Employee Retention Strategies in the Finance Industry
Employee retention in financial services
With the expansion and retention of clientele, financial institutions now focus on the retention of their analysts, bankers and private wealth managers. Currents trends in technology, such as the arrival of the bots, have created significant disruption. While the cost of turnover is too high to ignore, it is not strategic for an organization to try to do everything for everyone. Therefore, financial institutions grow assets when they identify what is highest priority of high performers in their organization. Some may find that they need to ramp up Diversity and Inclusion practices, while others will create the biggest impact through a revision of bonus packages or career advancement opportunities. Financial institutions who engage their new hires while retaining top talent do so using the same data driven strategies they use to identify financial opportunities. Now is the time HR can bring advanced tools and technologies to address these real challenges.
- The overall turnover rate in the financial services industry in 2017 was 27.5 with 16.2% being voluntary turnover
- This is a slight increase from the 2016 total turnover rate of 26.1% and voluntary turnover rate of 14.6%
- The average tenure of banking analysts and associates in 2005 was 26 months. By 2015 it dropped to just 17 months
What is the Cost of Turnover in Banking Industry?
As the turnover rate for financial analysts continues to rise, the average tenure continues to drop. It takes considerable time and effort to recruit and train an analyst. They must be taught new systems, technologies, mindsets, and behaviors. They must be integrated into the culture of the firm. It can easily take more than 6 months for an analyst to ramp up to productivity. Thus, an organization can conservatively estimate that the minimum cost of replacing an analyst is around 50% of their annual salary, or around $50,000 to $100,000. The cost of turnover for those who are customer-facing or in business development roles is even higher, averaging 200% to 400% of their annual salary. A Cost of Turnover calculator can be helpful to estimate quantifiable impact on the business. With such high costs of turnover in the financial industry, saving just one or two employees can often pay for itself.
Employee retention strategies for financial services industry
Financial services leaders have historically believed that regulation leads to attrition. While this is still true, it is only part of the picture. To create a full view of what causes turnover in the financial services industry today, leaders are looking to current industry trends.
1.Rise of People Analytics
Financial services, along with pharma and tech, is one of the industries paving the way for how people analytics can be leveraged in talent management. The reality of implementing new technology, however, is that employees have to change the way they work. The financial services industry is generally future orientated, but it is not immune to the fact that change is typically met with resistance which then leads to frustration, lower productivity and often to turnover. Firms who successfully retain their top talent train their workforce on more than just new systems. They train employees on adaptability to change, transparent communication, and new ways of working together.
2.Arrival of the Bots
With the rapid development in artificial intelligence, machines now replace many job functions with increased efficiency and cost reduction. It is only a matter of time before the role of financial analyst will morph into a very different role. The constant evolution of AI is shifting workplace dynamics. Financial institutions must cautiously navigate the heightened sensitivity around job security, to avoid a dip in morale and employee engagement. Two way communication is the key to uncover what employees think about day to day and how committed they are long term.
3.Lag in D&I (Diversity and Inclusion)
Financial services is not immune to the current social movement pushing for progress in diversity and inclusion. The current social climate, in combination with new regulatory standards requiring transparent D&I reporting has pushed this topic to the forefront of leaders across financial institutions. Transparency in recruitment practices and the promotion funnel has helped to reveal that there are gaps in perception of diversity and inclusion. Firms who attract, retain and grow top talent take this one step further. They leverage advanced analytics to discover and address root problems that get in the way of equal opportunities in their institution.
How Retensa improves employee retention in financial services:
- Exit Interviews start you off with actionable intelligence by asking the right questions. Using a third party like Retensa to conduct exit interviews creates the safety net people need to avoid burning bridges and be really honest about why they are leaving. Pinpoint the root causes for high turnover at your financial services institution and prepare strategies to help increase retention today.
- Retention Skills Training is critical because being a great manager takes different skills than being a great analyst or junior banker. It takes years of experience to be able to proactively identify individuals who are disengaged and at risk of leaving. Why not give your managers the skills they need to motivate and retain their staff in just 4 sessions? Retensa provides data-driven training based on customized insights from what your analysts and bankers say they want and need from leadership. Don’t lose any more analysts or bankers to the competition. Invest in training that is customized to the needs of your financial institution.
- Retention Diagnosticidentifies the areas where your organization is excelling when it comes to retention, as well as where it can focus to create the biggest impact. In financial services, there will always be high stakes, longer than average hours, and client pressures. Retensa focuses on the issues you can control. To reduce analyst turnover, you need more than just knowing the root causes of low morale, high absenteeism, or disengagement. You need clear and actionable recommendations to retain your best future and current bankers.
Retention does not get easier by itself. But there are real tactics that work in finance. It succeeds when we get proactive to reduce turnover and increase connection to the firm and future. Call us now at (212) 545-1280 or email a retention expert here