Should Financial Services Leaders Use Pre-Employment Testing?

Insights - 15 July, 2022

There is nothing more disappointing, inappropriate, and costly for a company than a bad hire. According to CareerBuilder, businesses lose up to $15,000 annually for making the wrong employment decisions due to replacement hire fees, company downtime while a position is vacant, and other unforeseen expenses. If we consider the negative influence of a bad hire on productivity and team cohesion, the detriment may become even more significant.

The growth of a financial services organization depends mainly on acquiring the right talent. Qualified employees are the company's best asset, and with one hasty decision, the business may lose thousands of dollars. Every financial services employer needs the best fit for their team, but how do you find the right talent?

Traditional candidate assessment methods, such as relying on resume screening, can oftentimes waste the employer's energy and time and may also provide incorrect information about the candidate. Criteria Pre-Employment Testing research of 2019 discovered that about 78% of candidates' resumes are misleading, and up to 46% of them contain undeniable falsehoods.

Pre-employment testing, in turn, is an objective, systematic way of collecting reliable applicant information during the screening process. Professionally prepared and well-validated pre-employment tests are an efficient and trustworthy way of acquiring insight into the skills and characteristics of prospective employees.

Top 4 Reasons To Use Pre-Employment Testing

1) Objective screening

Interview results may be distorted due to the interviewer's subjectivity, bias, and the candidate's communicative qualities. Resume screening, as we noticed before, is not a reliable method at all. On the other hand, pre-employment tests allow using objective data to make more informed recruiting decisions. They can provide standardized, relevant applicants’ skills evaluation, as well as forecast work success and corporate compatibility.

In contrast to personal interviews, pre-employment testing is suitable for the assessment of a vast array of applicable talents and personality traits. These may be cognitive ability, problem-solving skills, organizational skills, subject-area knowledge, confidence, leadership ability, agreeableness, analytic skills, initiative, dependability, collaboration, and many others.

Financial services employers are able to hire specialists who are the best fit for both the position and the organization due to pre-employment testing. That's not only great news for the hiring managers, but it also improves the overall quality of hires.

2) Effective hiring process

All hiring process steps, from posting the position to hiring the talent, usually takes an average of 42 days. According to the CEB research, only 43% of vacancies are filled within a month, and the other 57% may stay open for up to 90 days or even more.

Recruiters find it increasingly challenging to manage the applicant flow of hundreds resumes for each position, while discovering qualified prospects amidst the vast sea of the unqualified. The incorporation of pre-employment testing into the recruiting process can significantly accelerate this process.

Moreover, the Society for Human Resource Management discovered that 75% of HR managers reported skill gaps in job applicants. That’s why when performed at the beginning of the hiring process, pre-employment tests are at their most effective. Financial employers can clear out many unsuitable applicants with false information in resumes by asking applicants to take assessments early on. Candidates who complete the tests are at the very least committed enough to the employment opportunity to devote the time required to perform the assessment.

3)Boosting employee retention

It is equally critical for financial services businesses to retain personnel and reduce turnover as it is to hire the perfect match. Why spend so much time and money on finding educated and qualified talent, who won't stay long enough to make a positive impact?

According to Aberdeen Group research, businesses that use pre-employment assessments report a 39% reduced turnover rate. Pre-employment testing and assessment allow to screen candidates more quickly for ability and personality, as well as determine a candidate's likelihood of staying in the position and their cultural fit.

To determine whether a candidate is qualified enough for an advisor position, numerous elements, such as a passion for learning, ownership, initiative, overall ambition, empathy, communication skills, cooperation skills, honesty, and curiosity, might be examined. It can be quite challenging to assess these skills during a typical face-to-face interview, and candidates who fall short in these areas will eventually begin failing, and therefore are more likely to quit. Pre-employment testing and assessments can minimize recruiting and training costs by giving reliable data that enables the financial services company to hire the most qualified candidates for a job the first time around.

4) Strong legal defensibility

Surprising as it may sound, when done properly, pre-employment testing and assessments increase the legal protection of your hiring process. As with any other piece of the recruiting process, pre-employment testing must follow the same legal principles.

But because pre-employment testing provides employers with objective, standardized and evidence-based predictors of job success, unlike other subjective hiring methods, they provide an additional layer of legal defensibility. This data gives financial companies the opportunity for better protection of their hiring procedures if anyone questions their legitimacy.

