A critical asset
15 Sep 2021
Talented people are critical assets to companies despite the enhanced technologies that are out there today. Experts say while there is always more to be done to promote diversity across financial markets, there is strong evidence to indicate things are moving in the right direction
Image: olivier_le_moal/stock.adobe.com
While enhanced digital capabilities and fancy technologies like artificial intelligence (AI) and machine learning can be extremely valuable to a company, a person who is innovative, hardworking, and reliable is a tremendous asset to any organisation.
Retaining and nurturing talent is important as these people could make up the future leaders of the business. In addition, there are significant costs involved in training and development so it is important to get a return on this investment. As well as this, highly talented and innovative people have the potential to really bring out the best in other employees.
Asset servicing is a service-led industry, and so people are a critical asset.
Man vs machine?
The role of human input will always be crucial despite the value of new technologies. Technologies like AI can replace manual human tasks in the asset servicing industry but there is one main difference between the two; AI lacks common sense.
AI is only as good as the data fed into it. For example, while AI can help to increase the speed and accuracy of predicting the probability of events occurring by processing larger volumes of data faster than a human ever could, it cannot be heavily relied upon to predict risk.
AI is not good at predicting black swan events, tail risk, and the impact of events with no historic precedent such as COVID-19.
Automation can help firms move away from manual processing and allow people to focus their efforts on higher value activities that help reduce risk.
Therefore, industry participants need to strike a balance between implementing technology to save employees’ time, while also retaining talent.
Looking at the hedge fund space, for example, Alternative Investment Management Association’s (AIMA) research and engagement with members have reinforced the notion that hedge funds are placing a strong emphasis on achieving operational efficiencies through automating some parts of their business.
Tom Kehoe, global head of research and communications, AIMA, says: “Despite some concerns that increased automation could lead to job losses broadly across the financial industries, the reality seems to be that employing technology that enables the business to work more efficiently primarily seeks to lift the burden of more administrative roles across the various hedge fund functions.”
“Further, doing so allows investment managers and traders to have more time to focus on delivering performance. Beyond the front-, middle- and back-office, teams can also significantly reduce resource allocation to operations which would typically require manual input.”
Subsequently, AIMA notes the skill set for various roles within hedge funds is changing to include a greater need for technology.
Nurturing new talent
There are a number of strategies a firm can carry out to nurture new talent. Industry players say there is a focus on developing a more diverse and inclusive talent pool in the asset servicing space.
Rosie Guest, chief marketing officer and executive committee member, Apex Group, says this is something Apex is focused on, having recently conducted an environmental, social and governance (ESG) gap analysis to ensure the group focuses its efforts on attracting and developing a broader range of talent.
Guest adds: “We also utilise the Apprenticeship Levy and support around that and have a focus on investing in attracting graduates to our junior roles; in some locations we are also looking at implementing a university structure.”
There are many benefits to the Apprenticeship Levy, as it is there to fund apprenticeship training for all employers. Any unspent levy funds are used to support existing apprentices to complete their training and to pay for apprenticeship training for smaller employers.
Discussing what firms are doing to nurture new talent within the asset servicing space, Paul Chapman, co-founder and managing director of HornbyChapman, observes that generally speaking, millennials and Gen Z are much keener on their employer taking a deeper and more value-added role in the community and environment than their predecessors.
Chapman says that “while this is admirable, it can lead to ‘greenwashing’ tactics being employed by firms and also evidences a lack of appreciation that in order to survive, a firm needs to make money — if youngsters scratch beneath the surface of many firms they would be disappointed with what they find with respect to their firm’s ESG credentials and the extent of value a firm is giving to the local community”.
At a senior level of employee hiring, firms remain reluctant to hire outside the industry — buy-side staff may go to sell-side, and vice-versa, but rarely do hires from outside of the industry gain entrance or, if they do get hired, achieve success and longevity, according to Chapman.
Meanwhile, in the alternative investment space, AIMA recently surveyed members to find out what facilities they had in place to help new talent enter the industry.
The majority of respondents highlighted the popularity of internships enabling employers and employees to benefit from having a short-term industry experience (typically six months) to ascertain whether the employee has (or can develop) the right skill set to work at their firm.
In many industries, it is not uncommon for a company to launch a graduate programme every year. Graduate programmes are entry-level jobs that also double as training programmes. They allow the employee to experience multiple areas of the company and build up their skills and knowledge.
According to Kehoe, when it comes to attracting the top graduates, hedge funds may have to compete with Wall Street and the big tech names, depending on their strategies.
By any metrics, hedge funds have, on average, had a stellar H1 and will need to bring in new talent as they scale up, on the back of significant inflows from investors and strong revenue streams.
“The hedge fund industry is highly competitive and relies on relationships to source proven performers, but the larger names within the space have established talent pipelines with various educational institutions to make sure they can see who the stars of tomorrow might be,” says Kehoe.
