Staff cutbacks are growing as economic turmoil goes on

Money managers said they have laid off or plan to lay off nearly 3,600 staffers as a result of financial market swoons.

For example, Boston-based Fidelity Investments alone reportedly announced plans to cut about 3,000 jobs beginning this month through the first quarter of next year; Morgan Stanley & Co., New York, plans to lay off 9% of its asset management unit; MFS Investment Management Inc., Boston, said the firm has cut 90 positions or 5% of its total staff.

Meanwhile, Putnam Investments LLC, Boston, plans to lay off 47 staffers, including 14 portfolio managers; Legg Mason Capital Management Inc., Baltimore, intends to slash 40 to 50 of its approximately 140 employees, and Janus Capital Group Inc., Denver, plans to eliminate 115 jobs.

Some search firm executives estimate the money management industry in general will eliminate 10% to 20% of staff positions.

Said Richard Lannamann, vice chairman of SpencerStuart Inc., New York: “This is the worst environment in the investment world I've seen during my 39-year career. In term of the employment situation, it'll be more severe and last longer.”

Added John Siciliano, vice chairman of merchant bank Grail Partners LLC, New York: “The market has fallen so far that even the relatively stable asset management sector can't avoid changes.” In some cases, layoffs might not be a bad thing because it will make firms more efficient, he said.

Debra Brown, managing director of asset and wealth management recruiting practice at Russell Reynolds Associates, New York, believes massive job cutting is happening only at selected firms. “Not everybody is doing it,” she said.

“Anecdotally, we see some insurance companies who own asset management are looking to hire people on the general account level as well as in the business units,” said Ms. Brown.

According to a news release on a new study from Russell Reynolds, continued market volatility and anticipated regulatory changes are driving demand for more risk management, legal and compliance professionals. Also, many hedge funds, funds of funds and the alternative investment divisions of larger money managers are focused on expanding their institutional distribution teams, the release said.

In the interview, Ms. Brown also said there are opportunities for firms to strengthen their investment capabilities, because people who used to be unavailable or unaffordable are now in the market. She added these professionals are largely coming from the hedge funds and securities firms.

Steven Niss, managing director of RWD Executive Search Inc., New York, said some portfolio managers are willing to move to more stable jobs at pension funds such as the $178.8 billion California Public Employees’ Retirement System, Sacramento, and the $96 billion Teacher Retirement System of Texas, Austin, with less compensation. “They want a change of pace,” he said.

But if institutional analysts and portfolio managers can't find jobs after a while, they frequently end up in wealth management. “They either start managing friends' or families' money, or join wealth management firms where their institutional experiences become valuable,” Mr. Lannamann said.

Such a scenario partly is a result of high-net-worth investors' disenchantment with their existing wealth managers. Mr. Lannamann added, “There's always a churn of high-net-worth client business in this situation.”

Others might leave the financial services industry for good. “Whenever you see a major contraction of the Street,” Mr. Siciliano said, “it's normal for people to choose to do something else.”

“Now you might see portfolio managers opening sporting goods stores in North Carolina or Vermont,” Mr. Siciliano added. “I remember many people became entrepreneurs in the late "80s.”

However, for some people, the question is whether there will be any job at all, Mr. Siciliano said.

Still, recruiters said many laid-off professionals hope to find positions doing what they did before.

Ms. Brown thinks it's still too early to quantify how much the industry head count will shrink. “Nobody has gone anywhere yet,” Ms. Brown said.

In an interview, Rebecca Wilder, an economist who writes a blog from Boston, www.newsneconomics.com, said: “Some portfolio managers are not willing to settle with anything; they are just biding their time.”