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, lowered employee engagement, and rapidly increasing levels of automation that impact staffing levels and workforce skills 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, while others have emerged as new threats (or opportunities) to sustainable goal achievement.

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 making changes to 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 brought about more sophisticated fraud and theft schemes that have led to 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 payment) is now a consumer-required online experience, as are account creation, loan originations and approvals, insurance coverage and price 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 creating pressure on different industry segments, such as the increasing 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, as they are now accompanied by higher inflation, they are increasing business costs. Secondly, insurers face major climate-related disasters and related expenses, which are amplified by pressure from customers and legislatures on what are perceived as 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 that translate into the need for rapid shifts in their investments and resources to respond to market changes.

Reputational damage

FSIs face continuing drops in consumer and institutional trust and confidence, driven by several factors that have reduced their ability to effectively communicate and market their services. The fallout of the 2008 financial crisis still lingers, while large-scale ethical banking scandals, widely reported taxation avoidance or under-reporting, and recent moves to weaken governmental 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, need, and volume of work and workers, threatening job stability. As will be seen, the regulatory environment continues to create bureaucratic tasks that all employees must perform.

1. High turnover rates

Financial services HR teams must deal with and manage employee turnover rates that are among the highest of 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 reported for leaving FSIs, and they are more likely to resign in their first 90 days compared to their peers working in healthcare and technology. Glassdoor reviews from financial services companies cite 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 that translate into 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% complain of heavy workloads, 36% of manual work processes, 26% of tight deadlines, and 25% of 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 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 experience unique struggles. Bankrate reports that females earn 63 cents for every dollar of their male counterparts. 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, startling many financial services HR professionals and teams. Many FSI workers are abandoning their career fields altogether, complicating many industries' talent shortages. 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, and 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, which is being exacerbated by employee dissatisfaction, wage stagnation, and widespread fears about job elimination and replacement with 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 with 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 related to the digital skills of the FSI workforce, with one survey finding that 38% of FSIs lack sufficient employees 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 more automation and digitization cuts across 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 the concerns of many FSI workers 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-based, 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, bots for customer service, risk management, compliance tracking and reporting, and cyber security 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 are achieved and become industry standard, especially with estimates of 70% in processing costs and 90% processing time improvements 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 with so many changes happening and challenges faced on the business and talent front? 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 the 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 some high-priority opportunities for consideration.

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 shift and skill shortage requirements due to labor market shortages, AI and advanced technology adoptions, and revenue or profit pressures. Skills-based HR capabilities start with understanding who has what skills, at what level of proficiency, 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 on targeted skills development, and offer a multitude of ways that skill education and growth can occur, from formal programming (e.g., AI bootcamps, co-working with bots) to informal and experiential learning that brings similarly skilled employees together 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 to those in different functions and areas of professional expertise.

Recruiting should be targeted at filling known gaps and in sufficient numbers to meet the needs across functions, business units, locations, and markets (e.g., consumer, business, wealth management, etc.). 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 processes such as Lean, Six Sigma, and especially design thinking, focusing on the end-user or customer experience. Work with managers and the compensation team to communicate and remind employees how their work affects the customer, company, and community positively and constructively. Extensive research has been conducted that proves how bringing meaningfulness to an individual’s work increases their commitment to organizational objectives, raises engagement levels substantially, 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 a sole or primary reliance 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 the very human needs of the employees. Guide managers to recognize signs of burnout, stress, or personal challenges employees face and encourage intervention by trained and 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 behavior, including coaching, guiding, and flexibility that create more positive, constructive, and supportive work environments. Recognize and reward those whose performance as leaders and managers can be role models 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 broader variety of perspectives and solutions to shared challenges.

Relevant Practices & Tools

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

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