JP Morgan’s decision to make 100 staff in its asset management division redundant highlights the challenges faced by the industry from regulation and the rise of passives.
US bank JP Morgan Chase’s plans were decided after a business review and represent approximately a 1% to 2% cut in staffing for the asset management arm, according to the Wall Street Journal, which first reported the cull. Fixed income, equity, administration and sales groups would be affected, the newspaper said.
The staff cuts come at the height of the bull market and follow in the footsteps of Axa Investment Managers, which announced in June that up to 210 jobs were at risk due to restructuring plans.
“The fact that both groups are doing this when markets are strong is a recognition that the industry is facing challenges, not least from the rise of passives, challenge on costs and future changes to the regulatory landscapes,” said Adrian Lowcock, head of personal investing at Willis Owen.
This week, the S&P 500 entered record bull market territory having been on an upward trajectory for almost nine and a half years.
More active managers at risk
Asset manager redundancies are a trend that will not go away anytime soon, Ryan Hughes, head of active portfolios at AJ Bell told Portfolio Adviser.
“With passive managers taking an ever increasing bite out of active managers lunch, it is no surprise to see the largest asset managers look to see how they can operate more efficiently to maintain profit margins that are being attacked not just by other managers but also by the regulator.
“Sadly, this will likely mean job cuts, not least because of the way that technology can now be implemented in so many different parts of the workplace and I wouldn’t be at all surprised if we see other large asset managers make similar moves.”
He explained that the investment environment is shifting with a move from having vast numbers of products, distributed to the mass market via hundreds of advisers to fewer products, administered by platforms, with fewer advisers concentrating their investments into fewer funds.
But, Jason Hollands, managing director at Tilney, played down the timing of the announcement. “Everyone knows that the current, long-in-the-tooth bull market won’t go on forever, so this could be factor in being vigilant on cost structures as well.”
Hollands blamed regulatory changes in Europe for rising costs.
Global hit to JPMAM jobs
JPMAM stated the job losses would not be limited to one region.
A JP Morgan Asset Management spokeswoman said: “We routinely review our coverage model to ensure appropriate staffing levels across a variety of functions. We cannot comment on specific details, but the changes will involve a variety of functions across the business globally.
“Any reductions will be relatively small and will not affect our continued investment in client coverage and our business.”
Lowcock played down the scale of the job losses.
“100 people globally is not significant and is more about fine tuning and adjusting their business to ensure then they have the appropriate coverage for each area.”
“The announcements at Axa earlier this year are more of a result of restructuring in the business as it looks to ensure the group is correctly positioned to meet the investment opportunities and regulatory challenges facing fund managers.”
Lowcock exited Axa-subsidiary Architas in June in a move unconnected to staff cuts at Axa IM, also a subsidiary of the French insurer.
