How Covid Will Change Communication in Capital Markets

TL;DR (too long, didn’t read)

  • Covid is ushering in an era of change for communication tools in Capital Markets
  • This might finally break the resistance to truly allowing ‘work from home’, and that in turn will usher in a whole new era of technologies and opportunities
  • Those new technologies and tools will create a new universe of data points and metrics, allowing firms to better understand and personalize their client’s experience, allowing new approaches and tools to emerge, creating a virtuous loop
  • Some of my personal view and ideas are below including how it will change analyst calls, corporate access, and information distribution
  • Firms must also ask themselves: are we covering clients the way that used to make sense before Covid, or are we covering clients the way that makes sense now when everyone is quarantined at home?

The coronavirus certainly is putting a lot of strain on the capital markets infrastructure – and specifically, the communication infrastructure. I have been having a lot of conversations with business group leaders over the last few weeks about how they are adjusting to the new norm, and the one theme I can take away is just how unprepared the industry was for this. 

If you look at previous ‘disaster recovery’ and ‘business continuity’ playbooks, it was “move everyone from site A to site B, and then maybe put some at site C,” which was “move the trading floor from Manhattan to Connecticut and then some to Atlanta.” It always assumed you could move the trading floor, and it was never contemplated that you might have to dissolve the trading floor. That made sense though – it was a fair approach to all the previous issues – but something like a pandemic has presented a new set of constraints: what if people can’t travel? What if people can’t be in the same room? What if people aren’t allowed to leave their homes? Welcome to the current situation.

Add this to the fact that everyone said “work from home is impossible in this industry.”

Of course, there have also been very creative approaches. One Hedge Fund (Citadel) actually rented out a hotel to quarantine in so they could keep working. It makes sense though: you get sleep, food, and recreation all in one place, in a fully controlled environment. 

For the majority of the industry though, renting out hotels isn’t an option. Instead, we’ve been sequestered to our homes, and are adjusting to the new norm of working from home – and what an adjustment it’s been. 

Let’s take a look at where we were pre-covid. First, almost no one in this industry actually owns a laptop – the front office lives off a combination of a desktop and mobile phone, which the phone is often just for triage in-between desktop access. Complex and legacy compliance needs have kept the old systems in, such as fax machines, and the new systems out, such as video conferencing and messaging. Phone and email have continued to dominate the industry, as they don’t require ‘compliance approval’ to use – they are existing (vanilla) systems. Anything that requires special approval to use has usually died the slow death of a thousand cuts as it works its way through the approval process. 

But here we are, six or so weeks later, and we’re now grappling with the reality of what the new remote looks like. New system and tool approval timelines have been shortened from years to weeks. Everyone is trying to roll out new systems, hardware, and software at a breakneck speed as they help their teams adjust to the new normal. 

All of a sudden, work from home doesn’t just seem possible, it seems essential.

We have traders working from home, sales people, strategists, research analysts, portfolio managers, and everyone in between. The unthinkable just a few short months ago is now a reality. 

The Path Ahead – a Fork in the Road

Ultimately, this will eventually pass, and the world will return to normal. My view now is that this is going to go one of two ways on this, and I think it will be relatively extreme at either end: we’ll either lean into these changes, including remote working, new communication tools and technologies, and new norms, or we’ll rush back to the previous status quo, and hope this never happens again (and try to forget it ever did). 

There is a very real possibility that the industry collectively decides they want to ‘go back to the way it was’. That would be a shame. There has been so much positive change, innovation, and strides forward that it would be upsetting if we went back to the way things were – but it’s possible.

