Markets In Your Community

Can apprenticeships fill the financial industry’s skills gap?

Is the financial service industry facing a “skills gap” of too few qualified applicants to meet the need for new workers now and in the years to come?

According to a 2017 PwC survey of financial industry leaders, the answer may be “yes.” Nearly three-quarters (72%) of financial services leaders expressed concern about their ability to recruit and retain the talented workers needed to compete in today’s marketplace. The worry grows more acute as older employees retire and changes in technology present new challenges in the workplace.

It’s not limited to the financial industry. A great many U.S. employers are concerned over the perceived mismatch: the skills and preparation workers bring to the table is not what’s needed to meet the demands of their industry and the needs of their customers.

In response, many private and public-sector leaders have begun seeking new solutions to the skills gap by embracing an older workforce development model: apprenticeship training.

How apprenticeships work

An apprenticeship model combines paid on-the-job training with classroom instruction to create a pipeline for skilled workers. It’s a work-based training model that’s been popular across a wide range of industries in countries like Germany and Switzerland for decades.

In the United States, apprenticeships have long been used in the skilled trades and construction. For example, to become an electrician or a plumber requires an apprentice to work closely under a skilled and experienced master to guide them along the road to ultimate vocational licensing and certification.

But until recently, apprentice training has been relatively uncommon in industries that rely more heavily on white-collar professionals, at least in the U.S. However, that may be changing as other industries, including financial services, have begun exploring how apprenticeships could offer a competitive advantage at recruiting, hiring and retaining top talent.

For example, apprentices in the banking industry could get hands-on experience in lower-level customer service positions as bank tellers, underwriters or credit coordinators. Or an apprentice financial advisor could start learning the basics of researching investment opportunities, and observe how an experienced professional works to build and maintain a diversified investment portfolio to meet a client’s needs. Those jobs would be a launching pad toward positions of increasing responsibility.

In a similar vein, apprenticeship programs are being used to target a specific type of worker with support skills that are needed within the industry.

Support for Apprenticeship Model

The promise of apprentice programs has received substantial bipartisan enthusiasm among policymakers, many of whom have pledged to expand these training opportunities to more workers and industries.

That started at the highest level—both President Obama and President Trump have made expanding the availability of apprenticeships a linchpin of their workforce development agendas. In 2014, Obama urged a doubling of apprenticeship opportunities in the United States to 750,000 by 2018, and his administration increased investment in apprenticeship programs. By fiscal year 2016, the Department of Labor reported more than 505,000 U.S. apprentices in training.

For his part, President Trump signed an executive order in June 2017 aimed at boosting apprenticeships, in part by streamlining regulations that may be hindering more widespread adoption of these programs.

A number of financial industry leaders have already begun incorporating apprentice-style training programs into their talent development mix. For example, Fidelity Investments’ General Manager Apprenticeship offers a “company-wide, two-year rotational program designed to accelerate and develop high-potential talent by providing the leadership training and business challenges that propel individuals into management roles within the company.”

Likewise, D.A. Davidson Wealth Management launched a three-year apprentice program for aspiring financial advisors in 2014. That program “exposes apprentices to a variety of industry experiences, from obtaining licenses and wealth planning to corporate projects and client work with an established team. The goal is for each apprentice to deliver financial strategies to clients successfully, understand D.A. Davidson’s corporate culture, and develop a client base.”

Benefits of apprenticeship training models

While this form of training is still relatively new to the financial industry, apprenticeships could deliver a number of potential benefits to participating firms, including the following:

  • The ability to target fresh talent from outside the industry, rather than simply hiring away from competing firms, or from the same talent pools as one’s competitors. A firm that focuses on bringing in workers from other fields, minority candidates or mid-career professionals, for example, can tap a rich source of new talent that increases diversity and fresh thinking.
  • New hires who have completed apprentice training come to the job ready to perform on day one. Their deep familiarity with industry standards and corporate culture, compared to new hires who haven’t been immersed in the industry, could mean greater productivity.
  • Firms using apprenticeship training may see reduced turnover costs and improved worker retention. That seems intuitive: young workers who get more training and cultivation at an early career stage, with strong mentorship from more experienced professionals, could be better poised for long-term success and commitment in their chosen field.
  • In some cases, firms with apprenticeship programs may be eligible for tax credits, employee tuition benefits and other forms of technical assistance (depending on state policy).

Participants in apprenticeship programs can expect to see benefits as well:

  • Students can track their college studies alongside their career development, helping them to make the most of their academic years to ensure they have a clearly identified career path at graduation.
  • Ability to “hit the ground running” at the start of their career, which may lead to more rapid progress toward promotions, greater responsibility and higher pay.
  • Participants can receive an education and career training without going into debt. At a time when the rising cost of higher education is a source of anxiety for many American families, many may want to take a closer look at an option that allows them to get the skills they need to compete without having to take on a debilitating debt burden.

Challenges of apprentice training

While apprenticeships look to be a promising way to nurture and develop a new generation of workers, there remain challenges to the widespread adoption of these programs.

First, the “earn while you learn” approach is still quite new to corporate America. Industries that have not yet tapped this innovative form of training may be skeptical. Some executives say they fear “poaching” of young employees by competitors after they’ve invested time and money in educating and training apprentices. Such concerns suggest that some companies may take a “wait and see” approach on apprenticeships.

A second significant challenge is cost. An effective apprenticeship program requires a substantial investment in terms of time and resources to bring participants up to the desired level. Some of the financial costs may be defrayed by support from state and federal sources, but the larger share of the cost will still be carried by the firm. Building and maintaining an effective apprenticeship program isn’t just something that happens—it requires ongoing investment.

However, research suggests the ultimate pay-off may be worth the cost. A 2016 study by the U.S. Department of Commerce examined 13 apprenticeship programs in a variety of industries, and found “unanimous” enthusiasm for the programs.

“The companies in our study were unanimous in their support of apprenticeships,” the Commerce Department researchers conclude. “They found value in the program and identified benefits that more than justified the costs and commitments they made to the apprentices…. All of the firms we studied believe that apprenticeships improve their overall performance and provide a competitive advantage over other firms.”

The advantages of apprentice training are likely to grow clearer with time as the model becomes more widespread.