The decision by Janus of Denver to eliminate 546 retail operations jobs will reduce the firm's costs by cutting salaries, but the savings will come at the expense of shareholders who may find it difficult to speak with a shareholder representative, according to industry analysts.

Since the beginning of the year, Janus has cut more than 1,000 positions, primarily in shareholder services and operations. Last week, the company announced it would close its call center in Austin, Texas, eliminating 400 positions. An additional 146 operating positions were eliminated in Denver.

Janus began this year with 947 shareholder service representatives and with the most recent cuts has reduced the number of representatives answering telephones to 358, according to a spokesperson.

All of the cuts were necessary because technology upgrades have automated many customer service and operations positions, said Shelley Peterson, a company spokesperson. Also, there has been a reduction in the volume of incoming calls since Janus closed several funds to new investors last year, she said.

Even without the market decline, "we would still be making these reductions primarily because the increased business online has required less telephone representatives and people to process mail," said Jeff Snyder, another Janus spokesperson.

If phone volume were to spike on volatile market days, Janus is prepared, Peterson said.

"We feel our resources are well placed to handle any type of change in phone volumes," said Peterson. "The web can certainly handle the traffic. We also have the automated telephone lines that can handle the traffic and we feel that we have a sufficient number of representatives that can handle the various types of call volumes that we may experience." Janus does not anticipate queue times to speak to a customer service representative to increase as a result of the cuts, Peterson said.

But Janus may be cutting too close to the bone in an effort to cut costs, according to industry analysts. Janus' ability to service its customers appears to rely heavily on directing them to its website.

"After two years of unprecedented call volumes, we're experiencing a return to more normal call volumes," said Tim Hudner, Janus' chief technology officer, in a statement. "Because we expect our shareholders to continue embracing the web over the coming years, we've restructured Janus' retail operations unit."

Janus' expectations of its website to assume more of a customer service role may not be realistic, according to Lee Kowarski, a consultant with kasina LLC of New York, a technology consulting firm to the financial services industry.

"One thing that they have to remember is that you can't force customers into one channel or another," he said. "There will be those that will be hesitant to make the change."

Most shareholders do not contact their fund companies while approximately 30 percent call just once a year, he said. However, the small percentage of shareholders that do contact their funds on a regular basis will not want to change their preferred form of contact, he said.

"I wouldn't recommend making that decision for your customer," Kowarski said.

Providing human contact is especially important to Janus because it is a direct-sold fund complex competing with broker-sold funds, said Whitney Dow, an analyst with Financial Research Corp. of Boston.

"I think perhaps direct-sold firms, if they don't have customer service representatives to act as hand holders, may see more investors going to advice-sold products," Dow said.

Janus' decision to slash its staff is driven by its need to control costs, he said. Usually, customer service positions are the first to be eliminated in a down market, he said. By cutting over 1,000 operating and service positions, Janus can save a lot in terms of salary overhead, he said.

"It's a cyclical type of thing," Dow said. "When the market is strong and firms are retaining assets, they can have the luxury of focusing on customer service." Janus' cuts come at the expense of service, however, and that could result in disgruntled shareholders, he said.

Janus, like many firms, is trying to improve its earnings by finding a balance between personal customer service and automation, Dow said.

However, relying too heavily on an automated solution to customer service is full of pitfalls, said Kurt Friedmann, director of business development for Impact Learning Systems International of San Luis Obispo, Calif., a firm that provides training for customer service and technical support personnel. There will always be shareholders that have questions that cannot be answered by a telephone recording or website, he said. Moreover, the goal of customer service should be customer satisfaction, which a recorded voice simply cannot provide, he said. Janus is risking distancing itself from its shareholders, he said.

"Another pitfall would be that the customer has a disconnect with the personality of the organization," he said. "Janus has a really knowledgeable feel and a really helpful feel to their marketing campaign and if they can achieve that via computer, then great. But at some point I think the human interaction is important to retaining their customer base and that's extremely important now more than ever with the decline in shareholders' assets."

Moreover, Janus may find that improvements it has made to its website actually increase phone volume and costs, according to Kowarski of kasina.

"You can't assume that technology will directly lead to a cost savings, in fact, we've seen the opposite," he said.

More information provided through a website can increase call volume, he said. And the additional calls are generally of a more technical and sophisticated nature and so require an experienced representative, he said.

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