business woman

The rapid and effective transition to remote-based operations since early March has been a striking development in the investment industry.

Once Covid-19 had been declared a pandemic, most of the 240 IIROC-registered firms had shifted their retail and institutional businesses into remote-based operations within weeks. The scale and scope of retail businesses made this smooth adjustment even more impressive: 10,000 advisors, nearly 7,000 branch offices across the country, 7 million client accounts and a large share of 43,000 employees.

Transitioning to remote operations at this scale had not been anticipated. For institutional firms, business contingency operations and back-up locations have long been considered, given recent experience from power outages and terrorism threats, but a full conversion to home-based business brought a new level of challenge.

The success of this transition is also underscored by the industry’s effective response to heightened retail demand for advice and securities execution during the crisis period of volatile capital markets and swinging asset prices. Video-conferencing technology, such as Cisco Webex, Microsoft Teams and Zoom, helped make the transition to remote work effective.

Prior to the crisis, dealers had developed internal compliance technology and systems to monitor and record client conversations and transactions with advisors and institutional traders. Securities regulators had similarly adapted compliance oversight through technology systems.

Another key move was regulators, notably IIROC, making certain rule exemptions and changes to regulatory procedures, such as reporting, to accommodate remote operations without adding risks to investor protection or the stability of financial markets. Many of these recent adjustments to rules and procedures will likely remain in place, perhaps with some modifications, after the crisis period ends to maintain a consistent focus on cost-effective regulation.

Executives have recognized that many aspects of remote-based operations can be implemented on a permanent basis in a post-pandemic world. Remote-based retail and institutional businesses have been operating effectively to meet the full needs of clients without compromising their productivity, regulatory compliance or integrity.

The decision to retain these remote operations, or a significant component of them, will be made to save on real estate, given the continued pressure of operating margins from competitive markets and the rising costs of regulatory compliance and technology. Smaller firms with limited business scale will move more aggressively to retain remote operations.

This shift is already happening in other industries. Software firm OpenText recently announced that most of its smaller offices worldwide will close as 95% of its 15,000 employees working remotely have maintained productivity at typical levels.

The shift to permanent remote-based operations should be taken carefully to preserve and strengthen effective channels for frequent personal interactive communication. For retail operations, close oversight and personal face-to-face engagement with advisors is critical to improve productivity, to strengthen understanding of regulatory reforms and compliance policies, and to build morale.

In the U.S., the retail complex structure over-arching the branch system of investment firms carries out these oversight activities. A similar structure could be imposed in the Canadian system.

Most important, effective personal interaction between management and professional staff, and among professional staff across the firm — balanced carefully between infrastructure facilities and technology applications — is key to enable a full understanding of the business approach and identity of the firm, and to build culture, which is so essential to a firm’s efficiency, integrity and success.