The Financial Services Skills Gap: Are Baby Boomers the Answer?

The baby boomer generation is the fastest-growing workforce demographic in financial services. Here’s how the industry can do a better job of leveraging the generation’s wealth of knowledge and experience.

Appealing to the next generation of talent is often seen as a big part of the answer to closing the skilled labor gap. But in financial services, this approach won’t be enough, especially since the industry has an ongoing challenge to recruit young workers.

That’s why solving the skills shortage requires leveraging the talent that’s on hand. And in financial services, in large part that means baby boomers. Their wealth of knowledge and experience can fuel the digital transformation taking place in the industry—but all too often, the aging workforce is underutilized. 

Fastest-Growing Workforce Demographic in Financial Services

Millennials—those born between 1981 and 1996—are projected to make up 75% of the working population by 2025 in the United States.  But while the millennial-aged workforce is growing overall, it’s decreasing in financial services: in 1998, those aged 25 to 54 (millennials and Generation X) made up 76% of the workforce. In 2018, that figure dropped to 68%, according to research from Deloitte Center for Financial Services and the U.S. Bureau of Labor Statistics. 

That makes workers older than 55—the baby boomer generation—the fastest-growing demographic in financial services, going from 14% in 1998 to 26% in 2018. The proportion of older employees is higher in some sub-industries: in 2018, 40% of real estate appraisers and one-third of insurance sales agents were older than 55.

The growth of aging workers indicates that many are not retiring—they’re staying in the workforce. A host of reasons including increased life spans, insufficient retirement savings, and enjoyable work are among the reasons that older employees continue to work, Deloitte says. 

Despite baby boomers staying in the workforce longer, financial services companies often overlook them as an answer to the talent shortage and pour much more energy into recruiting and retaining the “digital natives”—the millenials and GenZers—to fill key roles. 

“With all of this evidence pointing to older workers as a possible way to solve the talent gap, you would think more financial institutions would have jumped on the boomer bandwagon already,” Deloitte says in their report  “Tapping Into the Aging Workforce in Financial Services.” “They may not have, in large part, due to legitimate hurdles and a few misconceptions.”

These hurdles and misconceptions include: 

  • Perception that boomers are reluctant to learn and adapt to technology.

  • Lack of company support and training for working in a digital environment.

  • Clash of working and communication styles between older and younger employees.

These are just a handful of the obstacles and biases that prevent financial services from fully utilizing the wealth of experience offered by older workers. As a result, companies end up sabotaging their digital transformation efforts and competitiveness in an ever-evolving marketplace.

Automation Increases, Not Diminishes, Value of Older Workers

Automation is among the hallmarks of the digital transformation, ushering in higher levels of productivity by eliminating routine and manual work. But the advancement is often seen as having a negative impact on older workers. “The Twin Trends of Aging and Automation: Leveraging a Tech-Empowered Experienced Workforce,” a report co-authored by Mercer, Oliver Wyman, and Marsh & McLennan Companies, sheds more light on this perspective: workers older than 50 are at mid-to-high risk of displacement by automation, and older low-skill workers tend to face a higher risk of displacement compared to those in higher-skilled professions.

But digital transformation is more than increasing the efficiency of tasks. It’s also about the changing nature of work. Automation frees up the time and effort that was once spent on manual tasks, and companies can invest those gains in magnifying the wealth of experience found in those who’ve been in financial services for decades.

It’s a viewpoint asserted by the Marsh & McLennan report authors, saying that “companies must seek to integrate the experience workforce into their broader strategy to reach greater success.” 

Companies need to create a structure of success to maximize the value of the skills they already have on hand, while also shaping the skills needed for the future.

Digital transformation is more than increasing the efficiency of tasks. It’s also about the changing nature of work.

Focus on Upskilling and Retention

Digital transformation is more than recruiting for much-needed skills—it’s also about shaping future talent. As Deloitte says, “companies can strike the right balance in their hiring and retention strategies, while taking advantage of the rise in older employees.” 

Let’s take a look at upskilling. While it’s often used synonymously with reskilling, upskilling focuses on “learning current tasks more deeply” while reskilling is “learning new skills for a new position.” For higher-skilled professions like financial services, upskilling helps experienced workers evolve—or “up”—their skills in a way that aligns with the needs of the future: Bank tellers turn into digital ambassadors by using analytics to predict the needs of customers beyond basic transactions. Insurance actuaries learn how to use data from health watches to create personalized risk assessments. These are just some of the examples that show how financial services are leveraging the value of experienced workers by augmenting their current skills with technology, tools, or enhanced learning. 

Retraining programs like upskilling also make sense from a cost advantage perspective. The Marsh & McLennan report on automation and aging included an analysis comparing the cost between retraining workers versus hiring externally in the wholesale banking sector: companies spent as much as $90 billion when they focused 100% on external recruiting, compared to spending as much as $40 billion when they allocated 80% on retraining and 20% on recruiting.

For higher-skilled professions like financial services, upskilling helps experienced workers evolve—or “up”—their skills in a way that aligns with the needs of the future.

For a successful upskilling program, companies should keep in mind the different learning styles across generations. “For instance, while all generations typically appreciate self-paced learning offerings, older professionals are more likely to prefer training programs that directly integrate with work and provide more timely feedback,” Deloitte says. “Firms should tailor trainings to fit with how different generations learn best.”

Part of upskilling is understanding the talent you have on hand. Analytics and data can help organizations understand the generational breakout of their workforce, using it as a launchpad to understand the workforce trends of specific organizations or departments. Data also helps companies understand the skills, workstyle preferences, and motivation patterns of their employees, which then can be used to create development plans that embrace the experienced, older workforce. 

The financial services industry is going through significant change, and companies need to utilize all their resources to fuel the transformation. Those resources include older workers, who make up the fastest-growing workforce demographic in financial services. When their work experience is augmented with technology, tools, and enhanced learning, older workers can close the skilled labor gap in their organizations and effectively become engaged in the digital transformation.

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