According to AdvisorHub, major brokerage firms are likely to restructure their real estate footprint, branch management structure, and supervision, as remote working will likely outlive the Covid-19 pandemic.
As fewer advisors need dedicated desks, firms may shrink their rosters of branch and complex managers as they consolidate supervision. Simultaneously, regulators and compliance officers will shift their attention to advisor's texts and voice communications with clients as a way to closely monitor remote office activity.
According to AdvisorHub, evidence of reshaping offices is currently underway. The trend could eliminate the need for permanent desks as firms shift to a more "hotel" type setup where advisors check-in and out of office space.
Remote Regulation
Regulators have also indicated they are preparing for permanent flexibility. Robert Cook (Cook), Chief Executive of the Financial Industry Regulatory Authority (FINRA), has begun discussing with the Securities and Exchange Commission (SEC) the possibility of extending the waiver on in-person branch inspection into 2022.
Cook also said that in 2022 he would like to review FINRA's supervision rule holistically and consider whether it could be updated to accommodate a risk-based approach to when in-person exams would be necessary.
According to Chip Jones, executive vice president of Global Relay, "FINRA appears to have grown comfortable with its ability to keep watch on remote workers." Jones also added that regulators have adapted by shifting their focus to advisor's text communications or phone calls. Firms are likely to do the same by boosting archiving abilities and focusing more on those remote methods of talking with clients.
Possible Tax Benefits
Advisors that run their remote work locales may be able to reap tax benefits, depending in which state they reside. According to Raymond Edwards, a national technical tax director, advisors' employers that no longer provide designated office space can claim as a deduction in some states for their home office (or costs of alternatively located workstations) as an employment-related expense, leading to significant savings.
Edwards stressed that such deductions for employees are not permitted for federal taxes. However, advisors who are compensated as contractors and receive 1099 tax forms may qualify to claim the home-office deductions at state and federal levels. Edwards recommends negotiating with their companies about sharing cost savings as real estate expenses decline for advisors who are employees and who do not live in a state with the deduction.
Financial Advisor Transitions consults advisors nationwide to explore employment transition options and to preserve and protect their practice in any transition that they make.
