The management of talent in the financial services industry (FSI) is a complex and challenging endeavor, as business leaders have to work to balance a highly regulated environment with negative consumer perceptions, high delivery pressures, emerging technology threats (and opportunities), generational consumer expectation shifts, climate threats, and rapidly changing government policies. Financial services HR leaders are navigating these ever-turbulent waters with a wary eye on pressures related to cost management, labor market shortages, talent flight, declining employee engagement, and rapidly increasing automation that affect staffing levels and workforce skill requirements.

The mission and impact of companies in this industry on the welfare and well-being of countries, markets, and citizens around the globe are astounding. Add to that the breadth of unique industry segments: banking, insurance, investment management, private equity and venture capital, loans and mortgages, financial planning and guidance, accounting, payments and processing, brokerages, and financial technology, and the range of challenges those face becomes daunting. Addressing the HR challenges in financial services requires an understanding of a broad set of external influences and an ability to prioritize talent approaches to support successful growth and business objectives.

Understanding the industry business issues

Some key business challenges faced by organizations in the financial services industry create issues that flow down and through the market, corporate, business unit, and even individual employee levels. These highlight the risks that must be faced—some long-standing, some cyclical, and others that have emerged as new threats (or opportunities) to achieving sustainable goals.

Dozens of governmental regulatory agencies

Financial services organizations are among the most regulated industries, protecting markets and individuals against fraud, theft, and economic instability. Federal, state, and international laws and industry standards relate to securities, banking, pensions and employee benefits, consumer protection, taxes, and financial technologies (Fin Tech). Dozens of governmental regulatory agencies provide oversight and regulations for institutions involved in commodities, depository, insurance, pensions, and securities. The legislative branches write, update, and promulgate laws and regulations. The executive branches implement treaties and trade pacts that those agencies are designed to promote in each country or market. Increasingly nationalistic and isolationist governments around the globe are changing long-standing practices, policies, and relationships.

Technological advances

The increasing adoption of advanced technologies is rapidly changing how financial transactions are identified, created, planned, executed, and protected. Innovations such as blockchain technology, AI-driven analytics, bots, and “robo-advisers, GPS and monitoring devices, digital banking, mobile apps, and robotic process automation are changing how financial services are designed, delivered, and executed for customers and internal processing alike. 48% of consumers are now banking on mobile devices, and another 23% on laptops or desktops. Unfortunately, the widespread use of these applications has led to more sophisticated fraud and theft schemes, prompting the rise of cybersecurity and AI-driven detection capabilities by FSIs and law enforcement bodies.

Changing consumer expectations

Associated with the online trend, customers increasingly demand convenience and personalization. Basic banking (balance checking, deposits, bill payments) is now a consumer-required online experience, as are account creation, loan origination and approval, insurance coverage and pricing comparisons, and investment insights and transactions. Today's customers expect convenient, tailored banking experiences that don't require them to complete basic tasks like checking their account balances or depositing funds. 92% of surveyed consumers strongly prefer working with providers who can tailor customer offers in real time. Even paper and hard copy forms and receipts have become a major turn-off for many younger customers who are ecologically and sustainability-focused.

Other external forces

Some peripheral factors are putting pressure on different industry segments, such as rising U.S. interest rates. After many years of low, single-digit levels that pressured profit, these rates have risen to the benefit of lending institutions. Still, with higher inflation now, they are increasing business costs. Secondly, insurers face major climate-related disasters and related expenses, which are amplified by pressure from customers and legislatures over perceived inadequate claims payments, significant premium increases, and future coverage denials. Finally, multinational and global organizations continue to face volatility and variable changes in financial markets, necessitating rapid shifts in their investments and resources to respond.

Reputational damage

FSIs face ongoing declines in consumer and institutional trust and confidence, driven by several factors that have reduced their ability to communicate and market their services effectively. The fallout from the 2008 financial crisis still lingers, while large-scale ethical banking scandals, widely reported tax avoidance or under-reporting, and recent moves to weaken government financial oversight and protection agencies have eroded the confidence of many. Trust in financial institutions dropped from 28% to 20% in the past two years, exacerbating the trend.

