Risk and Return

“In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” Mark Zuckerberg

The Covid-19 pandemic has brought about a sea change in how asset management businesses function at an operational level. The shift to remote working and hybrid work environments has created a dichotomy for asset management leaders.

Encourage and accelerate a return to the office that can provide reassurance and familiarity, or transition to a hybrid operating model whereby employees have far greater flexibility around where they work and when?

The effects of the crisis and the transition to new ways of working have not been homogeneous.

Some business functions – marketing and communications for example – have thrived having taken a more central role in how businesses have responded to the pandemic. Other functions, particularly some of those with more onerous regulatory demands, have found the shift, and its impact upon working practices, harder to assimilate.

So, with calls for an increased return to the office by Government on one hand and the growing possibility of further lockdowns – or at least, far tighter restrictions on individual movement on the other, how should asset management leaders be thinking about the immediate future and what this means in the long-term for their business?

Whilst harkening back to the immediate pre-Covid past maybe tempting, it may also be counter-productive in the longer-term. Given that the investment sector was in a transitional state prior to the lockdown due to increasing regulatory pressure, shifting demographics and lower-for-longer interest rate environment, is this not the opportunity therefore to accelerate that change, and lean in to the future?

It is a challenge that goes deep into the heart of any business, not just into its revenue models but into its culture and the wellbeing of its employees. The schism between wanting to return to the office and wanting greater operational flexibility does not just sit within boardrooms and teams, but individually within us as well. Both can have attractions, and our preference for one over the other will reflect our personal circumstances more than anything.

But as asset managers we know that we must take risks to make gains.

The pandemic has refocused investors’ attitudes, from the smallest private investor to the world’s largest asset owners, and the investment management sector needs to respond accordingly.

This will require much greater focus on culture and being collaborative in a decentralised working environment. This will require further investment in digitisation and technology, but the long-term benefits may be substantial. After all, one of the challenges for the investment sector is how to become a more diverse employer, and such a substantial shift in working practices may make the sector much more attractive to the talent it needs to fulfil that – working mums, tech-savvy graduates, etc.

It is also the opportunity to ensure the business is focused on doing the right things the right way. What better time is there to eradicate outmoded practices, and eradicate underperforming and uneconomic products? What a great opportunity to rebalance cost centres and to invest in those elements of the business – such as client relations and marketing– which are going to become much more important as the sector evolves. What a great opportunity to become carbon neutral, or even negative.

Obviously, these changes will have significant long-term ramifications not just on the firms themselves but on the worlds they inhabit, from commercial property valuations to the SMEs that make our daily working lives more manageable. There needs to be a degree of collaboration and coordination to minimise the disruption. That is what being a good corporate citizen requires.

There is no single right approach to solve this problem, but there is an obvious wrong one – not grasping the opportunity.

At Lansons we work with more financial services organisations (we believe) than any other consultancy in Europe. Get in touch with David if you would like to find out more about how we can help you during these unprecedented times.

David Masters, Board Director at Lansons
DavidM@lansons.com

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David Masters

Board Director, Lansons