Career paths in the financial services sector have historically been mostly linear. New hires might start at the lowest rung, like teller, clerk, or assistant, and then work their way up into management and executive ranks, often in the same department and at the same company. But the industry and its workforce are rapidly changing, and increasingly, those siloed career paths aren’t addressing the needs of either.
To stay relevant, growing financial services organizations need to reevaluate the efficacy of their career paths to attract and retain employees. This means that banks and traditional financial institutions need to view career paths less like a train track to a single destination, and more as a flexible, multi-pronged pathway that allows for many possibilities, shifting with the ever-changing needs of the industry and its workers.
“The best people are the most ambitious,” said Steve McIntosh, CEO and founder of career coaching firm CareerPoint. “If you want to keep your best people, you need to provide tools and resources, career pathways, and flexibility to allow them to figure out how to…realize their career ambitions.”
Shifting Workforce Needs
The COVID pandemic accelerated the monumental changes that were already happening in the financial services industry, from virtual tellers to higher customer expectations, as traditional firms compete with more nimble fintechs. The employee experience in this sector has been changing, too. Here's what’s causing these shifts — and what this means for employers.
1. Technology Disruption
When CareerPoint’s McIntosh started his career in financial services decades ago, his job as a junior employee involved mundane tasks such as organizing files and photocopying documents. But technology is automating those responsibilities and, in the process, transforming the traditional career paths and competencies that new hires need. Some 43% of all bank working hours can be automated with existing technology, according to a 2019 report from McKinsey & Company, and requirements for talent are shifting from “basic cognitive skills'' to “socio-emotional and technological skills,” the report said.
“When you start your career [now] in just about any kind of financial services firm, you really need to hit the ground running,” said McIntosh. But, he noted, that acceleration to being responsible for more strategic tasks early on in a career reduces the number of steps it takes to reach an executive leadership position. Promotions may come quickly in the early stages of a career, he continued, but less frequently by mid-career as employees get closer to executive levels.
“You’re going to be stuck at the same level for a period of 5-10 years,” McIntosh said. “People want more change and variety than that. Firms need to adapt to give people a broader set of experiences and continue to develop them.”
Reshaped career paths can ensure mid-career talent have the opportunity to build their skills and grow in their careers — without needing to leave for a new employer or industry to do so.
2. Competition for Workers
Workers have more options these days. Fintechs and startups are hungry for individuals with finance skills, and provide an alternative to the buttoned-up corporate culture of traditional financial services firms. Furthermore, the pandemic accelerated opportunities for remote work, making consulting an appealing choice for some top talent in the sector, said Kim-adele Randall, CEO of consultancy Authentic Achievements and a business consultant who has spent most of her career in financial services.
“You could end up losing your talent today to pay them tomorrow [as a consultant] to tell you what they could have told you in your organization,” Randall cautioned.
Additionally, amid the Great Resignation, financial services firms are struggling to fill open positions. In June 2022, the industry had 532,000 job openings, compared to 350,000 the year before, according to a report from the US Bureau of Labor Statistics (BLS).
“If you’re talented and you’re not getting [satisfaction] from your [work at your current] employer, you’re going to start to look for it somewhere else,” said Randall.
Redesigned career paths can be more responsive to the needs, skills, and aspirations of individual workers, giving them a reason to stay.
3. Changing Worker Expectations
High-paying jobs may have lured people to the financial services sector for decades, but a growing number of employees, especially younger workers, say money is no longer their only concern.
Deloitte’s Global 2022 Gen Z and Millennial Survey found that the top reason employees chose to work for their current organization was good work/life balance, followed by learning and development (L&D) opportunities, high salary or other financial benefits, and a positive workplace culture where they feel valued. In a 2022 survey of workers, Pew Research Center found that 63% of respondents said no opportunities for advancement played a role, big or small, in why they left their job the year before.
“If you, as a company, don’t want your employees to be talking to a recruitment consultant to get those opportunities, then you need to be talking to them about their career development opportunities,” McIntosh said. “It’s that simple.”
Why Career Paths Are Important for Employee Retention
All the upheaval of the current climate should trigger financial services firms to rethink the career paths they lay out for their employees. Without meaningful career tracks, banks and credit unions are at risk of losing employees to companies that are already investing in retention strategies.
“This is the differentiator for companies,” said Sandra Holzgen, Chief Human Resources Officer (CHRO) for PSECU, the largest credit union in Pennsylvania. “I wholeheartedly believe that if you have the right talent in the right jobs, you get exceptional results. It’s worth it for leaders [and] employees to invest in your career pathing and all of your talent management process.”
How to Develop Career Paths in the Financial Services Sector
To turn traditional, straight-line career paths into ones with more flexibility, breadth, and depth requires Human Resources to take the lead, shifting from “enforcing workforce policies” to “re-architecting work across the enterprise,” according to Deloitte’s 2021 report on human capital trends in financial services.
