that financial services firms have identified as critical to business success. Several are vital digital skills that are amongst the most in-demand across all sectors, including cybersecurity and AI. Competition is fierce, and these skills are in short supply.

Despite efforts from the sector to tackle these challenges through the adoption of skills forecasting and strategic workforce planning, the skills gap is widening. 

Overall, the industry has more than 5 unfilled vacancies for every 100 jobs, according to data compiled by the Office for National Statistics - the highest number since records began. This has significant implications for financial services firms seeking to maintain growth and value. 

Why is financial services losing talent?

Financial services is a changing sector, and some of these trends are exacerbating the skills challenge. 

Hutchings believes that the industry could experience even greater pressure for digital skills in the future. 

“We know that our recruitment times in financial services are quite long compared to other sectors,” he explains. “If you’re a technologist, you want to have a job at a new place within 4 or 5 weeks. But because we’re a regulated sector it could take you 12-16 weeks to get a job. That can compound on the pipeline.”

He continues: “We’ve got more people than average in the middle of their careers in our sector, compared to others. A quarter of a million people will retire over the next 10 years and take their skills out of the sector. With the slowing down pipeline of talent coming in, we will feel even more pressure if we don’t start investing in the current workforce.”

At the same time, the industry is also being forced to make redundancies: 

• Automation is rendering some traditional occupations in the sector obsolete. 
• Branch networks are closing as customers favour self-service. 
• Financial service jobs are amongst those most exposed to the impact of generative AI, according to the Society for Human Resource Management. 

“These kinds of pressures will combine to make the pool smaller unless we do something to broaden it,” adds Hutchings. “We need to think about different ways to develop the pipeline but, most importantly for us, keep people in the sector.”

By simultaneously retaining talent and filling skills gaps, reskilling presents itself as an ideal solution. 

Why reskilling is the solution to the financial services skills gap

Reskilling refers to the process of employees learning new skills to move into a new role within their existing organisation. In many cases, employees are moved from roles that are being sunset into high-growth roles. 

Reskilling contrasts with upskilling, which is the process of employees learning new skills to enhance their performance within their existing roles.

Both upskilling and reskilling involve training, and both are important for career development. However, while upskilling continues the development of employees along a continuing career path, reskilling often means that employees enter an entirely different function and profession.

Reskilling is an attractive proposition for both organisations and employees for multiple reasons. 

For organisations:

• Avoiding severance packages. 
• Increasing staff morale by creating job security. 
• Protecting the employer brand by negating mass redundancies.
• Avoiding hiring and onboarding costs.
• Closing the skills gap by filling high-growth roles. 

For employees:

• Retaining employment despite your role being sunset. 
• Changing career paths into a high-growth role. 
• Gaining new in-demand skills. 
• A greater sense of job security. 

Reskilling enables financial services firms to retain capable individuals they would otherwise make redundant and retrain them to fill skills gaps, which is why the FSSC is recommending it. Overall, the FSSC, EY, and PWC estimate that 160,000 employees must be reskilled and many more upskilled to address the skills crisis. 

They estimate that this would:

• Save firms £49,916 per reskilled employee, by avoiding the costs, of redundancy, recruitment, and onboarding. 
• Deliver a cost saving of £175-225 million for the sector through improved retention following upskilling. 
• Build a sustainable and adaptable talent pipeline. 

Chris Box, Global Workforce Risk Leader, at PwC UK, notes: “Closing the skills gap in the financial services industry isn’t just about meeting immediate needs; it’s about future-proofing our sector. By investing in upskilling and reskilling, we’re not only boosting economic output but also fostering a resilient, adaptable workforce ready to tackle the challenges of tomorrow.”

A skills-based approach to reskilling

In their report, the FSSC, EY, and PWC recommend that financial services firms should move towards becoming skills-based organisations in response to changing skills requirements. 

Reskilling offers enterprises an ideal opportunity to begin their skills-first journey, close their skills gaps, and create a platform from which skills-based practices can be scaled across the entire talent management lifecycle. 

‍

A skills-based approach enables financial services organisations to improve the outcomes of their reskilling programmes because:

• They understand the skills that are required for success in a role. Utilising multiple data sources, including manager feedback and employee surveys, organisations build a role skills profile detailing the technical and behavioural skills required. 
• They understand the skills their employees possess. Businesses conduct a blended assessment of their workforce, to understand their skills profile. 
• They can align roles and people. Because they understand their roles and their people, they are able to accurately and rapidly align people with opportunities 

A skills-based approach to reskilling dramatically improves the visibility of the pool of employees suitable for each opportunity and vastly expands the mobility opportunities for employees across their organisation. 

By its very nature, reskilling means that individuals don’t presently possess the necessary technical skills for a given role. A skills-based approach enables organisations to quickly and accurately identify those with adjacent or transferable skills, as well as the soft skills that indicate they will quickly learn the key skills.

Spotted Zebra’s Reskilling solution has delivered significant ROI for financial services partners by enabling them to identify individuals who:

• Have stronger motivation for reskilling; 
• Have higher levels of adaptability and agility (which will predict future potential);
• And are a stronger behavioural fit (i.e. they align with the behavioural skills required for success in the role).

For 1 financial services partner this has meant:

• Redundancy costs have been cut. Employees have been moved from declining roles to vacant high-growth tech jobs, saving an estimated £2 million in exit costs.
• Reskilling success rates have improved. The number of dropouts from training programmes has been cut, saving of £280,000 on training and development costs.
• Manager time has been saved. The process has been simplified for managers, reducing the cost-per-person by 70%. 

‍

Want to start your reskilling programme? Or perhaps you’re looking to optimise an existing programme? Book a workshop with our experts to learn how you can achieve reskilling success. 

FAQs

1. What specific reskilling programmes or initiatives have financial services firms already implemented, and what successes or challenges have they encountered?

Financial services firms have launched several reskilling programs to address the skills gap:

• HSBC has implemented a comprehensive reskilling initiative aimed at retraining employees whose roles are becoming obsolete due to automation. The programme offers courses in data analytics, cybersecurity, and digital marketing.
• Barclays introduced the Digital Eagles programme to reskill employees in digital and tech skills.‍
• Lloyds Banking Group has created an internal learning platform that offers a wide range of courses for employees to upskill and reskill.

These programmes highlight the importance of continuous learning and the need for firms to invest in training infrastructure. While successes are evident, common challenges include employee resistance, the need for substantial financial investment, and keeping training programmes up-to-date with industry changes.

2. How do financial services firms identify which employees are suitable for reskilling and match them to new high-growth roles within the organisation?

Financial services firms use several methods to identify suitable employees for reskilling:

• Skills assessments.
• Employee surveys and feedback.
• Performance data.
• AI and data analytics.
• Managerial input.

Once suitable candidates are identified, firms create personalised learning paths and align them with high-growth roles within the organization. Continuous monitoring and support ensure that employees transition smoothly into their new roles.

3. What are the long-term impacts of a skills-based approach to reskilling on the financial services industry's competitiveness and adaptability to future technological changes?

The long-term impacts of a skills-based approach to reskilling are substantial:

• Enhanced competitiveness.
• Increased innovation.
• Talent retention and attraction.
• Reduced recruitment costs.
• Future-proofing the workforce.
• Improved employee morale and engagement.

Overall, adopting a skills-based approach to reskilling helps financial services firms build a resilient, adaptable, and competitive workforce ready to tackle future technological advancements and market changes.