HR challenges in financial services

The HR challenges in financial services that people teams deal with are also significant, and many are related to the abovementioned business issues. Reputational issues impact the ability to attract, retain, and motivate candidates and employees. Organizational responses to external forces create gaps between employees' values and their perception of the company. Consumer preferences and technological advances change the nature, needs, and volume of work and the number of workers, threatening job stability. As will be seen, the regulatory environment continues to impose bureaucratic tasks on all employees.

1. High turnover rates

Financial services HR teams must deal with and manage employee turnover rates among the highest in any industry segment. FSIs experience 18.6% turnover, compared to an average of 13.5% across industries. The high rate is primarily driven by Millennials, who comprise 36% of the U.S. and 75% of the global workforce. The prospects do not appear to be improving, with a reported 60% of financial professionals seeking new jobs in other industries, and PWC finding that 53% of finance professionals contemplate a job change in their first year of employment.

2. Unhappy workers

With 9.2 million people employed in FSIs, the reasons for seeking new employment, especially outside the industry, reveal some concerning trends. 53% of departed FSI workers report low compensation and poor work-life balance, and 38% complain of less job security and stability in the current environment. They also report being overwhelmed by administrative and compliance tasks and repetitive work requirements. High-stress workplaces are a common reason cited for leaving FSIs, and they are more likely to resign within the first 90 days than their peers in healthcare and technology. Glassdoor reviews from financial services companies cite a lack of advancement and career opportunities.

3. Burned-out employees

Stressed workers leave due to heavy workloads, high performance expectations, quotas, and commission pay. Employees in global organizations complain about engaging with clients and coworkers around the globe, leading to unusual and extended work hours. 52% of surveyed financial services sector employees said they were burned out at work, likely due to a combination of performance pressures and long hours, which led to an unhealthy work-life balance. Financial services HR teams continue to battle this issue, with seemingly no end in sight.

31% of financial services and banking employees report a plan to leave the industry due to high pressure. Among those planning to resign, 42% cite heavy workloads, 36% manual processes, 26% tight deadlines, and 25% increasing demands from their managers. Inc.com similarly reported that FSI workers often experience high-pressure environments, time-consuming regulatory compliance tasks, and demanding financial performance goals.

The toll of workplace stress is physical and mental, and it hits performance and productivity. For example, one study found that FSI employees have the second-highest level of job stress and sleep disorders, and employee motivation has dropped 32%. A survey of UK FSI workers found that 39% of younger financial professionals have missed work days due to stress, compared to 36% of their older colleagues.

4. Women in FSI facing barriers

Women comprise an estimated 52%-56% of FSI employees and face unique challenges. Bankrate reports that females earn 63 cents for every dollar that their male counterparts earn. McKinsey found that women hold only 28-29% of senior vice president and C-suite positions in banking. Perhaps most difficult is the impact that the pandemic and subsequent return-to-office policies have had on female workers, as they are disproportionately family caregivers. Deloitte found that among those caregivers, remote work has allowed them to balance work and family obligations, and they are 1.3X more likely to quit if and when forced to return to commuting and working in the office on a full-time basis.

5. Talent shortage and flight 

A concerning and significant trend has been observed in the FSI workforce, which has startled many financial services HR professionals and teams. Many FSI workers are abandoning their career fields altogether, exacerbating talent shortages across many industries. The Wall Street Journal has reported that over 300,000 accountants and auditors have left their profession over the past two years alone, due to low pay increases, a lack of career growth, and advancement opportunities. Making matters worse, lower college enrollments and graduate volumes are making replacement plans difficult.

83% of financial leaders report significant talent shortages, exacerbated by employee dissatisfaction, wage stagnation, and widespread fears of job elimination and replacement by artificial intelligence and related technological advances.

