It is easy to prescribe what financial services businesses need for the future: greater investment in technology, more advanced analytical capabilities, and the regulatory infrastructure to experiment withemerging technologies.
It is more difficult to answer the next question: where can the industry find the people with the necessary skills to build new systems, analyse ever-expanding oceans of data, and pilot novel implementations of distributed ledger technology?
The UK has a talent shortage. The ONS reports that vacancies have been at an all-time high for over a year, and the latest BICS survey shows that over 30 per cent of businesses with 50 or more employees have been struggling with recruitment.
Financial services businesses are no exception: in August 2022, the UK financial services industry was reporting five vacancies per 100 workers.
The Edinburgh Reforms announced last year are a welcome reiteration of the government’s support for technology and innovation in the financial services industry.
Implementing a Financial Market Infrastructure Sandbox will help encourage technological experimentation and innovation, and changes to the Investment Manager Exemption will enable fund managers to build crypto assets into their portfolios.
These are useful developments, but if financial services firms do not have personnel with sufficient data, technology, and software skills they will not be able to make the most of the opportunities presented by the Edinburgh Reforms.
If you can’t hire them, train them
When we look at data-related skills using Lightcast labour market data, we can see that financial services job postings that require data skills hit all all-time single month high in July 2022 of 12,000 – double the pre-pandemic high of 6,000 in April 2018.
With demand far outstripping supply, the competition for people with these skills is expected to remain high through 2023 and beyond.
At the same time, financial services job postings for software developers also hit an all-time high in 2022.
However, in a labour market where there were 569,000 job postings for software developers in 2022 (Lightcast) and only 553,800 software development professionals in the UK (Nomis), financial services employers will find themselves up against severe competition to secure software developer talent.
If financial services businesses are finding that hiring people with the requisite technical skills is too expensive or impossible, one practical solution is to train people and equip them with these in-demand technical skills.
This is where professional apprenticeships – funded by the Apprenticeship Levy – can play a role.
Apprenticeships have been used for many years to provide financial services firms with financial advisers and investment specialists.
Now these programmes can help fill the gap between labour supply and labour demand in the industry.
The financial services skills landscape — which skills do firms lack?
The job posting data discussed above demonstrates that firms are searching for people who can develop software to support financial services products and services, and analysts who can analyse the data generated by those products and services.
Being more specific about the skills required by the industry will help us to identify appropriate training interventions.
The Financial Services Skills Commission, a collaboration between a number of financial services employers, recently created a ‘Future Skills Framework’ that describes the skills required in the industry in a little more detail.
Under technical skills they list: software development, data analytics, machine learning/AI, cyber security, and digital literary.
Consulting frameworks such as this helps us to better define the skills firms require.
Investment management and wealth management firms that choose to focus more on investment analytics will invest time and resources in the ability to use a greater volume and variety of data to guide more effective investment decisions.
Conducting this type of analytics, however, requires three types of workers: analysts to perform analysis, data engineers to organise data pipelines, and software developers/engineers to develop and maintain the underlying infrastructure.
BPP’s own analysis of Lightcast labour market data indicates that firms are prioritising investing in securing people with the technical skills to facilitate this type of investment analysis.
The top financial services software skills that appear in job posting in 2022 include Python (which can be used in
analytics), SQL (which is used to query databases), and AWS and Azure (cloud computing platforms).
Even if financial intermediaries choose not to pursue an investment analytics-led approach, a level of knowledge of analytics, software, and technology concepts can contribute to investment decisions.
It is easier to make effective decisions about incorporating crypto assets into investment portfolios, for example, when you have an understanding of how a crypto asset is created and the underlying technology.
Planning for the future — creating a skills plan for the financial intermediary market
Professional apprenticeships are a toolbox for equipping professionals – both new hires and those who have been in the business for a while – with practical skills.
The first step in creating any skills plan is to design the skills gap in existing roles and to identify what a business can do to create them.
The solution there will be different for every firm: larger firms may pursue complex analytics-driven investment strategies that require investment and maintenance in a complex underlying architecture.
Other firms may opt for a more agile approach that involves some in-house investment analysts, additional technical training for their existing financial advisers, wealth managers, and fund managers, and outsourcing the data infrastructure.
A firm’s long-term strategy will dictate the mix of apprenticeships required.
By partnering with the right training provider and designing a programme tailored towards the business’s specific needs, financial services firms could use apprenticeship programmes to alleviate the pressure for digital and data skills in the industry.
David Palmer is market intelligence partner and future skills expert at BPP
