Millennials get a lot of attention in banking for prompting companies to adapt to the digital world, encouraging them, for instance, to use social media or develop apps. But they are reshaping the industry in other important ways, ushering in a wave of more generous employee benefits.
Financial services companies are sweetening their benefits packages in ways specifically designed to attract and retain younger workers. For a demographic group that loosely ranges from about 20 to 36 years old, many of the perks are targeted at young parents.
In the past year, megabanks — JPMorgan Chase, Bank of America and others — strengthened their parental leave policies, and regional banks are now beginning to follow suit. PNC Financial Services Group in Pittsburgh upgraded its policy in January, and Fifth Third Bancorp in Cincinnati plans to do so later this year.
"We know that flexibility and work-life balance are important" to millennials, said Teresa Tanner, chief administrative officer at Fifth Third.
The new premium benefits at some banks also include ways to help employees make a difference in the world and to pay down college debt — both well suited to the millennial mindset.
Citigroup now offers a "gap year" program to junior associates, allowing them to take a year off from work while earning a portion of their annual pay. First Republic Bank recently started helping students pay down their student loans, and other banks are exploring their options to do the same.
Lori Szerencsy, global head of benefits at Citigroup, downplayed the notion that banks are trying to outdo each other, but "we definitely have our eye out. It's more about who is working here, how can I enhance the value of the employee proposition, and can benefits be a part of that?"
'Really need to do something'
Linda Bacon, manager of employee relations at First Horizon in Memphis, Tenn., was caught off guard when she surveyed the benefits landscape. "It was easy to see really quickly that we were way behind the eight ball," Bacon said.
From her perch in the back office, where she has worked since the early 1980s, Bacon has witnessed everything from mobile apps to post-crisis rules upending the industry. Yet when millennials — who make up nearly 40% of First Horizon's workforce — began asking for longer parental leave a couple of years ago, Bacon was initially struck by their boldness.
The $28 billion-asset First Horizon's policy seemed competitive enough: several weeks off for new mothers, a handful of days off for fathers and other partners.
But Bacon wanted her longtime employer to keep pace with the times, so she began researching the local market. It turned out other large employers in the area — bigger banks, tech firms, even the U.S. military — were offering longer leave periods at full pay for young parents to bond with their newborns.
There were other factors at play. First Horizon acquired several branches in 2014 from Bank of America. Employees who joined the company through the deal were allowed to keep their existing, more generous policies, creating a discrepancy among branch staff. "We really needed to do something," Bacon said.
First Horizon revamped its leave policy last summer, extending it to up to eight weeks at full pay for new mothers and four weeks at full pay for fathers and other parents.
Peripatetic talent pool
Such changes come as the industry continues to repair its tarnished image and woo a generation of young people who came of age during the subprime mortgage meltdown.
Millennials entered the workforce at a time when entry-level banking jobs lost some prestige. Over the past few years, business students from top schools have increasingly gravitated toward the tech sector in Silicon Valley.
QuoteFirst Horizon's Linda Bacon says when millennials began asking for longer parental leave a couple of years ago, she was initially struck by their boldness. But now she has a different perspective.
Most big banks, however, are "filling all of their slots" and recruiting top talent, according to Bhushan Sethi, a partner in the financial services practice at PwC.
Where they are facing some difficulty, though, is persuading younger people to stick around. "Their challenge is still with three or four years in, how do I keep [millennials] interested?" Sethi said. "Their challenge is still on retention."
A plethora of survey data on millennials, who have earned a reputation as job-hoppers, underscores the problem. Most young people don't expect to settle down with an employer for a long period. According to a recent PwC survey, 54% of millennial employees expect to have as many as five employers during their career, while nearly 20% expect to work at as many as nine different firms.
Asked about their likelihood of switching jobs, more than half of millennial-aged workers reported being open to a new job opportunity, according to a 2016 Gallup survey.
When Citigroup rolled out extended parental leave in September, senior executives hoped to send a message to ambitious employees: Please prioritize your personal life.
Over the past decade, Citi has steadily expanded its paid time off for new parents. In 2005, the company instituted 13 weeks of paid pregnancy leave after previously offering new mothers short-term disability. Two years later, it introduced eight weeks of paid adoption leave for primary caregivers, and in 2015 it introduced two weeks of paid leave for secondary caregivers.
The company took another leap late last year, announcing it would offer 16 weeks of paid leave for new mothers at full pay. It also increased paid leave for second parents to eight weeks at full pay to encourage bonding time.
"We believe that the new program is attractive to millennials," said Jill Rorschach, head of employee relations and human resources policies. "But more broadly than that ... we wanted to provide flexibility to families juggling lots of different priorities."
The change followed other steps the company has taken to help young employees create a better balance between their work and home lives. For instance, in 2014 the company barred junior-level employees in investment banking from working on Saturdays.
Still, as Citi prepared to roll out the longer leave policy last year, there were lingering concerns in the human resources department that some managers would discourage top talent from taking the additional time off.
"We were worried that we were going to have some noise from people who felt that their managers weren't supportive," Rorschach said, noting that she was "hoping for the best and expecting the worst."
But so far there have been no employee complaints to speak of, according to Rorschach.
"We had 50-year-old men saying, 'I'm out of the child-rearing times, but wow, this is amazing,' " said Terry Hogan, global head of diversity at Citi, discussing employees' reactions to the policy change.
As more companies increase their parental leave policies, they are sending the message that a healthy home life is a top priority in business, according to Pamela Stone, a professor of sociology at Hunter College, and author of a 2007 book on why high-achieving women opt out of the workforce. "I think it legitimates that it's OK to take advantage of the policy — the institution supports you," Stone said.
Student loan help
In addition to offering more generous parental leave, more banks are looking into ways to help millennial employees pay down their student loans.
This addresses what has been a growing problem for young professionals. Over the past decade, student loan debt has nearly tripled to more than $1.3 trillion, according to the Federal Reserve Bank of New York.
In November, First Republic in San Francisco began contributing up to $200 a month toward employees' student loans, and promised to do so until the entire debt is repaid. The following month, the $73 billion-asset First Republic bought Gradifi, a startup company in Boston that administers the repayment program.
"Banks are really seeing that to recruit and retain talent, this is a great differentiator," said Tim DeMello, Gradifi's founder and chief executive.
In the coming year, Gradifi expects to expand its services across the banking industry. The company recently received an endorsement through the American Bankers Association and hosted an informational webinar for ABA members in February.
DeMello said he expects to sign up as many as three banks per month in the months ahead.
First Horizon is also exploring the idea of helping employees pay off their student loans. Rather than making monthly contributions, though, the company would likely provide a bonus-like lump sum for new hires, according to Bacon. Those who stay with the company for a set period could keep the money, while those who leave earlier could repay it like a loan. Details are up in the air, including the timetable for offering the benefit.
"We are looking at what other people are doing and trying to figure out what's right for us," Bacon said.