Money managers attempt to calm layoff fears amid downturn

As firms brace for the financial impact of COVID-19, money managers and large banks with investment management staff, like Morgan Stanley, Goldman Sachs and T. Rowe Price Group, say they have no immediate plans to turn to layoffs amid the pandemic.

For most firms it remains unclear how long this will be the case, however, as the coronavirus continues to wreak havoc on the economy and businesses, pushing U.S. unemployment claims to new highs.

On March 26, Morgan Stanley CEO James Gorman told employees that there will not be a reduction in the workforce in 2020, according to an internal memo obtained by Pensions & Investments.

The move includes assurances for all staff, including New York-based Morgan Stanley's investment management unit.

"Aside from a performance issue or a breach of the Code of Conduct, your jobs are secure," Mr. Gorman wrote in the memo to staff. At the end of the year, he said the firm "will know what we are dealing with, and hopefully the economy will be on the mend by then."

Goldman Sachs Group Inc., which has an asset management unit and investment consultant Rocaton Investment Advisors LLC, along with money managers Amundi, T. Rowe Price Group Inc., Capital Group Cos., and AXA Investment Managers Inc. also confirmed through spokespeople that, at this time, the companies have no layoff plans related to COVID-19 concerns.

But layoffs, "from moderate to severe," will eventually occur at money management firms as a result of the market downturn and the "severe recession" that is expected to follow the pandemic, said Alan Johnson, managing director of New York-based compensation consultant Johnson Associates Inc.

Despite this, he has advised money management clients to not panic and "do sensible things" regarding decisions about their workforces.

"I know there will be stories of bad HR practices, and if you're a business, you don't want that headline," Mr. Johnson said. In addition to negatively impacting company morale, sudden decisions about layoffs amid the pandemic may also carry legal implications, particularly if employees become or are sick, he added.

Still, layoffs, even if put off for a time, seem inevitable.

"(Layoffs) are coming and they are going to come in waves ... Hopefully they are done compassionately," Mr. Johnson said.

In the U.S., mass job cuts have already taken place across some industries, following statewide orders for non-essential businesses to temporarily close in an attempt to contain the spread of the coronavirus. During the week ended March 21, some 3.3 million Americans applied for unemployment benefits, marking a record high, according to Labor Department data. Over the following week, ended March 28, unemployment insurance claims doubled to 6.6 million.

In March, the unemployment rate rose to 4.4 percent, marking the largest over-the-month rate increase, 0.9 percentage points, since January 1975, the Labor Department said Friday. The number of unemployed Americans rose by 1.4 million to 7.1 million last month.

Money managers are "definitely talking about" layoffs, though they may not have acted on the discussions, said Amanda Grant, a New York-based partner at executive search firm Calibre One Inc.

Money managers are evaluating such decisions every day, assessing the impact this virus will have on the economy, our way of life and business, Ms. Grant said. For now, "it's too soon to tell" when or if money managers will execute layoff measures that are on the table.

Rumblings of job cuts are occurring as global money managers are expected to see their assets under management decline, which will lower revenue and reduce cash flow in 2020, according to a March 23 outlook report by Moody's Investors Service Inc., New York.

Moody's changed its outlook for global money managers to negative from stable.

The report stated that "the broad and growing scope of the economic and market upheavals unleashed by the coronavirus pandemic will strain asset managers' revenue and cash flow, which are highly correlated to movements in the financial market indexes."

Additionally, net flows into the money management industry will likely be constrained, as investors react to rising economic uncertainty with more caution, the report said.

As far as recruitment goes, Ms. Grant has seen money managers take different paths amid the onset of the pandemic — either pausing hiring efforts due to economic uncertainty and the inability to recruit candidates in person, or accelerating hiring by relying on virtual interviewing

Ms. Grant's firm does senior-level searches, so the shift to recruitment via video interviewing is a "different way to hire" for money managers. She notes it will be interesting to see how those hired during this period fit within the organization when face-to-face interactions resume.

"It will be sort of a reintroduction to the company for the new hire," Ms. Grant said.

Firms accelerating the hiring process are doing so preemptively, in order to fill critical roles now in case hiring freezes or layoffs are around the corner, she later added. Some hiring managers anticipate that "it won't be until phase one of the recovery" that they can hire again, for instance.

Hiring managers might also want to move forward with recruitment in case promising candidates get cold feet about making a career change in the current climate, Ms. Grant added.

Job candidates often worry, "If they are the last one in (the organization), will they be the first to go?" Ms. Grant said of layoff anxieties.

Taking the more cautious route, some of the industry's largest money managers have already resorted to hiring freezes amid the pandemic.

BlackRock Inc., New York, instated a companywide freeze on new job offers as a result of the coronavirus, a spokeswoman confirmed in an email. "Right now, we are focused on serving our clients and making sure our people are (as) safe, supported and productive as possible. As a result, we have paused making new job offers. Long term, we believe that rapid industry and market change will create new opportunities for our clients and BlackRock," the spokeswoman wrote.

A spokesman for Paris-based money manager Amundi also confirmed in an email that the firm's "hiring process has been frozen for now due to containment measures."

Amundi will reassess the situation "in a few weeks," the spokesman added.

Other money managers have tweaked their recruitment practices to address new challenges brought on by the coronavirus.

Malvern, Pa.-based Vanguard Group Inc. will continue to hire "as appropriate, prudently taking into account both economic and business needs, while using only virtual and online interviewing," a spokeswoman said in an email.

Vanguard created best practices guides for both job candidates and hiring managers in light of the changes, the spokeswoman added.

While Los Angeles-based Capital Group is not putting a hiring freeze in place, executives are aware that recruitment efforts may be impacted.

"We continue to recruit new staff into Capital Group and do not anticipate any staff reductions due to COVID-19," a Capital Group spokeswoman said in an email. "We may slow down some of our hiring as onboarding in a work from home environment may take additional time to ensure new associates feel welcome and are well prepared."