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Money Management

Franklin plans to cut up to 5% of workforce to reduce costs

Franklin Resources plans to cut as much as 5% of its workforce to help save at least $75 million as the fund manager faces continued outflows.

San Mateo, Calif.-based Franklin started with voluntary buyout offers for eligible U.S. employees age 50 or older who have at least 10 years of experience, the firm said in a Jan. 29 staff memo. Those employees had until March 25 to respond to the offer. The firm had a headcount of 9,691 as of Sept. 30, the end of its fiscal year.

"Our industry remains in the midst of rapid change, which has put pressure on our business in recent years," CEO Greg Johnson and President Jenny Johnson said in the memo. "These are difficult decisions, but necessary ones for the long-term health and strength of the organization."

Asset managers including BlackRock (BLK) and State Street Corp. (STT) have unveiled plans for job reductions this year as cost-cutting is being driven by the 2018 market decline as well as industry automation and growing pressure to lower fees.

Franklin, which reported preliminary assets under management of $712.3 billion as of March 31, experienced net outflows in each fiscal year since 2014, according to the firm's annual reports.

A spokesman for Franklin, declined to comment beyond confirming the authenticity of the memo.

"They have a strong investment culture," Alison Williams, a Bloomberg Intelligence senior analyst who follows banks and asset managers, said in a telephone interview. "They're just in the wrong space. They're an active manager. They sell to the retail channel. They tend to be more value-focused, but that's been out of favor in recent years."

The day after the company announced to employees that it was planning to cut headcount, Mr. Johnson, the CEO, referenced upcoming cost-cutting in an earnings call. He said he expected to provide more details after the company next reports earnings on April 26.

The Financial Times' Ignites website previously reported the job cuts.

On April 26, Franklin is expected to post earnings of $313.4 million, or 62 cents a share, for the quarter ended in March, the average of 12 analyst estimates collected by Bloomberg.