A painful bear market and shrinking profit margins have forced nearly every mutual fund firm to consolidate operations and cut jobs in the past few years. With the unemployment rate sitting at 6.1%, it is difficult to sugarcoat what are clearly distressed labor market conditions.
Indeed, 21 months after the end of the recession, the U.S. economy is still shedding jobs, with 93,000 more people out of work in August alone. As companies scramble to finalize budgets for the next fiscal year, one has to wonder if more job cuts are on the horizon.
"Job cuts and restructuring are not short-term trends in the mutual fund industry. They are here to stay," said Charlie O'Neill, a principal at Diversified Management Resources, an executive recruiting firm in Boston. "Companies are feeling increasing pressure on their profit margins." He points out that fund directors were already paying closer attention to fund expenses, but now new regulatory requirements, such as anti-money laundering compliance, will force firms to incur expenses that cannot be immediately passed along to shareholders. Upper management at these companies must also adapt to an environment that emphasizes transparency and clarity in expense reporting, he said.
"We're seeing a lot of internal movement, which is not so much opening up jobs, but rationalizing what is happening within corporations," said Claudia Fogelin, managing partner at Interactive Communications, a New York-based consulting firm that has worked with more than 40 wholesaling organizations in the U.S. and Canada. Mutual fund giants Fidelity Investments, Dreyfus and Putnam Investments are among its most notable clients.
"We don't anticipate any layoffs, but firms are seriously sitting back and [asking], Do we have our resources in the right place?'" she said. "It's an employer's market right now." Fogelin added that her clients are clearly not mass hiring but, rather, pinpointing individuals from outside the company to fill strategic gaps. Essentially, they are looking at tightening up certain channels, reemphasizing one channel over another or moving personnel to areas where they would be most efficient. One clear trend is the continued integration of technology, such as upgrading customer relationship management (CRM) systems, to increase the efficiency of the sales force.
Based on conversations with clients and other people in the industry, Fogelin said that for the first time in several years. companies are discussing substantial spending when planning their budgets for next year. Whether that comes to fruition or not remains to be seen, but it is important that organizations are at least entertaining the notion of spending, she said.
Specifically, she noted there has been an uptick in the hiring of wholesalers. American Funds, for one, has successfully added at least 10 new wholesalers to its workforce. A simple query on online job search engine Monster.com revealed that a number of firms are looking for wholesalers, including American Express, John Hancock, Federated Investors and Washington Mutual, to name a few.
"Our clients are not budgeting for significant decreases in staff levels, unless they're purposeful outplacements," said Pamela Sedmak, an executive search expert and managing partner at Cleveland's O'Brien and Co. "[But] we don't see them allocating dollars for a significant increase in staff levels either. We're a couple of months away from feeling comfortable, but I think the worst is behind us. I think they're treading water at this stage," she said. Sedmak believes that most firms will continue to employ the services of a senior executive search firm to fill top-level positions due to their strategic importance to the business.
Another ongoing theme among fund complexes has been a wave of restructuring efforts, or what some in the industry refer to as "background noise." Many companies have found that their business models weren't working and have gone back to the drawing board. One area that has been targeted for retooling at many firms is their sales and marketing workforce. For example, it is likely that there will be more aggressive moves to leverage technology to improve or perhaps even replace some portion of the traditional wholesaling organization. That creates opportunity for job seekers, O'Neill argues, in that one person's restructuring typically means another person's job loss. In other words, when companies look to revamp their business, they tend to seek skilled outsiders to take on new roles.
"Too many people assume that if a company is downsizing, then it must not be hiring. Nothing could be further from the truth," said John Challenger, chief executive officer of Challenger, Gray & Christmas, an international outplacement firm headquartered in Chicago. "Many companies may pare workers in an unprofitable area of the company while hiring workers for another area that is assured better results."
Still, there's definitely a bias toward net loss of jobs in the fund industry. That is not just a function of the difficult market environment but also efficiency of technology. Overall, O'Neill believes that job seekers with the most experience are still highly employable, but folks whose credentials are not necessarily in the top tier will find the job search to be a daunting task.
An area where there will be real net growth in jobs is in the compliance field. In light of the intense scrutiny from securities regulators, legislators and most recently New York Attorney General Eliot Spitzer, mutual funds are being forced to beef up their compliance departments significantly. "Look for the compliance department to be gaining authority within a firm," O'Neill said.
One of the core functions of the compliance department, aside from making sure the company meets Securities and Exchange Commission requirements and files shareholder reports on time, has always been making sure sales literature was up to snuff with National Association of Securities Dealers' requirements.
In the past, many of these employees operated behind a wall. However, given the regulatory landscape the industry has encountered, there will be an increased focus on sales practices, breakpoint discounts, fees and the recently exposed market timing and late trading activity.
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