Addressing the Workforce Skilling Gap in UK's Financial Services

Jakub Cambor

June 14, 2024

Addressing the Workforce Skilling Gap in UK's Financial Services

The financial services industry is facing a significant skills gap, posing challenges for talent acquisition within sectors such as the mortgage industry. As the UK skills gap widens, with a staggering 92% of financial services firms reporting hard-to-fill vacancies, the urgency for bridging this gap is amplified in an era of rapid technological advances and shifting market dynamics.

This article will dissect the skilling challenges within the financial services industry, with a keen focus on the UK talent acquisition landscape, while also delving into strategies for overcoming the digital skills deficit to support sustained industry growth and competitiveness.

The Evolving Landscape of the Mortgage Industry

The financial services industry, particularly the mortgage sector, is undergoing a significant transformation driven by technological innovation and changing market conditions.

Here are some key developments:

Fintech Innovations: The integration of Financial Technology (Fintech) in the finance sector has been profound, introducing revolutionary services like internet banking, mobile payments, and cryptocurrencies, which have altered the landscape of the mortgage industry.
AI and Machine Learning: These technologies are at the forefront of change, enhancing various aspects of financial services from customer service to risk assessment and predictive analytics, thereby influencing mortgage lending practices.
Job Creation and Automation: Financial automation has not only streamlined processes but also created new roles, particularly for programmers and developers, to maintain and innovate banking automation systems.

Despite these advancements, the mortgage industry faces challenges:

Technological Change: A significant proportion of financial services leaders express concerns over the rapid pace of technological advancements, which necessitates a continuous adaptation strategy.
Competitive Edge: To remain competitive, financial firms are adopting a tech-company mindset, which involves embracing technology and innovation at the core of their business models.

Recent trends and statistics in the mortgage industry highlight the dynamic nature of the market:

Mortgage Rate Changes: Lenders like NatWest are adapting to market volatility by pledging to give brokers advance notice on mortgage rate changes, while the number of new second charge agreements and searches for second charge mortgages have seen year-on-year growth.
Property Market Movements: Average UK house prices have experienced fluctuations, with predictions of a 2% fall in 2024 by the OBR, and lenders like Foundation Home Loans and Nationwide Building Society are making strategic moves to cater to market demands.
Interest Rates and Inflation: The mortgage sector has seen varied interest rate trends, with two-year fixed mortgage rates dropping significantly and lenders announcing rate cuts in anticipation of a potential fall in the Bank of England base rate.

The mortgage industry is also adapting to socioeconomic shifts:

Remote Work Impact: The shift towards remote work has increased the demand for mortgage loans in less urbanised areas, impacting lending patterns and property market trends.
Pandemic Response: Lenders have responded to the COVID-19 pandemic by implementing stricter mortgage lending regulations and offering payment deferrals to support affected borrowers.

The skills gap remains a pressing issue:

Skills Crisis: The UK financial services sector, including the mortgage industry, is grappling with a significant skills crisis, exacerbated by Brexit, the pandemic, and the rapid departure of older employees.
Digital Talent Demand: As bank branches close and digital services become the norm, the competition for digital talent intensifies, driving wage inflation and staff turnover.
Regulatory and Technological Demands: The evolving regulatory environment and digital transformation needs are fuelling the demand for skilled mortgage professionals, with roles such as mortgage underwriters and loan originators being in high demand.

By addressing these challenges and capitalising on emerging opportunities, the mortgage industry can navigate the workforce skilling gap and continue to thrive in an increasingly digital financial services landscape.

Identifying Key Skilling Gaps

In the financial services industry, particularly within the mortgage sector, identifying key skilling gaps is critical to maintaining a competitive edge and ensuring a high-quality customer experience.

The emergence of new technologies and the evolution of market needs have rendered certain skills obsolete while simultaneously creating a demand for new competencies.

Here are some of the pivotal skilling gaps that have been identified:

Digital Literacy and Technological Proficiency: With a staggering 54% of CEOs in the financial services sector acknowledging that a lack of key skills negatively impacts customer experience and innovation, it's clear that digital literacy is not just a desirable attribute but a necessity. The rapid pace of technological change and digitalisation, including the increasing use of data, underscores the importance of digital literacy, data analytics expertise, and software development skills.
Advanced Analytical Skills: Data analytics and insights are among the most sought-after technical skills in the sector, with a 20% gap between demand and supply. This gap highlights the need for professionals who can not only interpret complex data but also leverage this information to drive decision-making and strategy.
Soft Skills and Business Acumen: Beyond technical prowess, there is a growing need for soft skills such as coaching, relationship management, and the ability to persuade and influence colleagues. These competencies are vital for fostering collaboration, ensuring accountability, and enhancing stakeholder management.

To address these gaps, the industry must adopt a multi-faceted approach:

Enhancing Education and Training: Collaborative efforts between the Financial Skills Sector Council (FSSC), employers, and the UK government are essential to develop targeted strategies that address these skill deficiencies. This includes updating curricula to include relevant competencies and creating continuous learning opportunities for existing employees.
Attracting Diverse Talent: The industry must broaden its talent acquisition strategies to include candidates from various backgrounds, thereby enriching the talent pool with diverse perspectives and skill sets. This includes tapping into non-traditional talent pools and emphasising the value of soft skills alongside technical expertise.
Leveraging AI in Recruitment: AI is transforming talent management in financial services, presenting both challenges and opportunities in workforce building. By harnessing AI, companies can identify candidates with the right blend of skills more efficiently and mitigate the impact of the skills gap.

