One question that has often been asked is “What has been the impact of the pandemic on the investment industry?” If the question was asked in the early months of the pandemic, the answers would have been different than they are now. At that time, plunging markets, panic selling, lockdowns and widespread uncertainties pointed to a major setback in industry performance.
Thankfully, that setback did not materialize, as businesses and governments rushed in to access liquidity to sustain them through the crisis. The Canadian underwriting business hit record levels in 2020, according to data from Refinitiv. Additionally, the wealth management business turned in another strong performance in 2020.
Clients were understandably nervous and anxious about their portfolios, reaching out to advisors more frequently for advice and knowledge to navigate market volatility and pandemic-related uncertainties. Demand increased for more personalized products and services — especially estate planning and insurance planning — and clients have been reconfiguring their retirement plans.
One of the biggest surprises in the past year was the surge in sustainable investing, most notably through ETFs. Dealers and other market participants benefited from the underwriting and distribution of these securities. ESG-themed investments have been growing in numbers and assets, accelerating sharply last year thanks to retail investors’ enthusiasm for more attractive investment returns and wider portfolio diversification. The pandemic gave home-bound investors more time to consider these investments and use them as a risk-mitigation tool. A 2020 RBC survey noted that 73% of Canadians believe responsible portfolios are the way of the future.
Another major impact of Covid-19 has been the accelerated adoption of technology right across dealer operations, catalyzed by the pressing need to adapt to remote-based operations. Firms rapidly built up teams and resources to accommodate remote-based operations to deliver financial services in a social-distancing environment. The initial focus was on available communications systems — Webex, Zoom and the like — and then on improving client digitalization, particularly online access to needed information and financial tools. Technology applications expanded in scope to include new platform systems like Datafile to improve operating efficiencies and extend client access to products and services.
The third impact was the massive shift from the office to working at home for the dealer workforce. The transition was seamless, without business and market interruption. While smaller numbers of staff gradually moved back to offices on a part-time basis late last year, it is anticipated many staff will continue to work remotely for the foreseeable future, at least until widespread vaccine inoculations are completed and uncertainties are settled. Many staff prefer the flexibility and lifestyle convenience of a home-based location, while others miss the collaboration and collegiality of the office environment. It is likely that a flexible, hybrid workplace model will emerge post-Covid, similar to a hoteling arrangement where employees schedule their use of an office/desk. This model can achieve operating efficiencies and cost savings, as well as higher staff productivity and morale.
The fourth impact was the timely and effective response of the regulators. During the pandemic, regulators approved numerous temporary relief measures to enable firms to operate in remote conditions. These measures included streamlined supervision and staffing requirements, such as eliminating the prohibition of using the same staff for order execution and advisory inquiries within the same dealer or affiliated dealers, and practical means of client identification. These measures have improved operating efficiencies and client experiences without jeopardizing investor protection. The industry is hopeful these rule adjustments will be confirmed as permanent.
In summary, the pandemic had a significant influence on firms across the investment industry and their clients. However, the changes the pandemic ushered in — the increased interest in ESG investments, rapid adoption of technology applications, workplace adjustments and regulatory relief — will have a positive impact on the industry, not just now, but for the long-term.