Are ethical concerns causing Wall Street exodus of talent?

Millennials are a growing force in the US, overtaking Generation X in the workplace and baby boomers more generally as the largest living generation.

 

According to the Pew Research Center data, the number of people aged between 18 and 35 across the country reached 75.4 million in 2015.

 

Otherwise known as Generation Y, millennials are having a huge impact on the economic, social and political landscape of the US and other nations. This demographic is often stereotyped as being tech-savvy, focused on a good work-life balance, socially responsible and champions of diversity.

 

But are these qualities causing many millennials to turn away from the financial services (FS) sector?

Is the US facing a banking talent crisis?

A recent Quinlan & Associates study found that 34 per cent of Wall Street banking employees are planning to leave their current job within the next two years. A further 37 per cent are undecided, suggesting more than seven in ten staff are open to the idea of switching employers.

 

This trend alone isn’t worrying; staff turnover is a sign of a healthy recruitment market and often signifies growth in the sector. However, what may concern employers is that 28 per cent of people intending to change jobs want to either move to another industry entirely or take a career break.

 

Moreover, fewer people are entering the industry. Columbia Business School revealed that only 14 per cent of MBA graduates chose an investment-banking career in 2016, compared with 27 per cent in 2011. This is a recurring pattern across the country, with a growing number of young people turning to the tech industry as an alternative.

 

The report found that the financial impact of these changes for the banking is industry significant. Just a one per cent increase of the voluntary employee turnover rate costs banks between $250 million (£191 million) and $500 million to find and replace staff worldwide.

Why are young employees disinterested in FS?

The Quinlan & Associates research uncovered various reasons why people were unhappy with their current role, including declining salaries, a lack of promotion opportunities and problems with team dynamics.

 

However, among younger employees, the reputation of the industry following the global financial crisis (GFC) has been a crucial factor. Millennials also appear to be disgruntled with the gruelling working hours and poor social life associated with an investment-banking career.

 

These findings were echoed in a report from the Toigo Foundation, which emphasised the effect of ethical concerns on young Wall Street employees. For example, many people interviewed for the study said diversity and inclusivity were potent issues.

 

“I transitioned to tech where the company says: ‘We care about you.’ That message alone gives you a sense of belonging and value. In banking, the messages are conveyed through your bonus. Not everyone is motivated solely by money. We want to feel engaged,” said one survey respondent.

 

FS firms have made substantial efforts to improve diversity in recent years. In the UK, the government launched the Women in Finance Charter to increase gender equity within the industry, and many countries have diversity targets for FS.

 

However, employees within the industry appear sceptical about the results.

 

“To build an inclusive culture, you have to be authentic and genuine about it. Simply updating a website or recruiting materials to show under-represented talent doing cool work won’t change an employee’s mind if they are considering Facebook. They have to do more,” another participant stated.

How can banks stem talent outflows?

The Toigo Foundation said that while millennials were initially the demographic turning to new industries, senior employees are following suit in the search for better hours and greater workplace satisfaction.

 

This suggests the US banking industry could face a significant shortage of key staff in the years to come. So how can organisations attract and retain both the younger generations and any senior personnel that may be weighing up their options.

 

Make inclusion a priority: Inclusion means more than just diversity. The Toigo Foundation said the wider workforce must feel valued, engaged and welcomed in their industry. FS firms that recognise individuality, while also encouraging and rewarding participation, are more likely to engender loyalty.

 

Align mission statements with values: Millennials are particularly keen to work for businesses that align with their belief systems. Organisations that only pay lip service to their claimed objectives and don’t understand the shift towards corporate social responsibility (CSR) may struggle as the modern workforce evolves.

 

Be vocal about ethical concerns: A key theme among survey respondents in the Toigo Foundation report was the moral ambiguity of banks. Many FS firms choose to stay neutral on current affairs, while tech counterparts are often quick to take a stance on the environment, politics and social issues. Sitting on the fence may not be the best approach for an industry attempting to mend its reputation in the wake of the GFC.

 

Invest in corporate governance functions: Talk is cheap, so businesses may want to consider quantitative measures to prove they are abiding by ethical practices and meeting their regulatory obligations. Developing an effective corporate governance function is an essential part of this process, but high-profile organisations are often found lacking in this area.

 

Ultimately, the workforce is changing, and Wall Street could suffer a significant brain drain from the finance industry into other sectors if businesses fail to account for shifting trends in the labour market.

 

Focusing on inclusion, ethics and CSR could help FS firms appeal to a new breed of globalised worker who is keen to align their personal and professional values.

 

Our 2017 Market Reports combine our review of the prevailing conditions in the corporate governance recruitment market together with the results of our latest employer survey.

 

Image: TomasSereda via iStock