Remote Risk, Remote Reward: The WFH Era in Quant Finance

Building teams, careers, and trust in an increasingly borderless workplace.

Nov 20, 2024

Introduction

There was once a time when, if you wanted to work from home you would need a really good excuse: for example, the boiler needing replacing or perhaps being home to let the builders remodel the kitchen would hit that criteria. It needed to be a legitimate reason. Outside of that, for the most part it was a perk reserved for those with child-care obligations or senior management who did not feel like the Friday morning commute into the city on a packed train. That was before the pandemic hit, then everything changed.

Key Statistic: Only 29% of employers had at least 60% of their employees working from home at least once a week before the pandemic.1

Five years later, with the threat of catching a potentially life threatening disease at the coffee station in the rear view mirror, the conversation about remote work is far from over. Employees and companies are still trying to strike the right balance amidst a noticeable change in rhetoric in what compromises are acceptable and unacceptable. The dynamics have shifted, in large part driven by an economic slowdown and the resulting job instability from layoffs affecting many industries pushing the leverage into the hands of the employers.

Since the pandemic, 79% of the employers surveyed had at least 60% of their employees working from home at least one day a week2

When it comes to the quant finance industry, the argument around return to the office is a source of discontent for some, and for others it makes the pressures of performing every day that bit more enjoyable — surrounded by talented peers to ideate and solve complex problems with.

This blog aims to explore the allure WFH policies have in attracting and retaining important staff members, as well as the pros and cons in making a big shift in getting everyone back into the office.

The key takeaways include:

New technologies bridging in-person and online collaboration
Cultural benefits of supporting WFH policies
The dark side of WFH to mental, physical health and personal performance.
Is balance an unattainable illusion: full return to work vs. generous WFH policies

The Allure of WFH Policies in the Quant Finance Industry

The technology and quant finance industry have many common traits, one of which is their sources of talent. They scour high and low to recruit, train and develop a subset of the global workforce that are selected to solve some of the most challenging problems known to humankind. In order to get the best out of these particularly bright minds, much thought and effort has been invested into making the working environment optimal to maximise creativity and performance. Everything from ultra comfortable office chairs to the direction of natural light and oxygen levels in the internal air circulation systems. For a long time that meant when signing up to work at a leading firm in either industry, coming into the office was part of the deal, to benefit from not only the peer to peer support, but also the culture and the working environment.

Intellectual property (IP) theft, cyber security risks and generally a culture of secrecy in a highly competitive industry were clearly understood reasons why having staff in the office was the modus operandi for such firms. Fully remote employees were far from the norm for the biggest players in both industries and were more prevalent in startups seeking to minimize their overheads, while at the same time offering an advantage against big firms who rejected the policy altogether. That was then, before the single biggest shift to the way we think about work affected us all in 2019 at the onset of the pandemic.

When people have the chance to work flexibly, 87 percent of them take it. This dynamic is widespread across demographics, occupations, and geographies.3

Fast forward to 2024 and so much has changed, narratives have shifted and in many respects the leverage of talent shortages in acutely specialised areas has resulted in policy shifts that cater to the needs (in some cases the demands) of the incoming talent. When it became clear that the pandemic induced working from home policy, not only worked well for particular cohorts of the workforce, but resulted in better performance, evidenced by some of the most impressive PnL results in the last decade, leaders took note and made concessions not seen ever before in the industry.

The Mirror Effect

a bird flying in the sky through a circular mirror

I draw parallels to the tech industry and quant finance for good reason, as for many years, sophisticated proprietary trading firms have modelled their work culture to that of Silicon Valley in order to be as distinctly different to ‘traditional’ Wall Street as possible. Silicon Valley tech companies were first movers during the pandemic to adopt a ‘work where you wish’ approach and the resulting impact has affected the expectations of employees. Wall Street giants were much more resistant and for traditional finance firms, office attendance was mandatory (where it was legally enforceable). However, quant finance firms took a more contrarian stance and found themselves having to quickly adapt. Most notably, reconciling their ability to attract top talent coming from within the tech community, they saw an uptick in employment contracts with written promises of the ability for fully remote work increased sevenfold.

