Going into 2023, the global economy is characterized by uncertainty. In the wake of the pandemic, Russia’s invasion of Ukraine, supply chain issues, rising inflation, and tightening monetary policy meant to combat inflation, the global economy is fragile. A recession looms. Against this backdrop, the financial services sector faces various challenges. And with the advent of new technology, the sector will also see new opportunities. How can executives weather this storm? And what should recruiters look for in a leader in these uncertain times?
Executive Search for Investment Banks
What makes a good investment bank CEO in the 2020s? The impact of Covid-19 and other factors have changed the landscape of the investment banking industry significantly. Market democratization, work from home, advances in technology and changing regulations have necessitated new business models and operational platforms.
Deloitte predicts a realignment of the structure of the investment banking industry. Brokers, they say, will be divided into two different archetypes: “flow players,” who will focus on middle-office functions, and “client capturers,” who will focus on front-office functions. Flow players will focus on highly-liquid, commoditized products, execute trades on behalf of other industry participants, and will have to invest heavily in tech infrastructure to achieve scale. Client capturers will be the client-facing brokers and will rely on others to execute trades.
Against this backdrop, investment bank leaders will have to rethink their business model in order to stay competitive. Leadership and vision are integral to navigating the coming decade’s seismic shift in business models, technology and consumer expectations. According to Deloitte, it is necessary to think outside the box and outside of current constraints in order to find a way forward. CEOs should demonstrate adaptability and flexibility as technology and financial regulations evolve. Emerging technologies like AI, blockchain and advanced data analytics offer exciting possibilities. Great CEOs will anticipate trends and stay ahead of the curve.
In addition to envisioning and developing a plan forward, CEOs must be able to effectively enact that plan. The key to executing vision is often managerial skills. CEOs must also build a team around them that has the competence to execute their vision; for this reason, it is vitally important that CEOs have the ability to recognize and attract talent. Leading by example, executives at investment banks should establish a culture of excellence and accountability.
A good executive must obviously have stellar communication skills in order to engage well with not only their employees, customers and investors, but also with regulators. CEOs must be culturally aware and able to interact with people from diverse backgrounds. They should build a diverse team around them – studies show diversity drives innovation, which will be essential to thrive amid industry realignment. Executives must also maintain a constructive partnership with the board. If the board lacks confidence in the CEO, it can be difficult to rebuild that trust.
“For banks today, the intangible aspects of effective leadership are as important as the technical skills and industry expertise,” Alan J. Kaplan, founder and CEO of retained executive search firm Kaplan Partners, wrote in a blog. “While the tangible proficiencies may be more obvious and identifiable on the surface, it is often the attributes, competencies and qualitative elements of leadership that make the difference in the success of truly great CEOs.”
Executive Search for Credit Unions
In 2022, credit union liquidity tightened at the fastest rate in 22 years. Inflation led to the highest credit union loan growth rate since 1985. Credit union new-auto loan balances rose nearly 20 percent, according to the Credit Union National Association. Rising interest rates have left credit unions with a portfolio of low yielding loans, while they feel pressure to raise rates on deposits in order to stay competitive.
Because credit unions are not-for-profit, an ideal executive will be fiscally responsible (though they do not necessarily need to be a financial whiz and can rely on the CFO). In the wake of the current drop in liquidity, and with the prospect of the Federal Reserve issuing a couple more rate increases before the end of the year, credit union leaders will need to make tough decisions. For example, whether to liquidate investments at a loss, risking their net worth ratio.
According to John Kutchey, the regional director for the National Credit Union Administration, over the next year or two, credit unions will have to decide whether or not to raise dividend rates, which could impact their earnings. Kutchey says the liquidity risk will be a top priority for credit unions in 2023.
Credit unions can only succeed if all employees succeed; therefore, the CEO must empower team members by having clear expectations and recognizing and rewarding excellent work. A great credit union CEO should understand that their role is essentially collaborative – the organization belongs to the community and the stakeholders, and it is the CEO’s job to synthesize input from these various voices.
A great credit CEO will usually be a great listener and have the ability and willingness to amplify the voices of their team members. All members have a say in how the company is run, so the CEO should be able to listen to everyone without being affected by intra-organizational politics. A great CEO will also understand the needs of their members. As with any type of bank, it is important for leadership to evolve, especially when it comes to new technology. CEOs should not be afraid of risk, lest their caution lead to incrementalism.
