On mutual funds and coming down the road

I have never understood why the enterprising economic developers in Nova Scotia and New Brunswick have never made any serious push to attract the back offices of the financial services industry. Many of these jobs pay very well and require a high level of skill. We already have many of the bank call centres (TD, RBC, CIBC) but it doesn’t seem we have made any real effort to move up the value chain on this sector. Halifax has made a few inroads here with that Bermudan company and with Seamark but really not a considerable effort.

And I think the potential is awesome. Toronto, for example, has quietly built up a significant hedge fund sector over the past year. There are thousands of people working in this sector (and related). However, there is really no need to locate researchers, junior analysts, planners, actuaries, etc. in Toronto. The front office, yes, but the back office no.

And with increasing pressure on fund companies to drop their MERs (expenses), alternative locations make a lot of sense.

There was a time when there was a logical progression to things. Toronto, New York, LA, etc. would get too costly for such business functions and they would move to lower cost areas in North America (consider call centres in the Maritimes or in Iowa).

Now, in the financial services sector, India is jumping the queue. They are aggressively pursuing these very jobs that, I think, offered great potential for this region. Now, India will ween off any potential economic benefit that this sector could have posed for the Maritimes.

What would’ve it took to attract this sector? Not much, in my opinion. These three elements would have been a good start:
1. Aligning college/university diploma/degree programs to the needs of the industry. Pump out hundreds of trained researchers, junior analysts, etc. each year.
2. Market the heck out of the region as a place for financial services (Ireland did a great job at this).
3. Leverage the English/French dynamic.

And finally, don’t underestimate the potential of ‘coming down the road’ (instead of the oft used ‘going down the road’). When a major company recently announced they were setting up in the Maritimes something like 70 of their staff said they wanted to move down here. I still run into people that moved here from Calgary, Toronto, etc. to work for OAO in Moncton. I think if good quality, back office financial services jobs were announced for Saint John or Halifax, I think you would see a lot of exMaritimers moving back. Don’t forget, over 500,000 NBers have left this province since 1978. You have to believe that a fraction of them, at least, would move back for real jobs with real salaries.

Consider India again. I read recently that there is a reverse migration of Indian IT talent from Silicon Valley back to Bangalore to get in on the IT boom over there.

Goin’ down the road for most folks is a function of economics and no of geography. Fix the economics and you’ll fix the out-migration.

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0 Responses to On mutual funds and coming down the road

  1. Anonymous says:

    Once in a while I will like leaving a comment or two but that picture letters get in the way. Sometimes the picture does not show on my computer and other times I have to enter those letters numerous times and it still does not work.

    I enjoy your commentary on various issues.

  2. Anonymous says:

    I get that once in a while too, but I just do the ‘page back’ and then ‘reload’ it. It’s actually a fairly new phenomena, I’m not sure why it started to do that.

    Since I’m sending this anyway, I’d just like to state that this is another political football. If you’ve been to Toronto you’ll notice how it is expanding outwords, in other words, the choice is between going to Moncton or going to Newmarket, Barrie, or London. Since all those places are within reach of head office and they offer similar costs to the maritimes there really isn’t a need to go elsewhere.

    If there are some links of Canadian companies doing the India thing then I’d love to see it. Financial services were protected under Free Trade for exactly the reason that protection of this market was considered essential to national security and independance, otherwise, like oil, gas, beef, agriculture, it would have just been bought up by american companies.

    So if these companies are now saying ‘thanks for the protection, now we’re outsourcing’ then that’s very much a national issue.

    Of course, as we’ve argued elsewhere, it would be nice to have actually had a functional federal government that would have realized that there never was a ‘free trade’ area in finances, therefore legislation should have FORCED financial services into the various provinces, and even regions of provinces.

    Like I’ve said, the US has banking laws all over the place that protect local areas, so it’s not like this is a ‘free market’ issue. I can’t remember who said it, but I remember a quote that basically said, “you can have all the democracy you want, all I need is control of the economy” to make all that democracy moot.

    In fact, to tie this up, Keynes himself was a strong proponent of the Tobin Tax and restrictions on the free flow of capital, but it was american bankers who refused to let them put this into Bretton Woods. All it takes is ONE lever to bring the whole thing down.