However, starting in early 2022 through to this present year in 2024, the expectation for full work from home conditions has subsided with employees desiring a combination of remote and office mix, termed: flexible working. Yet even so, the office environment has yet to return to pre-pandemic highs, evidenced from employers at the largest firms in financial centres in New York and London negotiating out of long term office leases.

While in the tech industry there have been firms that have trialled more radical policies that involve offering staff a digital nomadism pass for as much as 3 months of the year, firms in the quant finance sector have not moved quite that far. Policies including remote work from anywhere in the world have surfaced in prop trading firms with a limit of 3-4 weeks per annum in order not to trigger any tax penalties. The introduction of such policies have been established in a bid to retain and attract talent, and whilst they are still very much in the experimental stage, there is optimism that the future could involve potentially more creative policies in the future.

New Technologies Bridging In-Person and Online Collaboration

a man sitting at a desk wearing a virtual reality headset

Zoom Technologies, Microsoft Teams and Google Meet were technologies that were thrust upon us in recent years, moving from scarcely used applications that some had barely heard of during the pandemic, to everyday solutions in retaining our ability to remain connected with colleagues and family members. It’s been well observed that during the heights of working from home bonanza, much of the remote work force experienced severe fatigue from prolonged screen time, moving from virtual meeting to virtual meeting, glued in front of a screen with seemingly no end in sight.

During the transition to “normalcy” flexible working patterns that combine working from home and being onsite, workers have seen noticeable benefits of increased face-to-face engagement restoring balance of human connection in the lives of many. A major limitation to the present technological solutions such as Zoom, is the lack of immersive experience — the inability to accurately capture and read emotions of the others — and the challenge of creating organic, spontaneous interactions within team settings.

With advances in Virtual Reality (VR) and Augmented Reality (AR), team collaboration could soon feel more immersive than ever. Take for example the recent launch of Apple’s VisionPro and Meta’s QuestPro - it might not be obvious, but this technology could be the very bridge the present problem of interconnectedness of fractured global teams.

Imagine a future where you no longer looked at a monitor to conduct your work, instead to wear an Augmented Reality (AR) or Mixed Reality (MR) headset instead, where applications videos are not flat 2D images but 3D interactive, multi-modal media. Better still, imagine the feeling of being physically present for a team meeting in New York, while experiencing it all from the comfort of a co-working space or your home office in Hong Kong or India? These visions become all the more real as illustrated in a recent YouTube interview with Lex Fridman and Mark Zuckerberg. These innovations allow for a more nuanced and rich interaction, akin to being in the same room at the person you are meeting with. They are the next frontier in resolving the 'presence paradox'4, the notion that one can be anywhere in the world and still fully participate in a visceral shared experience as if they were physically present.

The quant finance industry that is notorious for embracing truly cutting-edge technology, is uniquely positioned to capitalize on these advancements. The trend of digitalisation continues where the adaptability of these firms to integrate such technologies could see a future where the trading floor is as much a digital construct as a physical one—allowing traders, quants and engineers to interact with data and each other in a shared virtual space, transcending geographical limitations. Much like the exchanges of yesteryear, that saw a reincarnation from physical centres of trade facilitation to dispersed, centralised and decentralised venues of electronic liquidity, the physical workplace as we know it could be set for a similar transformation.

Cultural Impacts of WFH on Performance

Culture is the invisible hand that weaves the very fabric of productivity and innovation within any organization. In the context of the WFH paradigm, we're witnessing a cultural evolution. The pre-pandemic belief that certain roles necessitated a physical presence has been debunked, revealing the portability of many jobs once anchored to the office environment. This realization has the potential to shift organizational cultures towards outcomes-based performance measures, rather than traditional time-based ones.

