The Top HR Challenges in Financial Services in 2025 – and How to Solve Them

Financial services encompass diverse organisations with distinct challenges. Retail banks manage thousands of customer-facing staff across branches. Investment firms focus on highly specialised technical roles. Insurance providers handle complex claims processes, whilst mortgage brokers navigate tightening lending regulations.

Despite their differences, these organisations share common pressures. The Senior Managers and Certification Regime (SMCR) places direct accountability on leaders for HR decisions. Client-facing roles require ongoing compliance training and competency management. Distributed teams across multiple locations and jurisdictions add operational complexity.

The sector's high-pressure environment and demanding targets create additional challenges for recruitment, retention, and wellbeing initiatives.

1. Navigating Regulatory Complexity

Financial services HR teams must manage strict frameworks including SMCR, GDPR, and FCA regulations. Under SMCR, senior managers take personal accountability for their areas, making HR documentation and processes critical for regulatory compliance.

Large organisations struggle with inconsistent policy enforcement across business units, inadequate audit trails, and poor documentation. Multiple jurisdictions add further complexity, with different compliance requirements for retail banking versus investment management arms.

Solutions for navigating regulatory complexities include:

• Centralised compliance platforms
• Comprehensive training programmes with reporting dashboards
• Real-time analytics that flag compliance risks

2. Attracting and Retaining Top Talent 

Research by the FDM Group found 75% of the financial services industry say they are “held back by lack of digital skills”. Talent management in financial services faces pressure from agile FinTech's offering flexible working and flatter structures.

The skills shortage is acute in specialist areas. Cybersecurity professionals command premium salaries across industries. The eFinancialCareers 2025 financial services compensation report shows that the average compensation package for financial services professionals in the UK is $310,900 (around £228,500). Data analysts need technical skills plus financial knowledge. Compliance professionals require deep regulatory expertise as frameworks evolve. Insurance firms are having particular issues with an ageing workforce; read our blog to discover strategies to ‘Addressing the Insurance Talent Gap – How to Tackle the Finance Talent Shortage’.

Hybrid working expectations have permanently shifted, with flexibility now seen as standard rather than a benefit. Career progression concerns affect retention, with professionals valuing meaningful work and development opportunities.

Solutions to attract and retain top talent include:

• Internal mobility programmes
• Career sites highlighting culture and growth opportunities
• Flexible working policies

“One wrong senior hire can wipe out the ROI of your entire recruitment function for the year. Not just salary. We're talking about lost productivity, team disruption, the cost of re-hiring, potential customer impact. Your CEO, your CFO, they're scrutinising every single hire. The days of 'we need to fill this role quickly' are over. Now it's 'we need to fill this role with someone who'll deliver measurable value' – because you might not get another opportunity.”

Emma Parkin, Head of Propositions at Access, Recruitment Under Pressure

3. Managing Hybrid and Remote Workforces

Hybrid working is now standard, but many firms struggle with culture maintenance, collaboration, and performance visibility across distributed teams.

Challenges include maintaining informal relationships that build knowledge sharing, coordinating projects across different schedules and locations, and adapting performance management when managers have less visibility into daily activities.

Risks include employee disengagement, inconsistent performance management, and reduced innovation from fewer collaborative interactions.

Solutions to managing hybrid and global workforces include:

• Digital collaboration tools
• Regular feedback loops
• Leadership training

4. Embedding Diversity, Equity and Inclusion (DEI)

Financial services continue facing challenges in board diversity, pay gaps, and inclusive hiring. 
Diversity and inclusion in finance remains complex despite increased investment. Board representation, particularly ethnic minority and intersectional representation, stays low. Pay gaps persist across gender, ethnicity, and age dimensions. Traditional hiring practices may inadvertently exclude qualified candidates from diverse backgrounds. As the Guardian reports, the UK’s top financial regulators “decided against introducing new mandatory diversity and inclusion regulations for financial firms,” reflecting the sector’s slow and uneven progress.

The business case extends beyond compliance. Research shows diverse teams make better decisions, generate innovative solutions, and better understand diverse client bases.

