The hallmarks of a future-fit workforce

I don’t know how many of you watch what I would call ‘typical’ Hallmark Christmas movies.

At the risk of spoiling the plot these often follow a very similar pattern.

An American woman with a thriving career in the big city goes home for Christmas.

There she helps to save a struggling business, reviving the local community in the process. Invariably, she falls in love with a local widower with a cute dog.

After a minor existential crisis, she quits her big city financial services / marketing job, re-skills as a baker, stays and lives happily ever after.

Now there is a running joke on the internet about a reverse Hallmark movie, where our heroine ditches her home town and her plaid clad man for an exciting career in the big city.

I would like to propose a third option – a UK version if you like.

In this version, our heroine – or hero – gets to enjoy life outside of London and a thriving career in the financial services sector.

As TheCityUK’s report on enabling growth across the UK pointed out, some 2.2 million people work in financial services and related professional services across the UK. Around two thirds are based outside London, with clusters in cities such as Birmingham, Edinburgh, Leeds, Manchester and Bristol.

Between 2010 and 2020 employment in the sector grew by 12.5%, with the highest rate of growth in the North West followed by Northern Ireland and London.

But we still have further to go to get to our Hallmark movie, unlocking talent across all of the UK.

That is one piece of the puzzle on how we attract the right talent to financial services. The Financial Services Skills Commission (FSSC) highlights that the demand for highly skilled talent – which currently sits at 73% of roles in the sector, up from 52% 20 years ago – will continue to grow.

It begs the question as to what that talent looks like.

Focussing on the right behaviours
One of my first jobs was in a record shop, so I know a thing or two about broken records.

That being said, I find good ideas should be repeated loudly and often to make sure as many people as possible hear them.

It’s even better when you get the opportunity to lead by example.

Since the pandemic we have more than doubled our presence in Edinburgh to around 250 colleagues.

In 2022 we opened our office in Leeds. We now have nearly 200 colleagues based there. We also have presence in Cardiff and Belfast.

Our aim with doing this is to tap into skills in markets outside of London to better reflect the demographic of firms nationwide.

For example, 2 in 3 firms in our Early and High Growth Oversight Function are based outside of London. Importantly, it helps us to better reflect the demographic of consumers.

This is important when you look at the work we have done in recent years, whether that is work on vulnerability or the Consumer Duty.

As these policies highlight, we see good outcomes for consumers and firms as inextricably linked.

It matters to firms, as much as it does to us. It is what we call outcomes-based regulation.

In order to get to those outcomes, it’s critical to understand the client persona and journey.

The FSSC has highlighted behaviours such as empathy as important in supporting consumer needs, and it is prioritised in its Future Skills Framework.

You need to be able to stand in their shoes as an advocate. This has always been important, but even more so now.

Recruiting people from different backgrounds helps to ensure there is diversity of thought, as long as you make sure their voices are heard.

The right environment
Because inclusion matters.

It’s why we helped the FSSC launch its inclusion measurement guide.

An inclusive culture is one where colleagues feel safe to speak up and challenge. In this environment colleagues are also more innovative and creative, and able to perform at their best. It improves job satisfaction, retention and ultimately outcomes.

It’s an area of focus for us, and we were pleased last year to reach gender parity in our own senior leadership team.

We have seen both commitment and passion from firms in relation to Diversity & Inclusion (D&I), with thoughtful initiatives underway.

However, we also noticed in our multi-firm work that firms lacked a clear articulation of purpose and actions oriented to achieving their goals. This becomes more stark if we, as an example, look at the decline in the share of women employed in the industry from 51% to 43% in the last 20 years. Bearing in mind this has happened while employment in the sector has expanded.

It’s partly attributed to a reduction in medium and lower skilled roles in which women were more highly represented and the increase in tech roles.

With the demand for technical capabilities only set to grow, what can the industry do to encourage more women into tech?

On top of this, financial services are facing challenges in attracting younger workers and retaining older employees.

There are questions here about talent pipelines and to some extent how the industry is perceived by younger generations. Whereas people from lower socio-economic backgrounds take on average 15% longer to progress from middle to senior roles compared with peers from higher socio-economic backgrounds.

Some progress has been made – while the sector employs a relatively small proportion of workers from minority ethnic backgrounds, many of these are in professional or managerial roles.

Financial services has the highest level of ethnic diversity amongst managers and directors at 19% compared with an average of 11% for other sectors.

That being said, there are marked differences between different ethnic groups. Last year we proposed flexible minimum standards to raise the bar on D&I.