Theodore Morapedi (Founder, Onyx Alpha): Remote work has reshaped what company culture means, shifting from being defined as an office energy, to placing high value on shared goals and placing trust in one another to achieve collective outcomes.

The cultural benefits of WFH policies are underscored by significant empirical data. The cultural benefits for individual and company performance from supported WFH policies are significant. Employees enjoy greater autonomy, leading to increased job satisfaction and retention. Companies gain access to a wider talent pool, unrestrained by geographic borders, and often benefit from cost savings on physical space and resources.

“It is possible for certain companies to be 100% virtual, these companies are generally in areas where information is the key service being offered, such as accounting firms, financial companies, or gaming companies.” says Robert Pozen, senior lecturer at MIT Sloan School of Management and a senior fellow at the Brookings Institution. 5

These insights reinforce the imperative that employers take a forward looking approach to workforce policy, straddling the fine line of preserving culture without it being the very thing that stifles growth and competitiveness.

The Dark Side of WFH: Health and Performance Risks

Yet, the shift to remote work is not without its perils. While flexibility offers freedoms, the blurring lines between work and home life can lead to burnout, with employees finding it difficult to 'switch off'. The lack of physical activity associated with commuting and moving around an office environment has tangible health implications that compound over the long term. Additionally, physical isolation can lead to feelings of disconnection from the company culture and mission, which can be especially detrimental in the tightly knit quant community where collaborative brainstorming is key to sparking innovation.

What’s more, the risk of intellectual property theft and cybersecurity breaches has escalated with the adoption of remote work. In the quantitative finance industry where data is gold and safely guarded like so, the stakes are especially high given the volume of transactions and obligations to investors, caution and in many cases paranoia — comes with the territory.

To protect the business from undue threats, robust security measures have been adopted including VPNs, advanced encrypted systems, two-factor authentication and cyber threat training. However these measures are in conflict with the desire for trust, autonomy and collaboration that many employees who seek these freedoms plead for in this era of decentralised workforce distribution. These acute tensions if not dealt with, will certainly cause long term problems around attrition and reputational damage.

The Illusion of Balance: Office vs. WFH in the Labour Market

Is the ideal work environment one that fully embraces WFH, one that demands in-office attendance, or is it a hybrid of the two? These questions have become central in the labour market, especially for firms competing for top quant talent. The modern employee is increasingly looking for flexibility and autonomy, weighing these factors heavily in their employment decisions.

Employees with flexible work arrangements report higher job satisfaction, with 51% of workers stating they would change jobs for one that offered them flex-time. The same 51% of currently employed workers say they are watching for or actively seeking a new job. 6

Companies that stubbornly enact traditional in-office policies may find themselves at a disadvantage, especially as the quant finance industry competes with younger tech-first firms that often offer more flexible working conditions.

On the other hand, companies that have embraced generous WFH policies may find themselves with a competitive edge in attracting not only local, but global and diverse talent pools. Still they will need to work harder to maintain a cohesive company culture and protect against security risks while avoiding overbearing micro-management.

As we move into the future, the landscape of work within quant finance will no doubt continue evolving, with companies employing various configurations to find the right balance that maximises both employee satisfaction and operational efficiency.

The transition to this new work culture requires deliberate and thoughtful navigation.

For Onyx Alpha Partners, this means advising our clients not only on the optimal strategic talent solutions that align with these shifts, but also on how to implement them in a way that preserves our shared guiding principles of transcendence, creativity, and well-being. We stand at the forefront of this change, ready to guide the quant finance community through the evolving terrain of work culture norms.

Effective Conclusion:

As we face the crossroads of workplace evolution, undoubtedly the quantitative finance industry faces some pressing choices on the ability to embrace durable and digital innovative solutions, or pivot towards a renaissance of the traditional office space as a cornerstone of collaboration and company identity.

Perhaps the answer lies in a hybrid model yet to be fully realised, blending the best of both worlds while tactfully negotiating the challenges ahead. For firms willing to embrace this shift thoughtfully, the path forward offers not only stability but also the potential for lasting, meaningful change.