Executive coach Berta Aldrich, former CHRO of financial advisory firm Private Advisor Group and author of Winning the Talent Shift: 3 Steps to Unleashing the New High-Performance Workplace, agrees. “HR needs to move into a strategic role [of being] responsible for the people,” Aldrich said. “[Human Resources is] involved in selecting the right people [and should] become completely involved in training, promotions, and coaching and development.”
Here’s how to rethink career paths in the financial services sector.
1. Make it flexible.
Job architecture provides a framework for how positions are categorized within an organization; it guides decisions about compensation, promotions, career pathways, and job leveling. Job architecture was once rigid — laying out a straight-line roadmap from junior-level employee to senior executive, with little room for horizontal movement within an organization.
But modern job architecture allows for a more flexible approach. As described by recruiting firm Robert Half, an organization might have fewer rungs up the ladder to senior leadership, but build in more opportunities for top talent to move upward, even if they don’t want to lead people, and encourage lateral moves between departments or teams to keep employees engaged and challenged. This could include things like assigning team-based projects, or helping subject- matter experts who don’t want to manage people become leaders in their field through training and development.
“You’re starting to see that the younger generations, probably one or two generations into the workforce, are expecting to move around laterally,” Aldrich said. “For them, it’s not all about the next promotion. It’s doing work that matters, that’s purpose-driven and where they can make a positive impact.”
2. Reconsider required skills.
In the highly regulated financial services industry, job postings might outline specific certifications or years of working in a particular area, such as mortgages or asset management, as requirements for a position. But these requirements can stymie an existing employee’s career path if that person doesn’t have the exact criteria needed to check every box.
As employers redesign career paths, soft skills may be the attributes that qualify employees for a lateral move or a promotion, rather than strictly technical abilities, said Holzgen. At PSECU, job descriptions include soft skills such as service mindset, initiative, ability to learn, positivity, and emotional intelligence.
This can require a change in mindset, Holzgen acknowledged. She recommended considering the five key competencies that will make somebody successful in a particular role, and how to teach them to do the rest. If an employee has a passion for learning, it should be fairly easy to teach them the technical skills they need to excel in a new internal role, she noted.
“Companies have to reimagine what they think about talent and not have specific degrees or skill sets [need] to align perfectly with that job posting,” Holzgen said. “Career pathing has to be more about attitude and approach versus competency and skill [from the start].”
3. Support employees’ growth.
As the organization emphasizes soft skills, PSECU also offers opportunities to employees for ongoing learning, including a tuition reimbursement program, access to LinkedIn Learning classes, and individual development plans that help employees map out their trajectory from one role to the next.
“In this environment — the Great Resignation — we have to be purposeful and deliberate and really help people see the path,” Holzgen said.
“Competency frameworks help early- and mid-career employees figure out where they are and where they’re going, and what they need to do to get there on their own,” he said. “That’s very important to allow them to have a sense of agency in their own career path.”
Conversations about career paths, professional development needs, and interests should come up monthly between managers and their direct reports, perhaps during one-on-ones, advised Randall. Regular, routine conversations like these could reveal an individual’s skills or hobbies that the organization could capitalize on and the employee would enjoy working on. A love of photography could lead to the employee shooting or sourcing images for a new social media campaign, for example.
Removing Invisible Barriers
Financial services organizations can make sweeping changes to their job architecture, bolster their professional development programs, and provide coaching to individual employees. But, Aldrich said, none of this will be enough to tackle the sector’s workforce woes if they don’t address a longtime problem in the industry: Women and people of color have historically had difficulty moving up the ranks within financial services organizations.
In 2021, women represented just 24% of leaders in financial services firms, according to Deloitte. And while people of color represent about 40% of entry-level workers in financial services firms, this falls to only 10% at the C-suite level, found McKinsey.
Removing the barriers — from retaliation for reporting bullying or abuse to unconscious bias — that are keeping underrepresented people from the industry is critical to ensuring everybody has opportunities for career paths within it, noted Aldrich. “There has to be a foundational shift,” she said.
Workplace diversity happens when organizations make it priority in their hiring process, set measurable diversity goals, and train management to get on board. Building a diverse, inclusive organization and extending opportunities to all is the right thing to do, but it also comes with clear business benefits, including better performance and talent attraction, stronger teams, and increased brand loyalty.
Redesigning career paths — and developing new ones — in the financial services industry will require big-picture changes for organizations, and a reframing of what jobs require and who will do the best work. Companies with HR teams that can lead the charge will come out on top, said Aldrich.
“More and more, [HR is] going to be looked to as the one central place that is going to manage the company’s greatest asset, which is their people,” Aldrich said. HR’s “job is changing. And the companies [that] can make that shift [and] look at HR as a central department to manage the greatest asset, are going to win.”
Ready to set your employees up for breakthrough growth? Download Lattice’s Individual Development Plan Template now.