Toronto talent shortage threatens financial services

Toronto’s financial services sector faces an unprecedented shortage of talent, which could threaten the city’s status as a world-class business centre, according to a new study by Deloitte.

Having conducted interviews with more than 80 human resource managers and business leaders and 35 industry associations, the study, entitled Talent Matters and commissioned by the Toronto Financial Services Alliance, suggests that Toronto is falling behind other world financial centres in its ability to recruit skilled workers.

Toronto boasts the largest financial centre in Canada and the third largest in North America, behind New York and Chicago. It is home to 29% of the nation’s financial services industry, including Canada’s five largest domestic banks and two of the country’s largest life insurance companies.

The vacuum in talent the industry expects to experience over the next two decades could put this standing in jeopardy. Companies in Toronto are already having trouble attracting new recruits, the TFSA says, which isn’t yet a huge problem because the existing workforce is quite strong.

But this is undermined by the fastest-growing segment of that workforce — those 55 and older — who hold the majority of senior management positions and high-skill jobs. This demographic has seen an astronomical 233% growth in its proportion over the past 20 years. During the same period, those in the 25–34 age range have increased by only 3.2%.

The retirement of the 55+ group will result in a mass exodus of much of the industry’s leadership and top personnel, leaving a diminishing talent pool that is potentially unprepared to pick up the slack.

Not taking the study’s findings lightly, Janet Ecker, president of the TFSA and former finance minister of Ontario, is concerned that the effects could be felt soon. For example, Deloitte found that 69% of the organizations represented in the study expect an increased need for financial advisors; 73% will need more accountants and actuaries; and 86% will need more technology specialists.

“It’s a report that is quite comprehensive. One of our key success factors is the quality of our workforce, quality of our people, and we are at risk of losing critical talent that supports the growth, productivity and innovation in this sector,” Ecker says. “If we don’t act now to implement the strategies contained in this report, we will have a crisis.”

While a number of factors contribute to the inability to replenish talent, the report says globalization is the most significant. For both foreign and domestic recruits, Toronto is not the hotbed of opportunity it once was. Increased global demand means that experienced financial services workers are highly sought after, and other centres are proving to offer both more attractive employment opportunities and higher salaries. The study suggests, as well, that Canada’s taxation and securities regulations are archaic, making it not only difficult to attract employees to current positions but also to allow the industry to grow.

Government and industry are going to have to work together to amend the problem. Ecker said that government can provide valuable help in improving Toronto’s position as a financial market leader by relaxing taxation, streamlining regulation and taking an active role in education and training.

“Governments need to make sure they are ‘talking the talk’ first. They need to be saying, ‘We’re open for business; we want to have more financial services jobs here in the city because we see that as a real benefit for our economy,'” Ecker says. “The good news is that we are seeing this at all three levels of government.”

Ecker says that the governments’ commitment to other areas is mixed, particularly with regulation and taxation.

“For example, national securities regulation — we need to have that. Ottawa and Ontario are pushing, but we’re not quite there,” Ecker says. “The provincial budget last week put a definitive date on eliminating the capital tax, which is a proven job killer. That’s a good move, but again, there is still a lot of taxation that needs to be addressed.”

Those are just a couple of the financial and regulatory issues on the government side that could remediate things, the TFSA suggests. The industry has its work cut out for it, as well. The study suggests that companies need to work together and make systemic changes to attract the two key demographics that are going to have to pick up where the boomers leave off.

The most immediate need will have to be filled by highly skilled immigrants, the study says. Attracting talent from the U.S. has been difficult because of the higher salaries there, and many European immigrants view Canada as a stepping stone to the U.S. With 60% of immigration to Toronto coming from Asia and the Middle East, that group will play an integral role in replenishing the labour supply.

There are challenges, though, the study says, particularly with language integration. Many key players in the industry such as RBC, Manulife and BMO have already recognized the importance of immigrant professionals and have been proactive in integrating them and ensuring that they get any necessary language training so that they are not relegated to languishing in technical or back-room jobs if they have the potential to be recognized corporate leaders.

“In the financial sectors, some of our banks and insurance companies are big leaders in this area. Royal Bank and Manulife, for example, co-chair an initiative with a group called Toronto Region Immigrant Economic Council. It’s making sure that we are attracting people around the world, and making sure they get the assistance they require to integrate successfully into financial services jobs, and that’s a big priority,” Ecker says.

April Taggart, senior vice-president, talent management and diversity at BMO, says that BMO was aware of the potential problems the report highlights and has been taking steps for some time to ensure there is no significant depletion of talent in the company.

“We have a creative talent review and talent planning process that we go through at all stages of the year, right up through the board. From that, we get information about who are our emerging leaders, who are our highest-potential individuals, and what development do they need to go from where they are today to where they need to go in the future. We manage pretty closely their career development from that point on,” Taggart says. “This includes things like on-the-job experience; it includes leadership development and an in-house Dalhousie MBA program, in partnership with the Institute of Canadian Bankers. That’s pretty unique to have an internal MBA program.”

Taggart adds, “Something else that is sort of distinctive about BMO is that we have a corporate university, where we bring people from across the company to both develop leaders and share information about how we can run the company differently.”

Doing things differently is one of the key proposals the study says is needed to attract the other major talent pool, generation Y, or the “echo” generation — the children of boomers, who are just entering the workforce now.

Demographic studies have shown that this group is averse to taking on sole responsibility for their work and prefer to work collaboratively, which is generally the opposite of the rigid hierarchical system through which financial services is governed.

The study says that in order for financial services to attract generation Y, they will have to transform their workplaces to be more collaborative, reduce the hierarchical structure, and offer a lot of parallel mobility. This group tends to attach greater philosophical importance to doing work they feel is meaningful or has purpose.

However, Ecker admits, youth currently have a very dim view of financial services, and the industry must reverse that.

“They tend to see financial services as only being a bank teller or having to sell insurance, but there is just a whole range of jobs with everything from human resources to customer relations and technology, policy analysis and compliance,” she says. “There needs to be a career buzz factor that financial services in Toronto is a very good career choice. Too many young people have not been introduced to the incredible breadth of career that they can have in financial services.”

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com

(03/30/07)

Mark Noble