Securities finance leaders and collateral professionals see a diminishing number of younger people entering their specialized markets. The reasons are well known: the financial services career track can be draining; younger people may not be interested in banks or investments compared to other industries; and more technology means fewer needs for entry-level staff. Who will take over when the current generation of leadership retires?
While Business as Usual operations may not suffer, any new (or recycled) stress in the system may test the resilience of both the people and the markets as a whole. Business leaders tell us that they are trying a variety of strategies but are competing against societal forces that impede their progress. What then can turn the tide, generate more interest among younger people in securities finance and collateral specifically, and help maintain a robust workforce going forward?
Employment statistics support anecdotal evidence that there are fewer young people working in capital markets than in prior years. According to the US Bureau of Labor Statistics, the number of individuals working in US banking and related services has fallen by 5% from 2013 to 2023, staying close to 2 million individuals. The age dispersion of employees however has skewed heavily towards older people. The number of 20–24-year-olds employed dropped 43% over the period, from 191,000 to 108,000 people, and the number of 25–34-year-olds dropped by 19%, from 551,000 to 447,000 people. A decades-long trend of hiring fewer young people is also evident in the European Union. A 2018 study by the European Banking Federation found that “Hiring for people aged 55-plus swelled by 35%. Meantime, workers hired under the age of 24 decreased by 38%, while hiring for those aged 25-39 dropped 19%. The trend slowed in the 40 to 50 age category, down just 5%.”
What happens in banking employment has had a historically outsized impact on other investments and financial technology businesses. The “up or out” mentality, where younger analysts would be promoted or leave an institution, meant that asset managers, technology firms and market infrastructures could hire from a group of newly released ex-bank employees with some experience already. It also meant that banks were drawing from an engaged participant group to staff thinning ranks of directors, managing directors and senior managers. We know countless individuals who worked in a bank then left at some point in their career for a non-bank role (including ourselves). The further the pool of younger people in the banking system declines, the less opportunities there are for other firms to staff up without making larger investments themselves.
This report presents three proposals for how securities finance and collateral market participants can generate attention among younger professionals and build a new pipeline of people who can thrive in the industry. The templates we present are meant to be customized: while no one strategy will solve every problem, business owners can mix and match among several options.
This report has been written for business leaders looking at their staffing and medium/long term succession plans. While specific to securities finance and collateral, the same principals could be applied to any capital markets activity with a similar degree of functional complexity.
A direct link to the report for Finadium research clients is https://finadium.com/finadium-report-desc/filling-the-talent-gap-in-securities-finance-and-collateral/
For non-subscribers, more information is available here.