The Investment Studies Center (ISC) at Union of Investment Companies (UIC) in collaboration with McLagan, held a seminar on " Compensation & Talent Related Trends in the Financial Services Industry " on Thursday, 21st March 2019 at the Chairman’s Club. ISC hosted Mr. George Broniszewski - an Associate Partner at McLagan and Mr. Hubertus von Drabich - an Associate Partner in McLagan’s Dubai office, to present the seminar.
Ms. Fadwa Darwish, Director of Technical Support and Director of the Center for Investment Studies, opened the seminar welcoming the instructors and the attendees, and delivering an introduction to the content of the seminar, clarifying that 10 years after the financial crisis, the sector is better and safer. Post crisis, regulators across the globe mandated changes that have increased banks’ capital strength and ability to withstand future crisis. Culture and conduct are now terms that are pivotal to shareholders, regulators, and bank management alike.
Then the she left the floor to the instructors, who tackled the following concecpts:
? With the global economy beginning to slow down, most firms will first and foremost be focused on maintaining business results. The second is digital and the continued focus on leveraging technology to do things better. The banking business is re-shaping, driven largely by advances in digital initiatives and technology. This investment will need to continue even if the cycle turns.
? Recent adjustments to compensation strategies are being driven by changes in talent and how firms compete. Compensation strategies today are very different to what they were 10 years ago – primarily driven by regulation, dismantling of certain businesses, being less leveraged, less profitable, technology transformation reshaping staffing profiles, increased investment in the industry etc.
? First, and most notable, is the convergence of the technology and financial services industries, which is forcing banks to re-visit their entire employee value proposition. A key difference in pay between the two industries is that technology firms are more effective in differentiating pay for top performers. This is in large part due to the use of equity that is both a valued vehicle, especially compared to bank stock, and distributed in a less structured approach than in banks. Although banks are not there yet, salary ranges are being challenged and altered and HR is more focused on pay for top technology talent.
? Secondly, the way banks view local talent and pay is changing. 10 to 15 years ago, firms typically looked at salaries for local markets and small cities as a discount to larger locations. However, as location strategies and talent pools continue to evolve across the globe, HR and reward teams are closely examining local market pay levels that broadly span financial services and even other industries. Banks are now both thinking and acting locally.
? Navigating the uncertainties that lie ahead can be challenging and competition for certain skill sets is at an all-time high. You can’t hit what you can’t see and education is the first step. It may sound obvious, but understanding the competitive market for pay and talent is critical for firms to assess where they currently stand. Furthermore, generational and regional differences drive alternative views on both pay and the broader employee value proposition. The banking business is evolving very quickly and talent strategies, including assessment, performance management, and pay, must be clear, yet flexible, to stay aligned with this transformation.
? The evolution of digital transformation and technology-driven change in all areas of banking is resulting in a convergence of talent. Technology firms have the edge here, with more flexibility in pay packages, a culture of innovation, and more favorable perks/benefits. In short, tech firms generally offer a better Employee Value Proposition, and it is here that banks and financial services firms are now more broadly focused.
? Despite these emerging challenges resulting from tech disruption, banks will not only survive, but firms that lead in adopting and delivering technology-driven change will thrive. Banks and HR teams will continue to educate themselves on talent practices across technology, as well as other sectors as their human capital becomes more diverse. The employee lifecycle at a bank will continue to change at all stages, from hiring practices and assessments to performance management and pay.
? Creative solutions are in a bank’s DNA. A multi-faceted human capital strategy that attracts, retains, and promotes the best talent of the future is key.
Also, it is worthy to mention that the audience at the seminar included representatives from UIC member companies, banks, and other entities, who evoked different inquiries about the subject of the seminar.