In recent years, Retail Financial Services organisations have had to make drastic changes in an effort to foster trust, embrace digital and ‘put the customer first’. Because of this, the requirements of leaders is changing and talent coming up the pipeline needs to possess a different set of skills and qualities to their predecessors. Per Ardua Associates Limited is a UK-based executive search firm focused on Board and Senior Executive opportunities in Financial Services. Its consultants discuss what the next generation of leaders will look like in Retail Financial Services...

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Margins are critical but the customer comes first

One of the challenges facing Financial Services’ businesses is the shift from a ‘product push’ and ‘margin first’ to a ‘customer first’ business model.  As a consequence of the Financial Crisis, the industry we all work in is operating under an increasingly intrusive regulatory regime where the focus on truly meeting and understanding customer needs is front and centre.  Leaders need to re-configure their business models to respond to this, whilst at the same time operating within a continuously evolving regulatory environment.  In many cases, this will require a fundamental strategic overhaul of their businesses.

Consequently, the talent pool below Executive Committee who aspire to be the future leaders are reinventing themselves. Many are adopting a mentality of ‘customer first’ and working back from this position to develop products that meet their customers’ needs as well as providing the necessary margins.  In banking, the large institutions are focused on re-building their reputations in the wake of a barrage of conduct issues, while the ‘challenger banks’ highlight their legacy-free status.  Restoring trust across the Financial Services sector is the priority.  Therefore, the next generation of leaders will be those that can successfully evolve to meet these challenges and embrace cultural change to ensure that they minimise the risk of conduct issues in the future.

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Digital (and more)

Customer and conduct focus is part of the equation but the next generation of leaders in Financial Services will need to have a deep appreciation of the changing dynamics in respect of digital running through their DNA, as well as being able to understand the fundamentals of the P&L.  This is something organisations are recognising in their talent management strategies.  Where career progression was linear - individuals moving through organisations within one function or one distribution channel - the focus is now on moving top talent around the business to create well-rounded professionals with broader experience.

In addition, the Financial Services industry is also tapping into talent pools in other sectors, such as technology and telecoms, to meet the challenge of identifying the next generation of leaders.  Talent from other sectors can provide fresh thinking on new channels and ways of engaging with customers.  Many Financial Services’ firms are organising workshops with companies in different markets or visits with technology firms for key personnel.  

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Talent Development

Individuals are managing their own careers more proactively and taking greater responsibility for personal development, rather than allowing their careers to be managed for them by the organisations they work for. This is because talent development in Financial Services can be formulaic and lacking imagination.  Often individuals progress through an appraisal system that is very structured with ‘top performers’ being identified by the number of boxes that they tick.  Looking ahead, businesses need to reach a level of sophistication that will allow them to re-define the traditional performance management framework and really focus on what is needed.  Given the increasing complexity of the industry and the broad range of skills that are required from the next generation of leaders, it seems unrealistic that all these attributes will be found in one individual.  This means the ability of senior leaders to recognise the skills they lack and build teams that make up for these deficiencies will be critical.

There is also a danger that organisations concentrate too much on the development of the senior population at the expense of identifying the best performers at more junior levels who represent the future of our industry.  Future leaders should be nurtured from day one and failure to do so will risk losing these individuals to other industries.  In many areas, the Financial Services industry lacks diversity and this can only be fixed by attracting talent from the broadest possible spectrum at entry level and then retaining that talent. 

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Will financial services continue to attract the best talent?

Much of the damage inflicted on the reputation of Financial Services has been related to a view that the sector attracted leaders with the wrong values because of the large financial rewards available.  The Financial Crisis has demonstrated that people are drawn to the sector for a range of non-financial reasons which will continue to remain relevant.  There is an unparalleled level of complexity within Financial Services and people get excited about leading within that because it is intellectually stimulating and requires maturity and strong leadership skills.  Those attracted to this environment are unlikely to opt for the relatively simpler business models in other sectors.  The sector is becoming more complex in the post Financial Crisis era, with the re-evaluation of customer relationships, the adoption of digital and the increasing regulatory burden providing a more challenging environment.

Despite this, the industry does face the threat of losing a generation of leaders if it does not remain vigilant. Talent will be attracted to sectors that are seeking to disintermediate the traditional business models in Financial Services much of which is related to the growth of the technology sector.  In addition, the experience Financial Services leaders have had of operating in a heavily regulated environment is already proving attractive to utility companies who are beginning to experience similar levels of regulatory enforcement. 

Finally, it is critical the industry ensures the right support is available to senior leaders in the wake of the Senior Persons Regime (SPR).  The aims of the SPR to ensure that there is clear accountability for decisions made are laudable.  However, there is a danger that if this is not carefully explained and implemented, it will act as a deterrent to the best talent remaining in or joining the Financial Services industry.  Failure to get this right will mean that the industry runs the risk of losing some of its brightest stars and its next generation of leaders due to a reluctance on the part of these individuals to step up and take on the extra burden of senior management responsibility.  It is important that the unintended consequence of the SPR is not less collegiate behaviours from senior leaders related to self-preservation.  If this is permitted to happen, it will disrupt and fracture carefully crafted executive teams and Boards whose strength has been the complimentary skill-set of each individual around the table where collective decision making is needed.  

About Per Ardua Associates

Per Ardua Associates Limited is a UK-based executive search firm focused on Board and Senior Executive opportunities in financial services. The company started in May 2008. There are seven practices: insurance; asset management; consumer financial services; corporate officers, HR, FS Real Estate and the Board practice. The Company has global coverage through its membership of IIC Partners, an international network of boutique firms.

Per Ardua Associates