Recent cutbacks made at Janus of Denver highlight the change underway in how investors and mutual fund companies interact. On Feb. 2, Janus announced that it was eliminating 468 jobs from Janus Service Corporation, the firm's operational unit. That represents 22 percent of the unit and 16 percent of Janus' overall workforce, according to Shelley Peterson, a spokesperson for Janus.
Almost all of the cutbacks are in jobs related to telephone and mail communications. Janus' investment team was not affected by the layoffs.
Janus has experienced a dramatic slowdown in telephone and mail volume, the main reason for the cutbacks, according to the company.
"Two factors contributed to this decision: the realization of technological efficiencies and a slowdown in mail and phone volumes to more realistic levels," said Margie Hurd, president of Janus Service Corporation in a statement. "Like many companies, Janus has embraced technology to deliver the kind of service our shareholders want. We've started to realize significant operating efficiencies, which has inevitably resulted in the elimination of some positions within Janus' operations unit."
One of those technological efficiencies derives from Intelligent Character Recognition, an automated system that responds to voice commands and can be used by investors to receive information about their accounts, according to Peterson. While that alone might not reduce phone volume, it lessens the need for a telecommunications workforce.
Although technological advances do reduce personnel needs, they do not eliminate them and the extent to which reductions can be made is a subject of debate, said several industry consultants.
"You can't just give investors a whole lot of technology and say, Good-luck, you're on your own now,'" said Jeff Naylor, an account manager at SunGard Investor Accounting Systems. "Telephone coverage and availability is essential, even with increased technology. One should complement the other, not eliminate it."
The other technological efficiency derives from an improvement in the company's website, made in December. As a result of the improvements, investors can now open new accounts online.
Since December, about 20 percent of all new accounts have been opened online, according to Janus. And, last month, 62 percent of the investors who contacted Janus did so via the company's website compared to 34 percent in January, 1999, according to the company.
At the same time, contact by telephone has dropped after reaching unprecedented levels in late 1999 and early 2000. In December, 1999, twenty-three percent of investors who contacted Janus did so by telephone, according to the company. That declined to 10 percent in December of last year.
As for most funds, the performance of Janus's funds deteriorated in 2000 after a very successful 1999. That, combined with Janus closing several of its equity funds to investors, cut asset flows and contributed to the slowdown, according to the company.
Janus is not the only firm to experience increased web use and decreased phone volume. Fidelity Investments of Boston has seen call volume drop over 10 percent over the last two years, from 680,000 average calls per year in 1998 to 604,000 in 2000, according to Anne Crowley, a spokesperson for Fidelity. Meanwhile, Fidelity's web visits have increased almost 900 percent since 1997. Putnam Investments of Boston has also seen telephone volume decrease nine percent from 1999 to 2000 and 16 percent from January 1999 to January 2001, according to Matt Keenan, a spokesperson for Putnam. Over the same periods, web volume has increased 126 percent and 211 percent, respectively. However, neither Fidelity nor Putnam have planned cut backs, those companies said. And, that might be the wiser approach, according to Derek Evans, a senior consultant at kasina LLC, a mutual fund consulting firm in New York.
"We feel that the web is another channel that mutual fund companies should take advantage of, but that in the current climate, shareholders still demand human interaction," said Evans. "Mutual fund companies should take advantage to leverage technology to increase and optimize internal systems, but we don't think they should focus on reducing human capital yet."
But financial companies in general - not necessarily mutual funds - are cutting back their operations units and hiring
less people to fill lower level positions, according to Cara Myers, a partner of Capital Search Group, a recruitment
firm in Boston which specializes in investment management and financial services
"I think that [technology] is taking away some of those jobs," said Myers. "They won't go away completely, but there is less of a need. Companies are able
to shift their costs to make it cheaper
Eliminating operations positions through use of the web results in disproportionately large savings because operations positions are generally more costly to a company than other jobs, according
"Operations positions have the highest turnaround of any job in an investment company," she said. "The recruiting costs alone are very high for those kinds
Janus is not releasing figures on its expected cost savings from the cutbacks. The lack of need for the positions, not cost savings, is prompting the cuts, according to Peterson.
It is not yet clear if technology will drive other fund firms to cut back their operations unit as it has Janus.
"It's almost impossible for us to give any meaningful predictions over an extended period of time [with regard to workforce]," said Terry Mattison, vice president for human resources at Janus in October at the Investment Company Institute's operations conference in San Diego. "It's like technology. The workforce of the 21st century is changing too fast to predict.