Unlike other areas of the financial services industry, asset managers haven’t laid off thousands of employees, and most say they don’t plan to.
A lull in merger and acquisition activity has caused some investment banks to cull their ranks — Goldman Sachs and Morgan Stanley, for example, have both laid off more than 3,000 employees. Meanwhile UBS, which merged with rival Credit Suisse this spring, plans to shrink their combined headcount by about 30 percent, or 35,000 people, since parts of the business overlap.
But according to Scott Gockowski, a senior manager at Deloitte’s Casey Quirk consultancy, these types of purges still aren’t happening in asset management businesses, and for good reason.
Asset managers — which are human-capital businesses and nicely profitable — have generally remained healthy, and alternative managers are doing especially well. “We’re not terribly surprised by the recent layoff announcements. However, at the highest level, we don’t expect most asset management companies to be reducing headcount, at least on a net basis,” Gockowski said.
He added that even in 2022, when markets and revenue fell significantly, the net number of people working in asset management increased, although that includes the increasing number of technology and other professionals working in the industry.
Some layoffs have occurred, and there could be more to come, Gockowski said. BlackRock already laid off 500 employees, a small part of its workforce, earlier this year. And this week, American Century Investments cut 30 jobs, while Wellington Management eliminated 170 positions.
“We do expect to see some reductions in underperforming personnel, in particular — either underperforming investment professionals or distribution professionals that aren’t selling what they have,” Gockowski said. “I think managers are really focused on ensuring that they get value for money.”
Managers are highly focused on the bottom line right now, but they can trim costs without eliminating employees, Gockowski explained, adding that the business is not one that’s conducive to slashing jobs. Casey Quirk expects the asset management industry’s headcount to remain flat for the rest of 2023.
Compensation per employee could fall slightly as companies encourage or force more senior, higher-paid employees out. Variable compensation represents a large portion of the costs borne by asset managers, so bonus pools are also going to shrink.
Significant changes to an asset manager’s headcount this year could happen in select circumstances. But even in a situation such as the merger of two huge organizations, the asset management business isn’t a boat that companies want to rock too hard, for fear of disrupting clients, Gockowski said.
“We’re currently seeing kind of modest headcount cuts,” Gockowski said. “But unless the market declines materially in the back half of this year, I don’t think we’ll see an acceleration in layoff announcements relative to what we’ve seen thus far. I think a lot of managers have kind of made their decision and are in an okay place for now, as long as markets stay where they are.”
