The Purge - Asset Management Edition
Monkeys, the purge is beginning, and I think this is only the tip of the iceberg. In short, Fido is offering packages to 3,000 workers who meet the 55+10 requirement (55yo + 10y of service), looks to be a year or two of severance, and maybe with some vesting of deferred stuff (an assumption as they don't have stock so they can't accelerate vesting of RSUs). (WSJ article at the bottom)
This brings up a couple of interesting concerns:
- will these people try to stay in the workforce?
I realize being in your 50s at a giant like Fido is probably a lucrative endeavor, but I guarantee there are some people getting packages that need to work another 10y to avoid being in financial straits
- is this done because the employees are old, expensive, and replaceable?
they will have to tread carefully here, because what could be a good deal for employees could be seen poorly by investors and the public. yes, older employees are expensive, but they've also weathered bear markets, and while youth is important, I think balance is too.
- or, is this done because Fido got into a price war with other discount houses and needs to trim fat?
this seems like the obvious answer, and I think there's some truth to it. Fido can never compete with Vanguard on price, chiefly because Vanguard operates out of Valley Forge PA, outsources all of its fund management (and therefore employs little analysts in the traditional sense), and doesn't want its employees getting rich. I mean their founder is only worth 80mm, while a lot of money, you'd expect someone whose firm has $4 trillion AUM to be worth a little more.
for comparison's sake
Larry Fink worth >300mm, BlackRock AUM 5 trillion
Steve Schwarzman worth >14bn, Blackstone AUM >300bn
Abi Johnson worth >14bn, Fido AUM >5 trillion
my gut tells me the AM industry will shrink 50% or more over the next 5-7 years (along with it, PWM). this is through a combination of years of overbilling (too high cost), underperforming firms, and technology. I'm still firmly a believer in active management, and I think the next bear market will give the flow of assets to passive management a pause, but this isn't about active/passive, this is about cost and the size of the industry, and that trend is downward. I still think AM, PWM, and HF will be a good place to be, but just realize in a shrinking industry under fire by technology in a low rate/return environment, it will not be like the 80s and 90s.
so what say you, WSO?