Protect and mitigate

The "work-from-home" pandemic experience demonstrated one thing clearly to asset management firms across the country: it is not necessary to rent expensive downtown Toronto, Montreal, or Vancouver office space to carry out certain asset management functions. Many back-office tasks can be performed perfectly well remotely and companies are seeing significant costs savings from operating largely virtual or fully remote environments. Whether firms retain their office spaces may ultimately depend on the size and number of employees.

Given market conditions, for instance, a dichotomy may emerge between smaller shops that lean more fully towards the remote model to maximize cost savings, and larger shops that return key functions to the office. At the same time, those mid-size and larger companies will likely continue to explore digitalization for areas that are not core to their value delivery and reduce their real estate footprints accordingly.

Areas that don't require physical presence or collaboration may be kept or made entirely remote, or even outsourced in cases where the function isn't integral to the corporate culture.

Many asset management firms are now deeply entrenched in the growing pains of operationalizing the shift across front, middle, and back offices. Some segments of the industry, including traders and investment bankers, remained in offices throughout the pandemic. Front office investment teams need to collaborate more fully and many have already, or will soon be, returning to the office.

Wherever people work in asset management – front, middle, or back office – they quickly grew accustomed to flexible work during the pandemic.

Most firms are now introducing (or have introduced) hybrid arrangements to maintain company culture and balance internal needs alongside employees' shifting expectations, with slight differences in approach.

The majority of asset managers we consulted – over 80% – are now requiring workers to come in 1-3 days per week, but are split on whether those days can be chosen by the employee or are designated by the firm. The approach is largely the same for front, middle, and back office employees.

A few companies have opted for fully remote or fully in-office work, though these are outlier positions. This strategy could change if we enter a major recession, in which case larger organizations may feel more comfortable requiring employees to be present in the office.

Even so, that may take some coaxing. Much depends on the individual role and the company culture. Firms that want to return to a predominantly in-office environment may need to explore incentive programs to return to pre-pandemic working arrangements.

PAs firms stare down a challenging market environment and weigh the heavy expense of downtown real estate, middle and back office functions may be shifted to hybrid or made remote. In fact, the pandemic experience helped many organizations shift their mindset from time spent at work to results achieved.

This new outlook will help the hybrid work model survive. Above all, asset managers will be focused on reducing fee revenue risk and getting costs under control. Many will invest in technology and outsource low- or non-high value activities and functions in the middle and back offices.

As firms ease into hybrid work, they will introduce productivity measurement and workflow software to ensure tasks are done efficiently to a high standard. Firms that take a substantially outsourced, remote or virtual approach could be able to offer lower fees to clients. However, those clients may lose out on the prestige, high-touch, personalized experiences offered face-to-face by salespeople at firms returning to the in-office experience.

There's a trade-off between models firms will need to weigh the factors depending on the economic outlook and client expectations. For most firms, hybrid work remains a work in progress. We should expect to see some ebb and flow, some trial and error, as organizations test methods and measure their impact.

Individual firms will need to determine what approach or combination makes the most financial sense and best serves their recruitment and retention needs.