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Wednesday, April 10, 2024

Fundster Headcount May Trend "Much Lower In Medium to Long-Term"

Reported by Neil Anderson, Managing Editor

Watch for fundsters to reduce their firms' sizes going to forward, at least according to the folks at a New York City-based, financial services-focused compensation consulting firm.

The team at Johnson Associates predicts, in their freshly released "Financial Services Compensation: 2023 Recap and Unfolding 2024 Changes" report, that at traditional asset managers and wealth management firms, headcount will trend "much lower in medium to long-term." Blaming the continuing margin compression due to fee pressures, the Johnson folks says they expect the shrinkage to hit back office and operations teams particularly hard.

"Systematic change is a key strategic issue," the Johnson teeam writes, noting that active products' net outflows and the continuing shift to passive "reinforces fee pressure on asset managers." They also predict continuing asset management industry consolidation, further dividing the business between large, scaled asset gatherers with varied product suites on the one hand and niche, lean boutiques on the other.

In terms of compensation, the Johnson team notes that 2023 asset management executive incentives (aka bonuses and the like) ranged from flat to down five percent on the fixed income side and from down five percent to down ten percent on the equities side. (The Johnson team previously predicted that fundsters' 2023 incentive funding on a headcount-adjusted basis would fall five to ten percent.) Incentives last year were "down moderately to flat despite rising equity markets," the Johnson team notes.

"Most firms reduced headcount as cost cutting continues," the Johnson team writes. 

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