Removing Travel: Understanding the Cost/Benefit in Capital Markets

Is traveling to clients worth it? I feel like a lot of gut reactions would be “yes”, but how do you know it’s worth it? I’ve never thought about it before, especially in the context of the Capital Markets – until now.

I used to travel a lot pre-pandemic. Like many of you, I was on the road seeing clients throughout the year – New York, London, Toronto, Boston, SF – the list didn’t stop: I did over 75 hotel nights in 2019.

One thing that really just dawned on me is truly appreciating how much time travel takes up, and what a tax it is on productivity – especially in the capital markets. Now, before everyone gets their pitchforks out, I get it, there is a lot of value in meeting face to face: as one of our board members says, “nothing will ever replace being able to see the whites of someone’s eyes.”

Let’s take a step back though: this industry has for a long time assumed almost everything needed to be in person. Roadshows, analyst meetings, corporate access – it was all in person – and while I don’t doubt there are massive benefits to meeting in person, did we ever stop to think about what the cost was?

Let’s take analyst marketing. If an analyst ends up spending 10% of their year traveling, that would work out to around 25 days per year (as there are roughly 252 trading days a year). Let’s say the average trip is 2 days (a quick trip, with some being shorter, and some longer) – that works out to roughly 12 trips a year. Now, we don’t have the ability to teleport yet, so whenever you go on a trip, you need to pack, go to the airport, wait, get on a plane, fly, get off the plane, go to your hotel, set up, etc. – both on the way out and on the way back (and that’s assuming no delays, etc.). I’ve become pretty efficient at that over the years, but let’s say it averages to around 4 hours on each side of the flight (not including the flight time). That means that just the logistics of traveling cost almost 100 hours of productivity time per year, without even considering the physical toll it takes on people. Double the marketing time (to 20%) and you double the number of wasted hours (200).

Not to sound pedantic, but even with those highly conservative numbers, that’s 100 hour-long calls with clients that aren’t being done. That’s a big cost.

Now, the industry has always made the assumption (right or wrong) that meeting in person is worth it – and in many cases, it is. But here is the experiment that we now find ourselves thrust into: is the loss of face to face meetings worth the upside in output? In other terms, to what extent does the value drop of remote meetings outweigh the volume increase?

You can measure the impact of this yourself, and your own firm

Low and behold, we actually find ourselves in a situation where we have the data to answer that question. With no travel, output for those who spent time traveling should meaningfully increase. Brokerages will be getting some great data that should tell them what that output change looks like (year over year), and what (if any) the value drop was of meeting over the phone/web vs. meeting in person.

For each analyst, you could look at what their ‘output’ was for Q2 2020, vs. their output in Q2 2019: how many calls, meetings, reports written, etc. This should give you some insight into what the production impacts of travel are, and how the removal of travel overhead has impacted that output (obviously it’s not a perfect science).

Then, you could start to look at voting/client feedback around those calls/meetings – are they finding them materially less valuable? Slightly less valuable? I don’t think I’ve heard of anyone doing it, but this might be the time to reach out to clients and get some quantifiable feedback on how they find remote/web analyst calls vs. traditional in person. It could be a very short (3-5) scaled questionnaire, i.e. “How do Zoom calls with our analysts compare to in-person meetings? Much worse, worse, neutral, better, or much better”

With this data, you could then look at output per person, against the perceived decrease (or potentially increase!) in value to the clients. You then have the cost/benefit data on which to understand the impacts of removing the travel overhead from your business.

Now, this is of course more nuanced than I’m presenting. There are lots of other factors. Clients might be happy with calls now but tire of them in a year’s time. No one knows the full picture – but you can at least find out parts of it.

Every brokerage now finds themselves forced into a real-time experiment on what the cost and benefits are of travel, and what the return on investment is. It’s time to ask clients how they feel about the new norm, and what is/isn’t working. It’s a great opportunity to take the lemons we’ve been given, and make lemonade. Then figure out what shipping that lemonade to clients ultimately costs.

Blair Livingston
Street Contxt

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