Though the global economy grew 2.9% in 2017, many financial services companies remain uncertain regarding the future of their industry. This widespread uncertainty can be attributed to a number of causes, from the increased competition coming from nimble tech startups to the e-commerce stores replacing traditional brick-and-mortar establishments. At the end of the day, there’s little doubt that today’s customers simply don’t interact with typical banking, insurance, and other financial institutions like they used to.
Financial organizations and HR professionals alike must reimagine their current value propositions to create agile, future-oriented, and effective workforces. Understanding the following financial services compensation trends is a vital first step toward accounting for these variables and creating truly competitive compensation strategies.
Workforce Management for New Financial Services Technology Jobs
The financial services industry has experienced a shift in the types of skills most valued by employers. Data from the Future of Jobs, World Economic Forum report, showed that 43% of jobs within the financial services industry are considered “unstable,” and this is sure to continue as financial services technology jobs (and employees capable of performing them) become increasingly valuable and scarce.
When comparing 2017 financial services findings to projected 2020 trends, the share of jobs requiring technical core skills is expected to increase from 5% to 16%. By comparison, the average for all industries today is 14% with the 2020 projection at 12%. However, the total share of technical skills actually available in the financial services industry is estimated at 2% currently relative to the overall industries total of 11%. As a result, many compensation management professionals in the financial services industry will be forced to look to other industries to find employees capable of filling these technology roles.
In fact, some are already attempting to attract this diverse talent by offering particularly competitive compensation plans to current and potential employees. One key job area where this was seen was the Business Analyst job position. In 2017, Business Analysts within the financial services industry received up to 5% higher base salary than their counterparts in virtually every other industry. However, as tech-related challenges continue to impact the financial services industry, workforce management experts will have to create even more robust plans to address these shifts, while also finding ways to leverage these technologies themselves to optimize their own recruitment and retention strategies.
New Hires, Incumbent Employees, and Prominent Turnover Trends
2017 financial services compensation data showed that total turnover rates throughout the industry were down across all segments, with the exception of Insurance (which remained stagnant at 12%). Throughout the six collective segments surveyed — Commercial Banking, Consumer Finance, Financial Operations, Insurance, Retail Banking, and Trust & Private Banking — Consumer Finance and Retail Banking had the highest rates of turnover at 19% and 18%, respectively. Consumer Finance and Retail Banking also had the highest percentage of new hires for key Para-Professional roles as well.
Data also showed that organizations within Consumer Finance and Retail Banking were quite capable of hiring Para-Professional employees at reduced rates in 2017. Meanwhile, within Professional roles, new hires commanded higher premiums compared to incumbent employees for several key benchmark roles. For example:
- Professional new hires in Commercial Banking commanded larger premiums in the market except for Credit Analysts.
- Professional new hires in Consumer Finance and Financial Operations commanded up to 12% more than existing employees.
- New hires in Management roles commanded up to 25% more than existing employees.
With all of this in mind, it’s clear that HR professionals must carefully consider the hiring trends unique to their individual segments if they want to adequately address turnover. This is especially true when it comes to choosing between a new employee hire versus an incumbent employee to fill a vacated position, which is a multifaceted, complex undertaking with many factors to consider. As always, HR professionals must consider many different compensation and benefits packages to keep pace with overall competition in the financial services industry.
Financial Services Industry Regulations and Cybersecurity
The new executive administration’s focus on deregulation and continued instability in the healthcare market has prompted great uncertainty in the financial services sector. The industry’s unsure future foreshadows potential declines in investment, output, and overall employment, and cybersecurity is one of the top concerns for the financial services industry.
As hackers often target the financial services industry, it’s no surprise that the government has implemented many regulatory safeguards to protect customers’ information and data. These laws — which can vary by state — can apply to any organization, employee, or device within the industry, from banks to insurance companies, partners to contractors, or from mobile devices to desktops, and so on.
Workforce management professionals must keep track of these many legal differences, a difficult yet essential component of financial services compensation planning. To help ensure compliance, cybersecurity has slowly but surely become one of the fastest-growing financial services technology jobs, and 2017 data corroborated this. For example, within the Financial Operations segment, cybersecurity positions accounted for the three fastest-growing jobs (in regard to annual median salary increases). These jobs were:
- Information Security Manager: This position saw a 9% year-over-year median salary increase.
- Top Risk and Compliance Executive: This position also saw a 9% year-over-year median salary increase.
- Risk and Compliance Manager: This position saw an 8% year-over-year median salary increase.
Within the Financial Operations segment, cybersecurity positions accounted for the three fastest-growing jobs
Just as with other financial services technology jobs, it’s clear that HR professionals are making efforts to retain the talent they already have, but there is still work to be done in regard to attracting new talent. For example, the Information Security role was consistently listed in the Mercer/Gartner IT Jobs & Skills Survey as one of the most difficult jobs for HR professionals to fill.
Addressing Today’s Top Financial Services Compensation Trends
HR professionals have many factors related to turnover, hiring, and technology to take into account. If you’re looking for additional financial services industry insights, Mercer’s Financial Services Suite can provide you with the most accurate and up-to-date competitive compensation planning data available.