Nevertheless, pre-employment testing has a number of drawbacks. Pre-employment testing may be prejudiced towards specific groups of individuals for example. For instance, pre-employment assessments emphasizing logical reasoning can be biased against women, who tend to score lower than men on these types of tests.

Secondly, pre-hiring assessments are not free of charge. If a major company with hundreds of job openings asks applicants to take a $50-per-person pre-employment test, this can quickly mount up an impressive cost.

And finally, pre-employment tests may not be reliable predictors of job performance. A candidate may perform well on a pre-employment test for a position that requires mathematical skills, only to learn later that the position also requires interpersonal qualities, which the individual lacks. So, for best results, different kinds of pre-employment testing should be included in the hiring process.

Types Of Pre-Employment Tests

Before a financial services employer extends a job offer, he will often choose a few types of pre-employment tests for comprehensive screening. These tests can assess a variety of skills, abilities, and even psychological features and are an effective way for employers to narrow down their pool of candidates.

Common pre-employment tests include aptitude tests, personality tests, and skills tests, but there are many specific tests for analyzing other factors.

Aptitude tests

Pre-employment aptitude tests are a common and essential part of the hiring process. They measure a candidate's ability to learn new information or master new skills. Aptitude tests are typically used to assess candidates for roles that require high levels of analytical and logical thinking, which are definitely the vital skills of a good financial associate.

There are numerous pre-employment aptitude tests, each measuring a distinct set of talents and abilities. These are some of the most prevalent:

Numerical Reasoning Tests measure a prospect's ability to understand and work with numerical data. They are used to assess roles that require strong math skills, such as accounting or engineering roles.
Logical Reasoning Tests determine a person's critical thinking and problem-solving skills. They are frequently used to evaluate positions requiring strong analytic abilities, such as research and project management.
Verbal Reasoning Tests assess a candidate's ability to comprehend and interpret written material. Commonly used to evaluate positions requiring excellent reading and comprehension skills, such as customer service and administrative functions.

Personality tests

Personality tests, on the other hand, are used to evaluate an applicant's personality traits and social skills. They can be helpful in predicting how well an applicant will handle certain job-related situations. For example, a test that measures agreeableness may be able to predict whether an applicant will get along well with co-workers. These assessments can also evaluate a candidate's ability to work under pressure as deadlines and handle stress.

A personality test might assess whether a candidate is extroverted or introverted, emotional or stable, etc.

Skills tests

Finally, pre-employment tests can also include skills assessments. Skills assessments evaluate a candidate's specific skills and knowledge related to the role they are applying for. Predicting hiring success requires evaluating a mix of two basic groups:

Technical Skills (code writing, data search, analytics, accounting, copywriting)
Soft Skills (organizational skills, strategic thinking, leadership, team building, communication, etc.)

For example, a skills assessment for a customer service role might assess the candidate's abilities in telephone conversation manner and conflict resolution.

Instead of designing a traditional skills exam for every potential member of a financial services firm, you should personalize skills assessments to the specific responsibilities of an open position. A range of question formats and immersive activities should be included in well-built tests.

Tips To Assess Your Candidates

Using pre-employment testing effectively can be a great approach to assessing candidates. Here are a few tips for prospect testing:

1) Make certain the test is relevant to the job. The most effective pre-employment tests are those that are closely related to the role at issue. Consider administering a financial analytics aptitude test when recruiting a financial advisor, for instance.

2) Avoid bias. Interviewer should administer the pre-employment testing in the same conditions to all candidates. It will guarantee that the results are not influenced by any personal preferences the financial services employer may have.

3) Combine assessment methods. Pre-employment assessments should not be administered solo. Instead, they should comprise a small portion of the entire evaluation procedure. Other pre-hiring methods, such as interviews and reference checks, can also provide valuable insights into a candidate's suitability for the job.

5) Ensure the test's validity and dependability. Pre-employment testing uses a series of validity criteria to validate the collected data. For instance, an evaluation presents content when the parameters it measures align with the job description and performance. Alternatively, a pre-employment test is criterion-relatedly valid when its outcomes can be used to predict work performance. It requires statistical analysis and the comparison of test results to the performance of employees.

If you want to study proper comprehensive pre-employment testing in detail, with all the legal aspects and pitfalls, feel free to book a call with Provision People. We can walk you through some clear and actionable steps on how you can fill in the gaps on your financial advisors’ team by hiring the best fit due to validated pre-employment assessments.