On the other hand, what if things do change? If the momentum continues, and the quarantine period ends up running longer than expected, or the industry collectively decides that we want to keep running in this direction, think about how many things that were “unchallengeable” are suddenly up for grabs. This could be the great dislocation of ‘standard practices’ in this industry. Here are a few that I’m thinking of:

  • Analyst calls: using new tools and applications, we can move away from “I’ll call you or you plus a few others” to more dynamic and structured calls. There are a number of applications already available (to the broader world) which could be repurposed: these include question submission (“Ask me anything” or AMA), voted questions, transcribing (so you get a transcript of the call after automatically), voting or value allocation tools during the call (which could be tied to the transcript), and a lot more
  • Corporate access: what does digital corporate access look like? Obviously there is video conferencing (which is well under way), but how do the connections/discovery happen in the first place? Where can people vote/nominate companies they want to connect with? Is there a place for presentations/slide share decks, where corporates can see what the ongoing engagement looks like? What tools are investment banks going to make available to their corporate clients to not only differentiate their offerings, but also improve their experience?
  • Morning note distribution: one of the most iconic emails, the morning note has a lot of opportunity – can you instantly click through to instantly join a ‘queue’ to talk to the author, or a given analyst/contributor? Can you click through to find more commentary similar to what you consumed? Can you upvote/tag for voting?
  • Research subscriptions: given the massive surge in digital touch points, how are those going to impact research subscriptions? Hopefully they will begin to feed back in, changing the subscriber’s preferences based on engagement. Which analyst calls have they been joining? What sections have they upvoted? What morning distribution content have they been consuming? What companies have they indicated interest in?
  • Trading flow distribution: trading flows go out today over many channels, but email is a major one – but who do these flows go to? How do the subscribers get updated? Can these be through push notifications to phones (or apps) or to another desktop application?
  • Event invites: calendar integration is going to be essential, but what about a calendar application for capital markets that makes event suggestions? Looking at what content you’re reading (via Email, Bloomberg, etc.) and other application interaction (voting for commission, analyst calls, etc.) a calendar application could suggest upcoming events, and help manage RSVP/attendance
  • Recruiting: with all these new data points, surely recruiting is going to become more science, and less art – individuals will be able to point to key metrics such as engagement scores, call attendees, performance, and other quantifiable metrics that will be able to supplement and colour the qualitative metrics. There is a massive opportunity to build new recruiting tools and marketplaces in capital markets, leveraging this data (and I’m sure some are already underway)
  • Commission allocation: perhaps one of the biggest areas of focus for the last few years: what does commission allocation look like in the new world? With way more data points across all the above, I would expect it to become much more sophisticated, such as new tools which bring in not only binary data (i.e. attended or didn’t, opened or didn’t) but complex data sets as well (listened for 45 min, upvoted 6 sections, relative to 85 upvotes given out that week, and a normal listening span of 22 min). 

Overall, the adoption of new technologies in this industry will have one key improvement: more quantitative data points. This will allow the industry to build more elegant and complex tools and technologies, to improve the experience for everyone involved. These experiences will follow two main vectors: automating low value tasks (like data entry), and augmenting high value tasks (like calls).

Personally, I’m hopeful that this period of chaos is going to open the floodgates for a period of change. Once business leaders see what is possible in such a short period of time, they are going to be a lot more open to what is possible over a longer period of time. 

Communication tools in Capital Markets suck… mostly because it’s so hard to get anything new in the door – hence the staying power of fax, email, and phone. For now though, it looks like the doors have opened just a crack, meaning that a few new tools will get through, and hopefully that will lead to a cambrian explosion of change – but only time will tell. This period is going to be a huge opportunity for those firms which can act fast, bring in new tools and technologies, and improve on their client’s experience in the new norm, while all their competitors try to service the same clients with the tools and strategies from the previous era. 

The world is changing quickly, make sure you are too!

As always, we’re here to answer any questions and provide you with our thoughts, don’t hesitate to reach out, and stay safe out there,


PS as you send more emails to your clients, and adjust to working remotely, we’re giving all of our existing clients unlimited free licenses to ease the transition, and leverage our email intelligence solutions – reach out if you have any questions, or read more here

Blair Livingston
Street Contxt

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