Many investment businesses will not return to full office working until 2021. Others are even considering permanent flexible operation; a minimum viable presence. Technology, it seems, can make new methods work, raise productivity, and improve work/life balance. But is it really just the same? Six months seems a short trial, and some subtleties of investment management may not yet have been tested. Individual psychology is better understood than group behaviour, but much decision making is in teams.
Time will tell if key ingredients of successful investment remain undamaged. Company culture is a fragile concept. But it is now a core focus of regulation, requiring good behaviour to be deeply embedded in relationships and practice. Significantly reduced face-to-face contact between team members may unsettle this culture and undermine risk management as well as performance.
Productivity in complex services is hard to measure, but it is best to carefully evaluate any change. Self-reporting by employees of better time management and greater focus should not be accepted without question. Investment analysts will understand the concept of reporting bias. And, mental health remains one of the biggest challenges in society; for some employees, office routine and camaraderie supports their wellbeing. Families, gardens and suburban living may help many to function well, but some people living in cities cannot work easily at home. Overwork may be a bigger risk without the visual cues of end of day that an office provides. HR managers might argue that employees can be supported and trained remotely, but video contact is not quite the same as face-to-face. Surveys may not truly capture engagement and morale.
The impact of direct contact is perhaps most obvious in customer interface. Most investment groups have stepped-up online reporting and client contact by phone or video. This can help to defend business or deepen relationships, attracting more money from existing supporters. But it is harder to win brand new investors in this way. Trust, it seems, has not yet moved fully digital.
The trust issue also impacts company results meetings and presentations for IPOs and fundraisings. Now, there are many more investor calls with company managements, making effective use of company management time. In future, the balance of video and physical meetings is not likely to involve previous levels of travel. Only the biggest investment groups in major financial centres are likely to be seen physically, with the focus on results and fundraising. But many analysts will say that face-to-face meetings sometimes delivered a gut feeling on management credibility and integrity. Did they imagine that? It is far too early to tell if investment can be distilled to numbers and hard facts. The rise of behavioural economics suggests not.
The biggest challenge may lie ahead. Once data is moved to the cloud and employees are remote, a role may be ripe for cost reduction. Machine readable data become more amenable to artificial intelligence and automated methods. Changing percentage hours employed also becomes easier, and recruitment is possible from much further afield. Not only workers that may prefer country living, but even those providing services from abroad. Commuting distance and the cost of city living need not be barriers. It may be some time before this undermines front desk investment staff, but mid and back office work could change first. It may seem surprising when disruption has encouraged manufacturers to shorten supply chains, that more sophisticated services may actually open up to a more competitive global labour market.
London has grown over centuries through a network effect of business relationships and complex interactions. This has been facilitated by location and a concentration of talent. The communication tools that foster good remote working practice within organisations do not maintain the same easy contact with other businesses. There is a buzz to big cities that creates new activity out of scale and connections. In a world where services begin to globalise, there is much for UK investment managers to think about. Investment managers should pause before they pivot to an entirely new working model. There is much to learn about individual wellbeing, company morale and the architecture of the financial ecosystem.
A version of this article was published on Citywire on 26/08/2020.