The Massachusetts financial services industry’s impact on the local economy is too often taken for granted. The industry accounts for 9 percent of the state’s GDP, but it is the sector’s potential, not only as an asset manager but also as a technology leader, that should cause people to pay attention.
Employment in financial services has rebounded from the dark days of 2008 and 2009, and the sector stands to benefit disproportionally from the massive multitrillion-dollar growth of global investment assets over the next 10 years. There will be a strong need for fresh talent, but with an important caveat: The jobs most rapidly evolving are those in which technology is increasingly embedded in processes and products.
The toughest challenge will be finding enough qualified people, especially for positions that require skill in data analytics and regulatory compliance. Boston has a distinct advantage in cultivating the talent that could sustain — or increase — its role as a financial services hub, but it needs greater public-private collaboration to leverage the many assets already in place.
Boston’s worldwide renown as an asset manager mecca, especially for retirement savings, is a powerful competitive advantage that should be nurtured, especially as global assets under management expand to $100 trillion by 2020.
That is just one of the findings of a new report on the outlook for the Massachusetts financial services industry, commissioned by the Boston Financial Services Leadership Council, with support from McKinsey and PwC.
The increasing importance of technology in finance offers a potent growth opportunity for Boston. Indeed, Massachusetts ranks third in the nation in the number of data scientists per capita. But that is just the beginning. The growth of big data — specifically, applying insights gleaned from reams of data for risk management, better customer service, marketing, and automation — is already reshaping the industry and putting a premium on people with new skill sets.
With its robust talent base and fertile startup ecosystem, Massachusetts is positioned to shape the next generation of financial technology. Boston today boasts a growing roster of FinTech startups, and large financial services companies like Fidelity are helping seed innovation by supporting the FinTech Sandbox. Ideally, many of these startups will prosper, and lure even more workers to stock the city’s financial services talent pool.
Yet the sheer number of data-related jobs that will be required in the next 10 years is daunting and calls for fresh thinking. A study commissioned by the tech trade group MassTLC predicted that Massachusetts could have as many as 120,000 big data-related jobs by 2018. The reality, however, is that there is no deliberate and orchestrated plan, either public or private, to fill these jobs. This very predictable demand for data-savvy talent creates an important opportunity for our colleges and universities, not just to adjust curriculum for undergrads, but also to create specialized programs for recent grads to upgrade skills or cross over to financial services.
The financial services industry will need more than data scientists and analysts, however. According to the research conducted for the Boston Financial Services Leadership Council, there will be abundant demand in many areas, including compliance functions and insurance sales. One common theme is that technology will increasingly permeate these jobs as well.
To stay ahead, and increase its lead, the financial services sector needs to rethink a few fundamental assumptions about the way it does business. Forging strong partnerships with startups and universities to cultivate the next generation of talent and technology will pay dividends for decades to come.Robert Reynolds is president and CEO of Putnam Investments. Clayton Deutsch is CEO of Boston Private Holdings Inc.