The data speaks volumes about the HR challenges in financial services. The Bureau of Labor Statistics presents a gloomy picture: a 2:1 ratio of job openings to hires, and a near-equal (1:1) ratio of hires to terminations in the Financial Activities sector. With 9.2 million employed and an up-trending 2.9% monthly turnover rate, high turnover and career abandonment rates lead to bare-bones replacement levels and no room to fill new and emerging roles needed to support growth plans.

Recognizing the industry skills gaps

Financial services face a global problem confronting employers across sectors—a rapid decline in the availability of critical skills. 70% of FSI's CEOs consider this a significant threat to their growth objectives. Only 28% of those have plans and actions to remedy the situation. The biggest concern is the digital skills of the FSI workforce, with one survey finding that 38% of FSIs lack sufficient staff to meet current business needs. Private market and FinTech firms are creating expanded opportunities, and the demand for appropriately skilled professionals is creating increased labor market competition for traditional financial service HR and recruiting teams.

Reported shortcomings in data analytics, cybersecurity, and cloud computing workers are noteworthy given the industry-wide movement toward advanced automation, customer preferences, and decision-support needs. Included here is the rapidly rising demand for AI skills in the risk, legal, and compliance functions essential to managing this highly regulated industry. The talent competition is fierce, especially when trying to draw from the technology industry in machine learning, cybersecurity, data analytics, neural networks, and data privacy in the face of emerging quantum computing fraud capabilities.

The digital transformation is creating new and expanded challenges

The movement towards greater automation and digitization spans the industry, with a few primary goals. The first is to use technology to streamline processes and reduce overhead costs. The second is to drive revenue and profitability with better decision-support tools. The third is to help address talent availability issues. The fourth is to meet changing customer and consumer demands. HR teams should be aware that many FSI workers' concerns that their jobs are or will be replaced appear to be real, as many financial transactions, management, and regulatory compliance reporting tasks are repetitive, data-driven, and can be digitized and automated.

Digitizing workflows and the workplace to maintain a lean workforce is becoming a reality, as robotization has transformed manufacturing. Adopting technologies such as AI-powered tools and workflow engines, Agentic AI, customer service bots, risk management, compliance tracking and reporting, and cybersecurity is ongoing, if not slow. While blockchain, 5G, and AI technologies are considered emerging and less widespread, they are projected to drive the transformation (C) of how financial institutions operate. Similarly, robots will replace 2,000,000 banking jobs in the next ten years. Further estimates show that 35% of the financial jobs can be fully automated, although that represents only 50% of total operations today. That means more is to come as early successes become industry standards, especially with estimates of 70% reductions in processing costs and 90% reductions in processing time for many repetitive financial processes (e.g., invoices, closings, expenses).

Priority solutions for financial services HR teams

How can financial services HR leaders and teams respond to so many changes and challenges on the business and talent fronts? Prioritization is always the key element of a solid HR strategy, and it should always begin with business alignment. Engaging in the process of enterprise strategy development is a crucial element of the HR leader’s role and success profile, and, as such, looking into business objectives, assessing the barriers and threats to their achievement, and planning and determining HR resource allocation creates a solid foundation. That said, financial services HR organizations appear to have high-priority opportunities to consider.

1. Conduct workforce planning

Many financial services HR functions struggle with strategic workforce planning, but the time could not be more provident to upgrade these capabilities and analyses. The key is anticipating talent shifts and skill shortages due to labor market shortages, AI and advanced technology adoption, and revenue or profit pressures. Skills-based HR capabilities start with understanding who has which skills, at what proficiency level, the volume of employees with those skills, and the functions and locations where they sit. Assessing what skills are needed to support the changes and business direction can better guide talent acquisition, learning and development, and career development teams' plans, programs, and resourcing.