Solutions for embedding diversity, equity and inclusion include:

• Recruitment with structured interviews and diverse panels
• Cultural celebration and awareness programmes 
• Dashboards to track representation, pay equity and inclusion

5. Supporting Employee Wellbeing

Stress, burnout, and financial anxiety rise across the sector, particularly in client-facing positions where performance expectations meet regulatory requirements. Addressing burnout can be an essential part of employee wellbeing and we’ve detailed the struggles finance professionals face and how businesses can support them better in our blog, ‘Addressing Burnout in Finance’.

The sector's culture traditionally emphasised long hours and high-performance standards. Client-facing roles carry additional pressure navigating demanding clients whilst ensuring compliance. Even well-compensated professionals face financial anxiety from market volatility affecting bonuses and job security. Work-life balance remains elusive in roles involving global markets or extended client service requirements.

Solutions for organisations to support employee wellbeing include:

• Confidential counselling
• Financial wellbeing programmes
• Flexible leave policies

6. Rising Employment Costs and Reputation Risk

Employer National Insurance increases from 13.8% to 15% in April 2025, with thresholds dropping to £5,000. HR errors trigger regulatory scrutiny and fines averaging £2.8 million.

Large organisations face substantial cost increases whilst managing reputation risks from HR failures.

Employment tribunal cases or regulatory breaches damage client relationships and create long-term talent attraction challenges.

Solutions for employers that can help mitigate rising costs and reputation loss:

• Automated payroll systems
• Embedded AI
• Real-time analytics

Discover real world examples of organisations using salary sacrifice schemes to make significant savings in light of the NIC rise in our NI Report.

The HR challenges that large financial firms contend with can be tackled, in large part, with the implementation of a unified HR suite, where data flows freely.

Empowering HR with Technology

Unified HR platforms integrating workforce management, payroll, learning, and analytics eliminate data silos whilst maintaining regulatory compliance. Embedded AI provides instant answers to employee queries whilst flagging retention risks. Mobile apps support distributed teams with self-service access.

Access PeopleXD Evo brings together core HR functions with AI capabilities and powerful analytics designed for complex organisations. Embedded AI can also answer employee queries whilst flagging retention risks. Self-service portals and mobile access reduce administrative burden and enable distributed teams. For financial services firms managing thousands of employees across multiple locations, these integrated systems create operational efficiency whilst ensuring consistent standards and regulatory reporting capabilities.

"Since adopting Access PeopleXD, we've observed a notable improvement in our end-user experience... This efficiency has resulted in valuable time savings for the team."

Andrew Dagger, Group HR Director, Arbuthnot Latham

Strengthening Leadership and Culture

Leadership development focused on empathy and agility creates capabilities for complex challenge navigation. Peer-to-peer recognition builds positive culture, whilst transparent communication keeps distributed employees connected to strategic decisions. Discover how effective peer-to-peer recognition can be in our blog on the ‘Best peer-to-peer recognition ideas that make a real difference’. DEI training integrates inclusion into core leadership competencies.

Measuring What Matters

Track employee Net Promoter Score (eNPS), analyse turnover patterns by department and demographics, monitor training effectiveness, and maintain compliance dashboards. Predictive analytics anticipate staffing needs whilst benchmarking identifies best practices across business units.

Financial services organisations addressing these challenges proactively gain competitive advantages in talent attraction, regulatory compliance, and operational efficiency. Large firms need comprehensive strategies addressing interconnected challenges with scalable solutions across business units.

Technology provides the foundation but requires leadership commitment and cultural change for effective implementation. Regular assessment and continuous improvement ensure strategies remain effective as conditions evolve.

Investment in comprehensive HR solutions delivers returns through improved satisfaction, reduced turnover costs, better compliance, and enhanced efficiency.

Ready to elevate your HR strategy? Discover how Access PeopleXD Evo’s AI-enabled platform addresses these challenges with integrated solutions designed for complex financial services organisations.

Why not book a personalised demo? Or download our brochure for a more indepth view.