We are grateful for all the feedback.

We are now considering the responses and will report back later this year.

This, alongside work we have done in the past on culture, is one of the ways we are looking to support industry in ensuring that it attracts and retains talent.

Our view is that it makes good business sense and improves the competitiveness of firms and by extension the UK economy.

We also know there is no one-size-fits-all, nor would we want there to be – different firms find different ways to succeed.

But the common denominator is a strong and healthy culture.

Focussing on outcomes ensures greater flexibility for firms with fewer rules and lower barriers to entry in that way helps to future proof regulation.

Our primary objectives are complemented by our secondary objective on international competitiveness and growth.

All of these are intended to support the UK economy.

The world around us is changing rapidly. We have seen that in the last few years, first with the invasion of Ukraine by Russia and its impact on markets, but also with the collapse of Silicon Valley Bank – which happened overnight. Both events required us to react quickly.

In the absence of a crystal ball, the second-best option is building an agile workforce with the right capabilities, including behaviours.

For us, these events amongst other things, also drilled home the importance of being data savvy.

We make no secret of the fact that we’re shifting focus to becoming a data-led regulator. We are also investing in our technology platforms and in improving user experience.

To do that we have looked to build out our capabilities around technical literacy, digital skills and data. It’s one of the reasons why we sought to open the Leeds office.

There we have been able to build a strong technology hub by tapping into local talent pools, supported by education institutions and tech start-ups who are also driving talent into the region.

This will only become more important.

Take an example from the cybersecurity space. Microsoft is currently shifting its focus from having passwords to biometrics, and are having these hashed onto assets to get around increasingly sophisticated cyber-attacks.

The ability to understand and prepare for these sorts of changes is important.

For us it’s important to adapt early.

It’s also an area of growing focus as the conversation around artificial intelligence (AI) intensifies.

Possibilities and challenges from AI
This is a field where we see possibilities, and are exploring through 3 workstreams.

The first is how it will impact us internally – this links to conversations around how AI will change jobs, and how we adapt organisational culture and employee experience accordingly.

I have talked about agility in responding to events, but another facet of agility is finding ways to up-skill the workforce as technology changes the way we work.

We are currently using machine learning to support us in supervisory work and to make recommendations – this includes predictive tools. Ultimately humans are still making the decisions.

As we evolve to increase the use of large language models and Generative AI we are mindful of doing this securely, with strong controls or governance, ensuring appropriate levels of human or technical validation.

We’re not alone to be grappling with these sorts of questions. What we do know is that it requires a highly skilled workforce.

In this context, it’s interesting to note that investment in skills has not kept pace with changing skills needs – in fact research has found that at least 16% of the workforce in financial services needs upskilling.

This brings me onto the second strand, which is how consumers will react to AI.

This includes how we make them aware of the risk they might be exposed to.

Could we for example see an increase in bespoke and specific consumer markets, and how does that interplay with consumer vulnerabilities?

Reflecting on this, it becomes clearer that the question is not just one of technical capabilities, but also one that links into behaviours – the ability to stand in someone else’s shoes.

And the third is in the policy space, and the reliability of AI in providing content.

This could extend to training. But how do we know the content is reliable?

We only need to look at deepfakes to realise the potential impact of unreliable content.

Ultimately these questions boil down to the efficacy of using AI, ensuring appropriate guardrails and the appropriate adoption of it.

The importance of financial services to the UK economy is no secret.

This is a sector that contributed £278 billion to the UK in 2022, that’s 12% of the economy and £100bn in tax revenue.

TheCityUK estimates that the UK is the world’s leading net exporter of financial services, with a trade surplus of £80.2bn.

We attracted the highest amount of FPS foreign direct investment (FDI) in Europe in 2022. More than £2bn was invested in financial and professional services firms – creating almost 15,000 jobs.

The number of UK fintechs is second only to the US but 3 times more than Germany, France, and Singapore. 

In fact, in 2022 the UK remained the world’s preferred regulatory regime for financial services. To maintain our competitive edge, we need a continued focus on attracting and retaining the right talent, but also on how we upskill the existing workforce.

Getting to that outcome requires collaboration across regulators, local and national policymakers and firms.

We are pleased the conversation on skills remains firmly on the agenda. But this needs to go hand in hand with action.

For us that means policy and supporting firms to get to the right outcomes.

It’s not something we can achieve on our own, so firms need to ask themselves what they are doing and if it is enough.

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