2. Prioritize upskilling and talent attraction

Establish clear priorities for training targeted employee populations, and eliminate dated or unnecessary learning programs that do not support the business direction. Reallocate and redirect employee focus toward targeted skills development, and offer a multitude of ways for skill development and growth to occur, from formal programming (e.g., AI bootcamps, co-working with bots) to informal and experiential learning that brings together similarly skilled employees for on-the-job training and group learning opportunities. Skill development in career-enhancing (and, for some, saving) capabilities such as advanced data analysis, cybersecurity, AI integration, and data science should be widely available and applicable across different functions and areas of professional expertise.

Recruiting should be targeted at filling known gaps and in sufficient numbers to meet needs across functions, business units, locations, and markets (e.g., consumer, business, wealth management). Consider hiring people with critical skills into rotations where their skills can be assessed and developed across applications. Help them find their ideal match in the organization while existing team members learn from them.

3. Consider climate and cultural fit in talent assessment

Address the tendency of many FSI workers towards burnout, poor stress management, and early-tenure turnover by leveraging pre-employment psychometric assessments that predict high performance, potential, aptitude, and culture fit. Many Big Four Accounting and Consulting firms have discovered that certain traits and work styles fit their high-performance cultures. Hiring people primed to steal in high-pressure work environments and who have demonstrated a history of self-management and self-care can prepare more staff members to handle the inevitable rigors of demanding work and mandatory compliance tasking environments.

4. Review workflows and job design

As changes are anticipated or occur, review employees' tasks to help reduce repetitive, bureaucratic, and less business—or customer-impacting activities. Engage employees in process redesign and reengineering through structured approaches such as Lean, Six Sigma, and especially design thinking, with a focus on the end-user or customer experience. Work with managers and the compensation team to communicate to and remind employees how their work positively and constructively affects the customer, company, and community. Extensive research has shown that bringing meaning to an individual’s work increases their commitment to organizational objectives, substantially raises engagement levels, and makes their daily work more palatable.

5. Incorporate comprehensive well-being programming and resources

Accepting that the industry has varying stress levels, move beyond relying solely on the employee assistance program (EAP) for more comprehensive physical, psychological, and financial support. Consider the need for targeted resources and support for working mothers and fathers, flexibility in work scheduling and location, programming during work hours, and employee benefits that directly address employees' very human needs. Guide managers to recognize signs of burnout, stress, or personal challenges employees face, and encourage intervention by trained, equipped experts. Use employee listening strategies to identify hot spots and anticipate problems before they damage operational efficiencies and performance. Use upward feedback to track the quality and frequency of the most valuable managerial behaviors, including coaching, guidance, and flexibility, that create more positive, constructive, and supportive work environments. Recognize and reward those whose performance as leaders and managers serves as a role model for balancing superior people management with goal achievement.

Build “resilience” throughout the organization by regularly placing employees in projects and training related to customer response, process improvement, change management strategies, stress management techniques, understanding and working with diverse population segments, and job shadowing or “field trips” to other businesses or geographic locations that expose workers to a wider variety of perspectives and solutions to shared challenges.

Relevant Practices & Tools

Core HR Practices to Activate the Digital Transformation Journey. >

Digital transformation integrates digital tools, technology, and culture into all aspects of a business, fundamentally altering how an organization operates and delivers value to customers... more »

Projecting Future Headcount Demand Requirements from Business Plans and External Estimates. >

An important step in Core workforce planning is to generate a sense of what will be faced in the future when working to maintain the proper level of a workforce... more »

Assessing External and Internal Business Trends, Pressures, and Drivers of HR Strategy. >

An important step in the development of a comprehensive HR strategy is researching and determining factors that are currently (or projected to be) operating in an environment... more »

Assessing the Change Impact on Specified Stakeholder Groups for Prioritizing Activities. >

Understanding how an initiative will impact the organization and specific stakeholder groups or people is key to designing effective change management strategies... more »

The Total Worker Health Assessment Tracker: Define Assessment Plans and Analyze Trends to Identify Focus Areas Shaping Wellness Strategy. >

This tool provides a structured approach to capture comprehensive snapshots of employee wellness based on the National Institute for Occupational Safety and Health (NIOSH) Total Worker Health assessment questions... more »