Financial Services. Workforce Development Strategy. Issues Paper. Introduction. About the industry

Transcription

1 Financial Services Workforce Development Strategy Issues Paper Introduction Australia s Financial Services industry is large, diverse and growing. But it faces a range of challenges related to recent and ongoing economic, regulatory, demographic, social and environmental changes. It is timely for the industry to consider how best to recruit, skill and structure its workforce for the future. About the industry The Financial Services industry offers a wide range of services and products, including: accounting and book keeping services business loans, home loans and personal loans stock exchange, share registry, trustee operations and credit agencies money market dealing, funds management financial planning and investment advisory services insurance services (life, health and general insurance) and insurance brokerage mortgage brokerage services debt collection services industry, corporate, public and self managed superannuation funds operations The industry has assets of around $5.6 trillion nearly four times nominal GDP, and it has experienced the strongest growth of any Australian industry in recent years 1. Superannuation funds, banks and insurers dominate the industry s revenue base. However, even the smaller sectors are still reasonably high earners, in relative terms. The health of the Financial Services industry is closely tied to the general economic and financial market conditions. As such, the industry around the world has experienced a particularly challenging five years. Once this period of adjustment ends, economic growth in Australia will accelerate again, and this industry is expected play a key role in financing the country s expansion. 1 Austrade (2013) Why Australia: Benchmark Report Update June 2013 Page 1

2 About the workforce The Financial Services industry employs around 552,000 workers, or 4.7 percent of the Australian workforce. Most people in the industry are employed by banks, building societies and credit unions or accountancy firms. Employment numbers have been fairly stable across the industry in recent years. FIGURE 2: PERSONS EMPLOYED IN FINANCIAL SERVICES INDUSTRY BY SECTOR 2013 Superannuation 2% Finance nfd 6% Auxiliary finance and investment 17% Other 3% Banks, building societies, credit unions 31% Insurance 17% Accounting services 24% Source IBISWorld Industry Report M6932 Accounting Services in Australia May 2013; ABS, Labour Force, Australia, Detailed, Quarterly, May 2013; SuperTABLE E06_aug94 - Persons employed by Sex, Industry (3 digit), State, Status in Employment, August 1994 onwards Two groups, Clerical and Administrative Workers and Professionals, dominate the financial services workforce, accounting for around four in every five workers. Accountants, accounting clerks and bookkeepers are the most common occupations in this industry. Together, these three occupations employ 435,000 people across the economy. The Financial Services industry is one of the most highly educated industries in Australia, with 57.5 percent of the workforce in the industry holding an advanced diploma or higher. 2 The higher education sector plays an important role in the provision of skills in this industry, with 40 percent of workers holding a bachelor degree or higher qualification, compared to 26 percent for all industries and 23 percent of workers have a Certificate III or higher VET qualification 3. Access to highly skilled human capital will become increasingly important for the sector if it is to maintain productivity growth and compete in the most innovative and high value add services 4. 2 Austrade (2013) Why Australia: Benchmark Report Update June DEEWR (2013) Australian Jobs Mulino, D. (2013) Funding Australia s Future: Improving Australia s Financial Infrastructure Page 2

3 Workforce development challenges Regulation The Financial Services industry is highly regulated and in recent years has been subject to intensified regulatory requirements, generally in order to build the transparency, global interconnectedness and stability of the financial system. Regulatory changes can have a pronounced effect on demand for services, the industry s dynamics and how innovative firms can be. A recent survey found ninety percent of finance and accounting executives felt that managing recent regulatory changes has been challenging. For some businesses, cultural change is required to improve the focus on ethics and transparency. For others, new organisational structures to bolster compliance capabilities need to be established, including internal controls and governance mechanisms. Others will need to focus on finding ways to innovate within a more tightly controlled environment. Technological change Technological change has been largely responsible for continual changes in the structure of the financial services workforce, including the offshoring of low level jobs and the fragmentation of financial services into narrower areas of specialisation. Technology is also affecting how firms do business. This industry is more exposed than almost any other to digital forces. Over the next five years financial services firms will need to better understand and use a range of technologies including the cloud, mobile apps, social media, big data and analytics, and defences to cyber threats. 5 Finance firms need a strategic understanding about technology in order to know which of the various products and platforms should be adopted and how they should be deployed within the organisation. Firms also need staff who can sort masses of data, draw conclusions and effectively communicate what the data is saying. Social media presents new marketing opportunities but also new opportunities to improve workforce efficiency by enabling employees working across various teams and locations to interact and share information and best practice. This industry also needs to consider the particular ethical and legal risks associated with applying different technologies. Global thinking As financial markets and regulatory arrangements around the world continue to become harmonised, standardised and globalised, the industry is more and more connected with global decisions and events. Furthermore, with an expanding middle class in Asia, particularly in China, new markets are being created for financial products. Australia s financial institutions are well positioned, geographically and in terms of expertise and business connections to capitalise on these emerging markets. Engaging with economies in Asia region and beyond will create a financial services system that is more outward focused, more competitive and more innovative and it will increase the likelihood of attracting more skilled employees 6. Australian finance managers need to improve their knowledge of international markets, particularly of Asia, in order to improve the competitiveness and productivity of their businesses. 7 Firms will benefit by fostering a global approach by recognising and respecting different perspectives and broadening and deepening their employees understanding of other cultures, languages, political, economic and social systems. 5 Hillard, R. (2013) Banking technology trends Mulino, D. (2013) Funding Australia s Future: Improving Australia s Financial Infrastructure 7 CPA Australia (2013) Australia s economic reform priorities Page 3

