The financial services sector is a cornerstone of the UK economy, playing a crucial role in facilitating economic activities, providing jobs, and contributing to the national GDP. However, like many other industries, it faces a significant challenge with a growing skills gap.

A report by the Financial Services Skills Commission (FSSC), supported by PwC and EY, suggests that the financial services sector in the UK could add £555.6 million to the economy each year by addressing skills gaps. The report, titled "People + Technology: How Skills Can Unlock Value for Financial Services," emphasises the need for upskilling 160,000 workers in response to technological advances, changing customer demographics, and geopolitical challenges.

Bridging The Gap

The report highlights that 73% of the industry's 1 million job roles are highly skilled, but 260,000 such roles are expected to be vacated due to retirement and attrition over the next 12 years. To bridge this gap, the report calls for an urgent development of both technological and interpersonal skills, such as AI, cybersecurity, and sustainability. Senior leaders are urged to integrate skills development into their business strategies and reskill 16% of their workforce by 2025.

The findings are based on 45 interviews with industry leaders and recommend a series of actions for creating skills-based organisations that can adapt to future demands. Claire Tunley, CEO of FSSC, and other industry leaders emphasise that reskilling and upskilling are crucial for boosting productivity, driving innovation, and meeting customer demands.

Progress

In another article by FSSC, states that The Financial Services Skills Taskforce, set up in 2018, called for substantial investment in skills to maintain the UK's competitiveness in financial services. The sector has undergone significant changes since 2020, driven by technological advancements, geopolitical tensions, and demographic shifts. The task force's findings revealed rapid changes in required skills, with a significant lag in investment from employers, employees, and the government.

Significant progress has been made over the past four years, with the establishment of the Financial Services Skills Commission (FSSC) to tackle skills gaps through collaboration. The FSSC has expanded its membership from 15 to 42 firms, demonstrating the sector's commitment to addressing skills issues. The Commission focuses on practical, long-term solutions, encouraging firms to prioritise skills investment and forecasting as part of their workforce strategies.

Future Skills Framework

The introduction of the Future Skills Framework, developed with NatWest, helps firms identify and address capability gaps. The FSSC reports that employees now benefit from increased learning opportunities, with financial services investing more per trainee. Addressing skills shortages in areas like AI and digital literacy, the sector aims to shift focus from rigid job roles to skills-based development.

The FSSC's efforts have led to notable improvements, including contributions to broader initiatives like the FCA's Inclusion Measurement Guide and the World Economic Forum's projects. Research on menopause support has also helped attract and retain female talent. The FSSC's work demonstrates that reskilling and upskilling are key to unlocking productivity, driving innovation, and maintaining competitiveness. So, as we can see this is a known issue and is being addressed, but what can you do as a business to complement this move forward in closing the skills gap? Lets take a look!

Skills Gap Overview

A skills gap occurs when the skills available in the workforce do not align with those needed by employers. In financial services, this gap can manifest in various forms, including:

Technical Skills: Proficiency in data analytics, cybersecurity, fintech innovations, and advanced financial software.
Soft Skills: Communication, problem-solving, adaptability, and customer service.
Regulatory Knowledge: Understanding of evolving financial regulations and compliance requirements.

Understanding Why We Have Reached This Point

Several factors have contributed to the current skills gap in the financial services sector. Rapid technological advancements have outpaced the education and training systems, leading to a mismatch between the skills taught in schools and those required in the workplace. The rise of fintech and digital transformation in finance demands new technical proficiencies that traditional education often fails to provide. Additionally, the evolving regulatory landscape requires continuous learning and adaptation, which many existing employees find challenging without proper support. Furthermore, the industry has historically placed more emphasis on academic qualifications rather than practical skills, resulting in a workforce that may lack the necessary hands-on experience. These factors combined have created a significant gap between the skills available and the skills needed, necessitating urgent and strategic action to bridge this divide.

Strategies for Addressing the Skills Gap

Skills-Based Hiring Practices

Top of the tree in solutions is a move toward skills-based hiring practices! Traditional hiring practices often focus on degrees and certifications. However, shifting to skills-based hiring can help employers identify candidates with the specific skills needed for the job, regardless of their educational background. This approach involves:

Creating Detailed Job Descriptions: Clearly outline the skills required for each role.
Utilising Skills Assessments: Implement practical tests and assessments during the hiring process.
Leveraging Technology: Use AI-driven tools to match candidates with job requirements accurately.

Upskilling and Reskilling Programs

Investing in the current workforce is crucial. Upskilling involves enhancing employees' existing skills. While reskilling focuses on training them for new roles. Effective strategies include:

Continuous Learning Culture: Encourage a culture of constant learning and development.
Tailored Training Programs: Develop training programs aligned with the organisation's needs.
Partnerships with Educational Institutions: Collaborate with universities and training centres to provide relevant courses.

Embracing Technology and Innovation

The financial services sector will need to embrace technological advancements to stay competitive and manage workflows. This includes:

Adopting Fintech Solutions: Implement innovative financial technologies to streamline operations.
Data Analytics and AI: Utilise data analytics and artificial intelligence to enhance decision-making processes.
Cybersecurity Measures: Invest in robust cybersecurity measures to protect sensitive financial data.

Enhancing Employee Retention

Retaining skilled employees is as important as hiring them. Strategies to enhance retention include:

Competitive Compensation: Offer competitive salaries and benefits.
Career Development Opportunities: Provide clear career paths and opportunities for advancement.
Work-Life Balance: Promote work-life balance through flexible working arrangements.

Championing Diversity and Inclusion

A diverse and inclusive workforce brings varied perspectives and skills, driving innovation and problem-solving. It would be beneficial if financial services organisations were to:

Promote Inclusive Hiring Practices: Ensure diversity in hiring processes.
Create Inclusive Work Environments: Foster a culture where all employees feel valued and included.
Support Employee Resource Groups: Encourage the formation of groups that support diversity and inclusion initiatives.

Measuring the Impact

Organisations need to measure their impact to ensure these strategies are effective. Key performance indicators (KPIs) include:

Reduction in Skills Gaps: Track the decrease in identified skills gaps over time.
Employee Performance: Monitor improvements in employee performance and productivity.
Retention Rates: Measure employee retention and turnover rates.
Financial Performance: Assess the overall financial performance and growth of the organisation.

Conclusion

Addressing the skills gap in the financial services sector is imperative for organisational success and economic growth. Financial services organisations can bridge the skills gap by implementing skills-based hiring practices, investing in upskilling and reskilling, embracing technology, enhancing employee retention, and fostering diversity and inclusion. This not only enhances their competitiveness but also contributes significantly to the UK economy. The potential to add £555.6 million per year to the economy underscores the importance of taking decisive action to align employee capabilities with organisational needs.