Improving diversity, equity and inclusion (DE&I) is a top priority for the industry and many of AIMA’s members are adjusting their hiring processes to achieve this.
Part of the answer for many has been to shift from a focus on qualifications and where a candidate went to school to focus more on having the right skill set, which opens the industry up to benefit from having a more diverse talent pool.
At AIMA, for example, several members work with schools, charities, and similar organisations to make the hedge fund industry feel more open to young people considering their career options.
This includes promoting financial literacy and technology-orientated skills.
More recently, with the pandemic forcing a rapid shift to remote working, hedge funds have become a lot more open to allowing greater flexibility in working practices to accommodate staff in juggling professional and personal responsibilities and a healthier work/life balance.
Having the right tools
It is important to provide people with access to the right tools that can help them adapt and evolve their skill sets. There are many tools and resources in the market but it is the responsibility of the company to invest in learning and development as a strategic priority.
Additionally, it is important for a company to communicate the benefits of utilising these tools and opportunities to their employees.
Apex’s Guest observes that adoption is often a key issue here and, in some cases, mindsets are not shifting quickly enough which will delay some people from accelerating their careers the way they did pre-pandemic.
“We have known for some time that professional development works best when we have a 70:20:10 mix of experiential, social and formal training. In our current environment, the social and experiential activities are more structured and therefore take additional time and resources from managers and existing subject matter experts, while prioritising business as usual client deliverables,” says Guest.
More of Apex’s learning (particularly in the pandemic environment) has moved to online learning and live webcasts. Guest highlights that professional bodies have been fantastic at adapting content to virtual delivery, and while Apex has an accessible learning platform that provides on-demand learning, nothing can replicate the relationships and experience sharing that in-person working and learning provides.
Diversifying the talent pool
Diversifying the workplace creates an inclusive environment and shows acknowledgement of an employee’s individual strengths and the potential they bring. Valuing the differences in others can be the key to a thriving workplace and fair work culture.
The asset servicing industry is not known for being particularly diverse. However, experts say the industry is working on this. Progress in this space will require a deep dive analysis within each individual company to form an action plan for change. For example, a higher percentage of senior roles are still typically taken by men.
Chapman highlights: “This is a numbers-based situation to a degree; to secure a senior role, one usually has to have experience, and experience takes time to earn. Historically, for well-documented reasons, the industry was seen as a male enclave with only a few outliers of senior women. Mirroring changes in society as a whole, and as a result of a growing appreciation of the benefits of diversity of thinking, roles have become open to anyone regardless of their background, sex, sexuality, etc. Consequently, in due course the ratio will change.”
Additionally, work by organisations such as Women in Asset Servicing, which was founded by Northern Trust’s Kate Webber, has gone a long way to create a more level playing field, instil confidence, especially in younger women, and educate them as to how they can succeed in a career in the asset servicing industry.
“A wider question, and one which is rarely touched upon given its sensitivity, is what the optimal split of male versus female actually is - does it have to be roughly 50:50 which is the unspoken, but accepted, target?” Chapman muses.
For example, Chapman explains that in the legal world, there is a higher percentage intake of women to men (although after five years that proportion flips).
Chapman says: “Might it be that women with children still feel that despite much progress, the working environment in any given firm in the financial service space is still not conducive to having a balanced home life?”
Weighing in on diversity in the industry, Guest comments: “Change must come from nurturing a more inclusive environment that provides equity within the workforce and opportunities for individuals to reach their full potential within a business.”
Apex, for example, established a Shadow Executive Committee, which was made of up 50/50 male and female members, across six different countries and including a range of age groups.
“The intention for this committee was to bring diversity of thought and a different perspective to the leadership conversation. That initiative ultimately paved the way for further diversification of our formal executive committee, with the addition of two new female members to a formerly all-male group,” affirms Guest.
Following the success of that initiative Apex has also established an Equity, Equality Diversity and Inclusion Council, with executive sponsorship, to ensure it retains a focus on implementing actionable initiatives to continue to drive positive change in these areas.
Additionally, Apex has implemented a mentoring programme to connect employees across the business with various volunteer senior members of the team. It has also launched an internal podcast named “Everyone Deserves a Voice”, which celebrates diversity across the industry business, exploring the different experiences of its employees covering important topics to educate employees on the experiences of their peers including race, religion, gender, sexuality, disability and more.
In the hedge fund space, industry participants believe the pandemic has accelerated moves towards diversity.
Kehoe suggests the importance of good company culture has been made abundantly clear during the remote working environment and part of that comes with making sure everyone feels welcome and included. Managers are widely acknowledging this, and AIMA’s market research indicates that companies are setting policies in place to make the workplace as attractive as possible for everyone.
