Skills-based talent strategies will solve the financial services skills gap - research

Demand for highly-skilled talent in financial services is outstripping supply - with a new study estimating that the industry would be contributing an additional £555.6 million per year to the UK economy if it closed its skills gaps.

And the report - ‘People + Technology: How skills can unlock value for Financial Services’ - concludes that the number one recommendation to address the gap and improve talent attraction and retention across the industry, is for financial services firms to build towards becoming skills-based organisations. 

Authored by the Financial Services Skills Commission (FSSC), along with PwC and EY, the research report found that 73% of financial services jobs are now classified as highly skilled (managerial and professional roles), up from 52% 20 years ago.

And a combination of factors is leaving the sector with challenges filling these roles:

• The skills required are becoming increasingly complex and evolving more rapidly, with the ‘half-life’ of a skill - the period of time a skill is innovated, flourishes and then becomes irrelevant - now estimated to be a mere five years.
• Investment in skills across the industry is failing to keep pace with changing skills needs, with 160,000 workers (16% of the workforce) currently requiring upskilling.
• The industry is expected to lose over a quarter of a million highly-skilled people through retirement and attrition in the next 12 years.

How are skills requirements changing in financial services?

Skills needs in financial services have shifted dramatically over the past 20 years as firms have adapted to changing expectations, while also becoming increasingly digital and seeking to maintain growth and value.

During this time, there has been an increasing recognition that skills are integral to business success, reflected by greater ownership of skills at board and ExCo level. And more firms are also forecasting skills needs and putting skills frameworks in place; increasing learning hours and development of personalised learning plans; and implementing reskilling programmes. 

But the FSSC warns that current efforts to close skills gaps are not going far or fast enough. 

“Skills are integral to business success and a driver of competitive advantage and growth,” says Claire Tunley, CEO of the Financial Services Skills Commission. “The sector must act now to close skills gaps by reskilling 160,000 people and build sustainable talent pipelines for the long-term.”

There is a potential cost saving of £175-225 million for the sector through improved retention following upskilling, the report estimates. It also suggests that firms can save an estimated £49,916 per reskilled employee, by avoiding the costs of redundancy, recruitment, and onboarding.

But the benefits of addressing skills gaps extend beyond the financial benefits of today. 

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.”

The FSSC has also called on the sector to ensure technological skills – such as AI, cyber and sustainability – are developed in combination with soft skills such as empathy and adaptability. 

How can financial services firms better manage skills?

The FSSC makes the following recommendations to ensure that skills become a driver of value, rather than an obstruction. 

• Firms should move to become skills-based organisations. Each firm in the sector should ensure skills are integral to their business strategy, transformation plans and risk registers. But over the longer term, the FSSC advises that firms should move to become skills-based organisations, with clear leadership and accountability at the most senior level.
• Firms should have greater clarity on skills needs. Firms should build a robust data-led evidence base of existing capabilities and future skills needs, to inform business and skills strategies and monitor progress and impact, recommends the FSSC. Again, becoming a skills-based organisation will facilitate this, enabling firms to identify both the technical and soft skills required for success in roles. 
• Firms must create and build the skills needed through reskilling, upskilling and building talent pipelines. The FSSC is calling on financial services firms to offer upskilling to the 16% of colleagues with skills proficiency gaps by the end of 2025. Skills-based organisations not only have access to the skills profiles of their employees and the skills profiles of their roles, but they are also monitoring how skills requirements are changing - both at an organisational level and an industry level. This means they are able to identify any current or impending skills shortages and find workers that are the perfect fit to address these issues through upskilling or reskilling. 

Despite these recommendations, some organisations labour under the misconception that skills-based practices can only be implemented as part of a c-suite-led, top-down project that must be simultaneously embedded throughout all areas of the talent lifecycle. This can discourage some enterprises from embracing skills-based approaches. 

However, Spotted Zebra has helped many large enterprises take an incremental approach to skills-based practices that delivers ROI within a very rapid timeframe. Furthermore, this approach can start wherever the need is greatest - whether that is hiring, reskilling or upskilling. 

Download our latest report to learn how Spotted Zebra helped a large financial services partner to rapidly adopt a skills-based approach to reskilling, moving hundreds of employees from declining roles into high growth tech jobs, simultaneously cutting redundancy costs and addressing digital skills shortages.

If you'd like to review your strategic workforce plan, our experts are available for a Skills Strategy Lunch and Learn. Click here to learn more and reserve a session for you and your team.

FAQs

1. What are the primary reasons for the growing skills gap in the financial services industry?

The primary reasons for the growing skills gap in the financial services industry include:

• Increasing complexity and rapid evolution of skills.
• Insufficient investment in skill development.
• Retirement and attrition.

2. What are the benefits of adopting a skills-based approach for financial services firms?

The benefits of adopting a skills-based approach for financial services firms include:

• Closing skills gaps.
• Cost-savings.
• Future-proofing the workforce.
• Competitive advantage and growth.

3. What steps can financial services firms take to effectively manage and close their skills gaps?

Financial services firms can take the following steps to effectively manage and close their skills gaps:

• Become skills-based organisations.
• Clarify skills needs.
• Reskilling and upskilling.

‍