The job market in the fund industry has softened in the past year so much that the edge prospective employees once had in negotiating benefits and other perquisites as conditions of their employment has been eliminated, according to industry recruiters.
It was only a year ago that job seekers could request an equity stake, signing bonus or other perquisites with a fund company and have the request considered seriously, said J. David Barrett, a partner with Heidrick & Struggles of New York. Job candidates could negotiate with prospective employers much more aggressively, but "there is a much more level playing field," between employees and employers in today's market, he said.
While the demand for top talent will allow some executives to negotiate signing bonuses and other financial incentives, funds are not likely to extend such offers as readily as they have in the past, he said.
The shift in negotiating power from employees to employers is the result of hiring cutbacks in some areas of investment management, especially in those that do not contribute directly to a company's revenue, Barrett said.
Another factor has been an increase in merger and acquisition activity within the fund industry in the past year, according to Donald F. Dzurilla, president of Dzurilla International of New York, an executive search firm.
"Mergers and acquisitions are creating redundancies and cutting out jobs," he said. As a result, employers are less likely to offer compensation packages that include costly benefits for employees, he said.
Although the balance of negotiating power may have shifted back to fund companies, that balance has been markedly listing towards employees for the past several years, said Charlie O'Neill, a principal with Diversified Management Resources, an executive search firm in Boston.
"I think over the past few years, the supply and demand equation has gotten out of balance with too many jobs chasing too few qualified people," he said. "That resulted in unrealistic expectations from employees in the fund industry."
The fund industry shares some of the blame for creating those inflated expectations, he said. Financial service firms have traditionally been quick to hire more employees than needed in strong economic periods, he said.
"My view is corporate America has been somewhat capricious in the past in terms of hiring in good times and firing at the first sign of trouble," he said.
Funds will probably eliminate technology and back office positions in the paring back process, according to Barrett.
T. Rowe Price of Baltimore is currently examining areas in which it can cut costs, according to Brian Lewbart, a company spokesperson.
"In a general sense, as is the case with a lot of companies, we are taking a look at ways to control expenses and we're looking at open positions and seeing if those can be deferred," he said. The firm is not instituting an across-the-board hiring freeze, but it is evaluating each department, he said.
The firm is planning to reduce its technology spending and will cut back on the number of its contracts with outside technology consultants, he said.
"I think in a business like ours, where a lot of revenue is tied to assets under management, the decline has put a strain on revenue and then we have to take a look at expenses," he said. "It's no different than any other company."
Many fund companies have decided to either postpone or cut back on some web-based projects, said Steven Miyao, a senior vice president with kasina of New York, an electronic business strategy consulting firm.
"One thing that we do see is all of the budgets are being looked at more closely and all of the projects are being tightly scrutinized," he said.
In particular, marketing campaigns to get shareholders to open online accounts as well as online advertising budgets have been cut, he said.
Smaller public fund companies are the ones that are most likely to make significant cutbacks because they are the ones feeling the greatest amount of pressure from shareholders to do so, Miyao said.
One company feeling the pinch because of current economic conditions is Lindner Funds of St. Louis, a family of seven no-load funds. The firm eliminated 15 positions last month when it outsourced several of its back office and client support roles to Firstar Mutual Fund Services of Milwaukee, said Hank Boerner, a spokesperson for the firm.
The firm decided to outsource its back office functions because it believed its back office required significant technology upgrades in order to remain competitive, he said. The firm found that it was less expensive to upgrade through outsourcing than by doing so internally, Boerner said.
T. Rowe Price and Lindner Funds are just two of many firms making budget cuts and slashing positions. In February, Janus Funds of Denver announced it would eliminate 468 jobs in its operations unit. Putnam Investments laid off 21 in March and another 256 last week.