Moreover, Kehoe notes that investors in hedge funds are making criteria around DE&I a core part of their broader ESG policy. This is generating even greater momentum behind the industry’s push to become more open to all demographics.
There is always more to be done to promote diversity across financial markets but there is strong evidence to indicate things are moving in the right direction.
Retaining and nurturing talent is important as these people could make up the future leaders of the business. In addition, there are significant costs involved in training and development so it is important to get a return on this investment. As well as this, highly talented and innovative people have the potential to really bring out the best in other employees.
Asset servicing is a service-led industry, and so people are a critical asset.
Man vs machine?
The role of human input will always be crucial despite the value of new technologies. Technologies like AI can replace manual human tasks in the asset servicing industry but there is one main difference between the two; AI lacks common sense.
AI is only as good as the data fed into it. For example, while AI can help to increase the speed and accuracy of predicting the probability of events occurring by processing larger volumes of data faster than a human ever could, it cannot be heavily relied upon to predict risk.
AI is not good at predicting black swan events, tail risk, and the impact of events with no historic precedent such as COVID-19.
Automation can help firms move away from manual processing and allow people to focus their efforts on higher value activities that help reduce risk.
Therefore, industry participants need to strike a balance between implementing technology to save employees’ time, while also retaining talent.
Looking at the hedge fund space, for example, Alternative Investment Management Association’s (AIMA) research and engagement with members have reinforced the notion that hedge funds are placing a strong emphasis on achieving operational efficiencies through automating some parts of their business.
Tom Kehoe, global head of research and communications, AIMA, says: “Despite some concerns that increased automation could lead to job losses broadly across the financial industries, the reality seems to be that employing technology that enables the business to work more efficiently primarily seeks to lift the burden of more administrative roles across the various hedge fund functions.”
“Further, doing so allows investment managers and traders to have more time to focus on delivering performance. Beyond the front-, middle- and back-office, teams can also significantly reduce resource allocation to operations which would typically require manual input.”
Subsequently, AIMA notes the skill set for various roles within hedge funds is changing to include a greater need for technology.
Nurturing new talent
There are a number of strategies a firm can carry out to nurture new talent. Industry players say there is a focus on developing a more diverse and inclusive talent pool in the asset servicing space.
Rosie Guest, chief marketing officer and executive committee member, Apex Group, says this is something Apex is focused on, having recently conducted an environmental, social and governance (ESG) gap analysis to ensure the group focuses its efforts on attracting and developing a broader range of talent.
Guest adds: “We also utilise the Apprenticeship Levy and support around that and have a focus on investing in attracting graduates to our junior roles; in some locations we are also looking at implementing a university structure.”
There are many benefits to the Apprenticeship Levy, as it is there to fund apprenticeship training for all employers. Any unspent levy funds are used to support existing apprentices to complete their training and to pay for apprenticeship training for smaller employers.
Discussing what firms are doing to nurture new talent within the asset servicing space, Paul Chapman, co-founder and managing director of HornbyChapman, observes that generally speaking, millennials and Gen Z are much keener on their employer taking a deeper and more value-added role in the community and environment than their predecessors.
Chapman says that “while this is admirable, it can lead to ‘greenwashing’ tactics being employed by firms and also evidences a lack of appreciation that in order to survive, a firm needs to make money — if youngsters scratch beneath the surface of many firms they would be disappointed with what they find with respect to their firm’s ESG credentials and the extent of value a firm is giving to the local community”.
At a senior level of employee hiring, firms remain reluctant to hire outside the industry — buy-side staff may go to sell-side, and vice-versa, but rarely do hires from outside of the industry gain entrance or, if they do get hired, achieve success and longevity, according to Chapman.
Meanwhile, in the alternative investment space, AIMA recently surveyed members to find out what facilities they had in place to help new talent enter the industry.
The majority of respondents highlighted the popularity of internships enabling employers and employees to benefit from having a short-term industry experience (typically six months) to ascertain whether the employee has (or can develop) the right skill set to work at their firm.
In many industries, it is not uncommon for a company to launch a graduate programme every year. Graduate programmes are entry-level jobs that also double as training programmes. They allow the employee to experience multiple areas of the company and build up their skills and knowledge.
According to Kehoe, when it comes to attracting the top graduates, hedge funds may have to compete with Wall Street and the big tech names, depending on their strategies.
By any metrics, hedge funds have, on average, had a stellar H1 and will need to bring in new talent as they scale up, on the back of significant inflows from investors and strong revenue streams.
“The hedge fund industry is highly competitive and relies on relationships to source proven performers, but the larger names within the space have established talent pipelines with various educational institutions to make sure they can see who the stars of tomorrow might be,” says Kehoe.
Improving diversity, equity and inclusion (DE&I) is a top priority for the industry and many of AIMA’s members are adjusting their hiring processes to achieve this.
