Hybrid hits home

The workplace revolution prompted by the COVID-19 pandemic has become entrenched across industries, and asset management is no exception. KPMG's Asset Management Opportunities and Risks survey helps assess how top Canadian asset management firms are adjusting to today's evolving workplace and tight labour market.

Flexible work arrangements have long been a major draw for top talent across sectors. That criterion has only grown stronger since the pandemic proved beyond a doubt that remote work was possible and could be done well.

Almost all the Canadian asset management companies we spoke to are using hybrid work arrangements as a way to attract and retain talent.

While the bulk of asset management firms we consulted are using hybrid arrangements to recruit and retain quality personnel, many are also attracting staff with flexible work hours. Half are offering even more flexibility by introducing work from anywhere policies.

While some sectors have experienced layoffs in the past few months, it’s still a challenging labour market and competition is high. Business leaders recognize that they need to be responsive to employee demands to assemble and maintain a talented workforce.

Depending on position and seniority level, we may see employees start to self-select based on their personal preference for hybrid, office, or fully remote work and work experience. Asset managers facing a shrinking labour force in a tightening economy may choose to leverage flexible work arrangements to meet employee expectations without relying on salary increases.

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 Canada enters 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.

As 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.

Inclusive workplaces remain a priority for Canadian asset management firms. The majority is placing more emphasis on diversity, inclusion, and equity to build workplaces that are a true reflection of Canadian society. Investors and pension plans are also looking carefully at diversity and inclusion in their selection process for external service providers. Many are now requesting diversity and inclusion data from external managers forming part of their portfolios.

Lastly, while vaccination programs in Canada have been highly effective in reducing the risks associated with COVID-19, health officials continue to stress the importance of pandemic safety. Despite a prevailing "post-COVID" attitude, the coronavirus still presents a workplace risk.

Policies regarding workplace illness, testing, working from home while symptomatic, and office social distancing will continue to inform workplace decision-making for in the months ahead. To protect employees, clients, and their businesses, asset management companies of all sizes should plan for employment disruptions and stay informed.

KPMG's Asset Management team has the experience and knowledge to help firms transform, grow, and optimize their offices, workforces, and employment policies to meet today’s changing circumstances. Contact us today to discuss and develop a tailored strategy that addresses your comprehensive workplace needs and lays the groundwork for growth and success in the days ahead.