Executive Search for Consumer Banks
On the precipice of a recession, retail banks are struggling with inflation, slowed growth and rising rates. In the United States, banks are having issues with the mortgage and auto loan markets, as well as possible action by the Federal Trade Commission to crack down on junk fees. According to Deloitte’s 2023 banking and capital markets outlook, retail banking customers are increasingly looking for a “superior cross-channel experience and hands-on guidance during challenging times.” This will necessitate creating customer experiences that are personalized and driven by data.
Environmental, social and governance (ESG) concerns, embedded finance, and digital assets are the way forward for retail banks, Deloitte says. Particularly, racial equity, decarbonization and data security are top priorities for consumers.
According to the Edelman Trust Barometer, 73 percent of Gen Z consumers choose brands based on personal beliefs and values. Young people expect companies to take a stand on environmental and social issues, and retail banks should prioritize efforts to be sustainable and socially responsible, such as Bank of America’s 2018 decision, in the wake of the Parkland shooting, to stop lending to certain gun manufacturers.
Nearly half of full-time workers are now Gen Z and Millennials. Younger people have dramatically different priorities than previous generations when it comes to the workplace. It is essential for bank CEOs to be aware of their position and the power dynamics at play in society. According to Bank of the West CEO Nandita Bakhshi, empathy and self-awareness are paramount for the modern-day CEO, especially when it comes to bridging the generational gap. Bakhshi argues that employees should feel comfortable bringing their authentic selves to work, and that organizations should be inclusive. Research shows an inclusive culture is important in recruiting, retaining, and engaging top talent.
Younger workers have a reputation for craving affirmation and wanting a workplace that makes them happy. In response to this, CEOs have become increasingly visible and available to rank-and-file employees. A good bank CEO in 2022 will take a true interest in their employees and make them feel valued in order to avoid turnover.
Executive Search for Insurance Companies
Rising interest rates, inflation and loss costs will be challenges for insurance carriers in 2023. A recession, climate change, geopolitical upheaval, and competition from InsurTechs will also require insurance carriers to adapt. According to Deloitte research, insurance carriers should shift their focus from simply adopting new technology like cloud-based applications to fully integrating their systems and data while using the cloud to become more customer-centric.
AI is increasingly being integrated into the industry. AI helps insurance companies assess risk, reduce human error and detect fraud, and might make human underwriters a thing of the past.
Deloitte says insurance carriers must pick up their ESG and DEI efforts. The executive level of the insurance industry is particularly lacking in diversity. In addition to their workforce, their customer base also must be diversified. Access to insurance products should be extended to underserved communities. Insurance companies should focus on sustainability, Deloitte says, and actively limit the impact of climate change.
In pursuit of these goals, leadership must be empathetic, bold, innovative, and intentional. Empathy is necessary to understand team members’ and customers’ needs. This is especially true of organizations with a diverse workforce and customer base, because executives will encounter people whose life experience, cognition, and/or learning styles differ from their own. CEOs must be bold when it comes to customer-centric innovation, Bernhard Kotanko said on a McKinsey podcast. This will open them up to new markets. Kotanko also emphasizes the need for insurers to present themselves in talent markets as value creators, and focus on ESG to attract talent, showcasing the CEO as a role model. Insurance executives must be intentional, reimagining the culture to be more actively inclusive.
Financial Services Executive Search: DEI Considerations
There is plenty of research that shows that diverse leadership is good for business. But in order to be effective, diversity must be accompanied by inclusion. Inclusive leadership treats every team member respectfully and fairly, assures them that they are valued, amplifies their voices and makes them feel inspired.
Research from the Harvard Business Review shows that inclusive leaders are distinguished from others by awareness of their own biases, curiosity about others and their cultural intelligence. These traits are especially important for companies marketing to underbanked groups. It is important to understand marginalized people’s lives and perspectives.
Marketing to women is very important in consumer financial services because women disproportionately handle finances in heteronormative households.
Financial Services Executive Search: An Ellig Group Specialty
At Ellig Group, DEI is our DNA, and financial services executive search is our wheelhouse. In 2021, 96 percent of our candidate slates contained women and/or diverse executives. Since its inception, Ellig Group has been authentically committed to diversity and gender parity. In fact, over the past 20 years, 80 percent of our executive appointments and 85 percent of our board appointments were women and/or members of underrepresented communities.
Studies show that 40 percent of executive searches fail. Without good management, executive searches can easily fail or take too long. As a client-focused, boutique service, Ellig Group can say that every executive search we conduct is managed by our CEO, Janice Ellig. Our level of hands-on attention is unparalleled in the industry.
Ellig Group is based in New York City, the financial center of the world. We have long nurtured deep ties to the NYC business community. We boast a very strong track record in insurance and financial services. What’s more, we tailor our services to meet your industry needs, taking into account both the markets you serve today and your future strategic imperatives.