Part of the answer for many has been to shift from a focus on qualifications and where a candidate went to school to focus more on having the right skill set, which opens the industry up to benefit from having a more diverse talent pool.
At AIMA, for example, several members work with schools, charities, and similar organisations to make the hedge fund industry feel more open to young people considering their career options.
This includes promoting financial literacy and technology-orientated skills.
More recently, with the pandemic forcing a rapid shift to remote working, hedge funds have become a lot more open to allowing greater flexibility in working practices to accommodate staff in juggling professional and personal responsibilities and a healthier work/life balance.
Having the right tools
It is important to provide people with access to the right tools that can help them adapt and evolve their skill sets. There are many tools and resources in the market but it is the responsibility of the company to invest in learning and development as a strategic priority.
Additionally, it is important for a company to communicate the benefits of utilising these tools and opportunities to their employees.
Apex’s Guest observes that adoption is often a key issue here and, in some cases, mindsets are not shifting quickly enough which will delay some people from accelerating their careers the way they did pre-pandemic.
“We have known for some time that professional development works best when we have a 70:20:10 mix of experiential, social and formal training. In our current environment, the social and experiential activities are more structured and therefore take additional time and resources from managers and existing subject matter experts, while prioritising business as usual client deliverables,” says Guest.
More of Apex’s learning (particularly in the pandemic environment) has moved to online learning and live webcasts. Guest highlights that professional bodies have been fantastic at adapting content to virtual delivery, and while Apex has an accessible learning platform that provides on-demand learning, nothing can replicate the relationships and experience sharing that in-person working and learning provides.
Diversifying the talent pool
Diversifying the workplace creates an inclusive environment and shows acknowledgement of an employee’s individual strengths and the potential they bring. Valuing the differences in others can be the key to a thriving workplace and fair work culture.
The asset servicing industry is not known for being particularly diverse. However, experts say the industry is working on this. Progress in this space will require a deep dive analysis within each individual company to form an action plan for change. For example, a higher percentage of senior roles are still typically taken by men.
Chapman highlights: “This is a numbers-based situation to a degree; to secure a senior role, one usually has to have experience, and experience takes time to earn. Historically, for well-documented reasons, the industry was seen as a male enclave with only a few outliers of senior women. Mirroring changes in society as a whole, and as a result of a growing appreciation of the benefits of diversity of thinking, roles have become open to anyone regardless of their background, sex, sexuality, etc. Consequently, in due course the ratio will change.”
Additionally, work by organisations such as Women in Asset Servicing, which was founded by Northern Trust’s Kate Webber, has gone a long way to create a more level playing field, instil confidence, especially in younger women, and educate them as to how they can succeed in a career in the asset servicing industry.
“A wider question, and one which is rarely touched upon given its sensitivity, is what the optimal split of male versus female actually is - does it have to be roughly 50:50 which is the unspoken, but accepted, target?” Chapman muses.
For example, Chapman explains that in the legal world, there is a higher percentage intake of women to men (although after five years that proportion flips).
Chapman says: “Might it be that women with children still feel that despite much progress, the working environment in any given firm in the financial service space is still not conducive to having a balanced home life?”
Weighing in on diversity in the industry, Guest comments: “Change must come from nurturing a more inclusive environment that provides equity within the workforce and opportunities for individuals to reach their full potential within a business.”
Apex, for example, established a Shadow Executive Committee, which was made of up 50/50 male and female members, across six different countries and including a range of age groups.
“The intention for this committee was to bring diversity of thought and a different perspective to the leadership conversation. That initiative ultimately paved the way for further diversification of our formal executive committee, with the addition of two new female members to a formerly all-male group,” affirms Guest.
Following the success of that initiative Apex has also established an Equity, Equality Diversity and Inclusion Council, with executive sponsorship, to ensure it retains a focus on implementing actionable initiatives to continue to drive positive change in these areas.
Additionally, Apex has implemented a mentoring programme to connect employees across the business with various volunteer senior members of the team. It has also launched an internal podcast named “Everyone Deserves a Voice”, which celebrates diversity across the industry business, exploring the different experiences of its employees covering important topics to educate employees on the experiences of their peers including race, religion, gender, sexuality, disability and more.
In the hedge fund space, industry participants believe the pandemic has accelerated moves towards diversity.
Kehoe suggests the importance of good company culture has been made abundantly clear during the remote working environment and part of that comes with making sure everyone feels welcome and included. Managers are widely acknowledging this, and AIMA’s market research indicates that companies are setting policies in place to make the workplace as attractive as possible for everyone.
Moreover, Kehoe notes that investors in hedge funds are making criteria around DE&I a core part of their broader ESG policy. This is generating even greater momentum behind the industry’s push to become more open to all demographics.
There is always more to be done to promote diversity across financial markets but there is strong evidence to indicate things are moving in the right direction.
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