In conclusion, the financial services industry must remain vigilant in identifying and addressing the evolving skilling gaps. By doing so, it can ensure the long-term competitiveness of the UK financial services sector and continue to meet the complex demands of financial products, regulations, and technologies.

Strategies for Bridging the Talent Gap

To effectively bridge the talent gap in the financial services industry, particularly within the mortgage sector, organisations must adopt a strategic and multifaceted approach to talent development and acquisition.

The following strategies are pivotal in addressing the skills shortage and ensuring a workforce
capable of adapting to the evolving landscape:

Reassess Recruitment Processes: Financial organisations should broaden their recruiting process to search for candidates with a diverse array of soft skills, such as behavioural awareness and critical thinking, in addition to financial acumen. This approach includes tapping into talent from various educational and work backgrounds, even those outside the traditional finance industry, to bring fresh perspectives and adaptability to changing environments.
Invest in Training and Development:Specialised Soft Skills Courses: Invest in qualified trainers and additional training courses to enhance soft skills like mentoring and coaching. These skills are crucial for fostering a collaborative and innovative workplace culture.
Digital Literacy and Regulatory Knowledge: Ensure financial professionals possess a foundational level of digital literacy and are well-versed in key regulatory issues such as anti-money laundering, senior investing challenges, insider trading, and cybersecurity.
Leverage Learning Technologies: Utilise Learning Experience Platforms (LXPs) for personalised content and peer collaboration, embracing microlearning and social learning methods that can rapidly build future skills.
Leadership and Tech Training: Develop leaders from within by training emerging leaders on digital capabilities, succession planning, and technology advancements. Tech training prepares staff to better support digital transformation, optimise customer service, and ensure regulatory compliance.
Proactive Talent Development:Upskilling and Reskilling: Implement comprehensive upskilling and reskilling training programs to develop talent within the organisation, ensuring employees are equipped to handle AI, ML, RPA, Blockchain, DLT, and data analytics.
Mentorship and Continuing Education: Encourage mentorship initiatives and support continuing education opportunities to facilitate knowledge transfer and enhance skills in line with the latest industry trends.
Performance Feedback and Recognition: Offer regular performance feedback and recognition to motivate employees and identify areas for improvement, thereby fostering a culture of continuous learning and growth.

By implementing these strategies, financial services companies can cultivate a workforce that is not only technically proficient but also adaptable and innovative, positioning themselves to thrive amidst the challenges of digital transformation and an ever-changing market.

Embracing Technology for Effective Skilling

Embracing technology is crucial for the mortgage industry to effectively skill its workforce and meet the demands of a digital-first market.

Here are ways how technology can be harnessed for effective skilling:

Digital Literacy and Proficiency:

E-Learning Modules: Develop comprehensive e-learning modules that focus on enhancing digital literacy among mortgage professionals, ensuring they can navigate and utilise new software systems and platforms.
Interactive Workshops: Organise interactive workshops that simulate real-world scenarios, enabling professionals to gain hands-on experience with the latest digital tools.

Data Analytics Expertise:

Data Analytics Training: Provide specialised training in data analytics to empower professionals with the ability to analyse market trends and make data-driven decisions.
Collaboration with Tech Experts: Encourage collaboration between mortgage professionals and data scientists to foster a deeper understanding of how analytics can be applied within the mortgage sector.

Software Development Skills:

Coding Bootcamps: Offer coding bootcamps that teach the basics of software development, tailored to the needs of the mortgage industry.
Cross-Functional Teams: Create cross-functional teams that include software developers, allowing mortgage professionals to learn from their expertise in automation and digitalisation.

Coaching and Creative Thinking:

Mentorship Programs: Establish mentorship programs that pair experienced mortgage advisors with newcomers to coach them through the complexities of the mortgage process.
Innovation Labs: Set up innovation labs where mortgage professionals can work on developing creative solutions to industry challenges, fostering an environment that encourages out-of-the-box thinking.

Process Design Skills:

Process Optimisation Workshops: Conduct workshops focused on process design and optimisation to streamline mortgage processing, making it more efficient and customer-friendly.
Certification in Process Design Methodologies: Offer certification courses in the latest process design methodologies and tools, keeping professionals abreast of the best practices in the industry.

By integrating these technology-driven skilling initiatives, mortgage professionals can better adapt to the changing landscape, improve efficiency, reduce costs, and enhance the overall customer experience. It's imperative for professionals to continuously develop their digital literacy, data analytics, software development, coaching, and creative thinking skills to remain competitive and provide innovative solutions within the UK home buying sector.

Conclusion

As the UK financial services industry, with a spotlight on the mortgage sector, progresses towards a technology-driven future, the imperative to close the workforce skilling gap becomes increasingly evident. The synthesis of technological advancement and the cultivation of a diverse, adept workforce must operate in tandem to address the current and future challenges faced by this dynamic sector. The commitment to investing in digital literacy, comprehensive data analysis, and soft skills will fortify the industry's foundation against the tides of change and ensure its sustainable growth.

The strategic embrace of advanced training methods and a creative, continuous learning culture underpins the resilience of the UK's home buying sector. Such progress underscores Novus Strategy's role, aligning with the enabler perspective as we navigate this evolution with lenders, law firms, brokers, and vendors. By fostering this environment of growth and adaptation, we fortify the industry for upcoming advancements, ensuring a steady course in the digital transformation journey. Discover more about how Novus Strategy supports this vital transformation in the sector and empowers your organisation to thrive in the evolving digital landscape.