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US asset managers are embarking on their second wave of job cuts this year. Charles Schwab, Prudential and Invesco each announce cost controls as customers flee to safer investments with lower fees.

Schwab and Prudential have in recent days announced plans to cut about 2,000 and 240 jobs, respectively. Invesco last month reported severance and reorganization costs of about $39 million in the third quarter of 2023 – about twice as much as expected – while also recording a small decline in headcount.

While not as large as the widespread layoffs in early 2023, the cost cuts reflect asset managers’ cautious approach following their 2021 hiring spree. Back then, they were competing for talent in a booming market, but now face declining fees and outflows from active strategies and shrinking margins, said Chris Connors, principal at payroll consultant Johnson Associates.

“I don’t think the outlook for 2024 is overly optimistic in the traditional asset management space,” Connors said. “It is more cautious and moderately pessimistic.”

Asset managers expect more of the same in 2024 and are taking measures to control costs, including through attrition and combining job functions. Connors said he estimates year-end asset management incentives will decline 5 to 10 percent in 2023 compared to 2022.

The gloomy outlook has been accompanied by a flood of money into money market funds, particularly in the United States, as investors seek returns of 5 percent or more for lower risk. These inflows peaked in the spring as the regional banking crisis in the U.S. prompted investors to seek safer havens to park their funds.

Asset managers have also struggled with continued outflows from legacy mutual funds, while exchange-traded funds – which trade like stocks and enjoy preferential tax treatment – have seen increasing inflows in recent years.

Schwab, which manages about $7.8 trillion in client assets and manages nearly $1 trillion through its wealth management division, confirmed it is laying off 5 percent to 6 percent, or about 2,000, of its 35,900 employees, “mostly in non-client areas.” . opposite areas.

“These were tough but necessary steps to ensure Schwab remains highly competitive and with industry-leading efficiency levels going forward,” the company said in a statement.

Prudential officials in a call with analysts last week forecast a $200 million “restructuring charge” in the fourth quarter as they continue to try to grow the assets under management of PGIM, the insurance company’s $1.3 trillion asset management business , to increase. Bloomberg previously reported that Prudential would cut about 243 employees, including senior management positions.

Invesco, which manages about $1.5 trillion in assets, previously estimated spending on severance and restructuring costs at $20 million in the third quarter, but reported $39 million in such costs and expected more $15 million to $20 million in the fourth quarter. It was predicted that this would result in savings sooner than expected.

“Part of the increase in severance and reorganization costs in the third quarter is due to the fact that we front-loaded some of these savings so that we would begin to realize the benefits of them in the fourth quarter,” Chief Financial Officer Allison Dukes said in a press release last earnings call Month.

Companies are also looking beyond recruiting to controlling costs. Franklin Templeton, which has made a series of acquisitions in recent years including a $1 billion deal for Putnam Investments, is seeking to build a single third-party platform for portfolio management, trading, compliance, cash management and risk management across the board 1.4 trillion US dollar Franklin Group including its new specialist managers.

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