Financial services battle flight of talent to lucrative sectors

Attrition is accelerating in the financial services segment with the total departure of employees in the first nine months of 2022 pegged at nearly 25%, shown an exclusive HR trend analysis for ET, done by consulting firm Aon.

Within the banking, financial services and insurance (BFSI) space, the life insurance segment recorded the worst attrition at 47% followed by general insurance at 33%. Domestic banks continued to record high attrition levels at nearly 31% followed by fintechs at 27%.

“Banks and NBFCs are struggling with attrition, they have lost a lot of people to fintech, start-ups and tech organisations,” said Roopank Chaudhary, partner at AON Consulting. “Financial services companies are facing a huge amount of challenge in retaining talent because they are highly regulated and they don’t have much leeway in offering career paths, remote working flexibility and great compensation.”

Chaudhary added that regulatory approvals are needed for key management hirings in the industry.

“We are also seeing that the central bank is regulating the compensation of top-level management at banks and NBFCs. It is also keeping a close eye on variable pay, which dents senior-level hiring because you can use very few structures to pay CEOs and CXOs,” Chaudhary said.

Banks across the board have continued to see high levels of attrition, especially among the junior employees that have been drawn to the IT sector because of the latter’s lucrative pay packets.

The Aon analysis also showed that overall attrition in the banking segment is 24.7% between January and September, with domestic banks showing 30.6% attrition and foreign banks 16.3%. Fintech players also contributed to high attrition levels of 27.4%. Wealth management players, too, saw a significantly high number of employee departures at 26.4%, while investment banks saw exits at 21.8%. The lowest exits in the BFSI space were recorded with asset management companies at 16.3%.

“Attrition is a smaller problem now as compared to what it was six or nine months ago,” said Jairam Sridharan, managing director at Piramal Capital and Housing Finance. “Especially coming out of Covid, a lot of people had quit but I confidently feel that the last six months have been more benign. In the first year of Covid, attrition rates had gone up 15 percentage points; in the last six months it has retraced 7 percentage points.”

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