4 Risk management Risk management has always been integral to work in this industry. But new types of risks are emerging that firms will need to understand. For example, the management of natural capital risks ; the risks associated with environmental externalities such as damages from climate change, pollution and depletion of natural resources, are becoming more important. Financial institutions are increasingly thinking about how environmental factors, weather extremes, volatile commodity prices, carbon liability and water challenges affect their clients and their own bottom line. A growing group of banks, investors and insurance firms recognise the need for a broader understanding of emerging natural capital risks in bond and equity markets, insurance and lending 8. In coming years, it is expected that organisations may need to develop expertise, tools and metrics to integrate these risks into various financial products and to report on these issues in public documents. Attracting a diverse workforce There is a strong business case for organisations to focus on workforce diversity. Benefits for businesses include: Broadening market share via gaining insights into diverse customers and local environments Promoting innovation and risk management by including diverse perspectives, and Enhancing brand and reputation. 9 Also, for the Financial Services industry to respond quickly to changing market conditions in the face of specialisation and innovation, it will probably be necessary for firms to import skilled labour from overseas countries 10. A recent study on the diversity and inclusion strategies of employers in Australia and Asia revealed business leaders have a high level of awareness about the importance of workforce diversity but are failing to implement a range of strategies to meet critical business needs; they are talking the talk but not walking the walk 11. In the Financial Services industry, gender diversity is a particular issue that needs attention. Financial Services has the second widest pay gap of all industries at 31.4 percent, close to double the average pay gap. Customer service Financial services firms are seeing increased customer expectations in relation to simplicity, transparency and speed of transactions. These higher expectations, along with the increasing range of financial products on offer and an enhanced ability for customers to self serve using the Internet for basic requirements, means the role of the frontline worker is becoming more complex, requiring better communication and interpersonal skills. To create a consistent customer experience, many financial organisations need to transform their culture as well as their operations, allowing staff to understand the customer rather than the product and be responsive in supporting customer demands. Another challenge for financial services is to deliver a seamless experience to customers as they move from one channel eg mobile, ATM or branch to another within an institution, and to integrate their back office systems with their customer interface. 8 National Sustainability Council (2013) Sustainable Australian Report Deloitte (2011) Only skin deep? Re-examining the business case for diversity 10 Mulino, D. (2013) Funding Australia s Future: Improving Australia s Financial Infrastructure 11 Adecco (2013) The reality of talent: issue five diversity Page 4

5 Retaining workers Eighty six percent of Australian Chief Financial Officers and Finance Directors feel it is challenging or very challenging to find the right skilled professionals in today s hiring market. Almost the same proportion have expressed concern about losing top performers to rival job offers over the next 12 months. 12 Staff retention and effective staff management strategies are expected to be a high priority for finance companies in coming years as the labour market tightens and the workforce ages. As economic conditions improve and the employment market turns, employees are expected to have more power and choice over their working environment. They may be seeking a better understanding of their employment options and a greater say in how work is assigned, assessed and rewarded. A key trend in workplaces is the increasing use of social media and social analytics to strengthen decision making and increase workforce collaboration. Getting the workplace environment right for high performance and innovation requires strong leadership skills. Changing demographics mean that leaders need to have the skills to nurture cross generational relationships and adapt to the emerging and evolving needs of employees. What do you think? What are the most important trends impacting on the workforce in the next five years? How will the workforce need to change to accommodate these trends? What workforce development strategies will businesses need to employ to respond to the anticipated changes? Please send your responses to Katy O'Callaghan, katy@outpostconsulting.com.au 12 Robert Half (2013) 2013 Salary Guide: Finance and Accounting Page 5

6 References ABS (2013) Labour Force, Australia, Detailed, Quarterly, May Adecco (2013) The reality of talent, Issue five: Diversity. AU/news andmedia/documents/adecco_reality_of_talent_diversity_ipad.pdf Austrade (2013) Why Australia: Benchmark Report Update June Resources/Benchmark Report DEEWR (2013) Australian Jobs jobs publication Deloitte (2011) Only skin deep? Re examining the business case for diversity. Capital/Diversity/Deloitte_Only_skin_deep_12_September_2011.pdf Hillard, R. (2013) Banking technology trends Deloitte. f70arcrd.htm IBISWorld (2013) Accounting Services in Australia Industry Report M IBISWorld (2013) Finance in Australia Industry Report K Mulino, D. (2013) Funding Australia s Future: Improving Australia s Financial Infrastructure. Australian Centre for Financial Studies. al_infrastructure.pdf National Sustainability Council (2013) Sustainable Australian Report Robert Half (2013) 2013 Salary Guide: Finance and Accounting. guides Page 6