Fidelity to cut nearly 1,300 jobs, plans more in early '09
Posted November 6, 2008 12:43 p.m. EST
Updated November 6, 2008 3:45 p.m. EST
BOSTON — Fidelity Investments is cutting nearly 1,300 jobs this month, and the mutual fund company says more layoffs are coming early next year.
Boston-based Fidelity said Thursday that it will lay off about 2.9 percent of its more than 44,000-employee work force later this month. The company isn't specifying which of its far-flung locations will be affected.
Fidelity is building a campus in Research Triangle Park, N.C., where it already employs several hundred people.Layoffs will be "proportinate" across Fidelity's various locations, a spokesperson told The Associated Press.
A second round of layoffs is planned in the first three months of next year. Fidelity says the number of those cuts will be determined in coming weeks.
Fidelity says the cuts are a response to global economic conditions and unsettled financial markets.
In August 2006, Fidelity announced plans to invest $100 million and add as many as 2,000 employees at its RTP operation. The campus is expected to be finished next year.
Fidelity has more than $1.4 trllion under management. It is the largest mutual fund firm in the U.S. and has more than 23 million clients.
The cuts will be spread across the company's far-flung U.S. operations, affecting management positions as well as lower-level jobs, said Anne Crowley, a spokeswoman for Boston-based, privately held Fidelity.
Crowley declined to offer specifics, but said both rounds of cuts will cumulatively affect fewer than 4,000 jobs - a figure that had circulated recently in media accounts.
In a letter distributed to Fidelity employees Thursday, Fidelity President Rodger Lawson said recent market volatility has hurt company revenue and "has led me to conclude that many of the cost improvement plans which would have been phased in by our business units over the next three years need to be accelerated."
Crowley said the cuts are being made "based on decisions by individual business leaders on what their needs are. Most of them are doing some layoffs in their divisions."
In addition to its Massachusetts operations in Boston and Marlborough, Fidelity has significant operations in Florida, Kentucky, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Rhode Island, Texas and Utah.
The cuts are in addition to reductions totaling about 800 jobs in two rounds earlier this year after Fidelity reorganized some business units. Those reductions came largely in Fidelity's personal and workplace investing operations that oversee other companies' pensions and 401(k) plans.
Reeling markets made Fidelity's more than 400 mutual funds targets for jobs cuts as well. According to Financial Research Corp., assets at Fidelity's funds had lost nearly 23 percent of their value through October of this year, to nearly $717 billion. The total excludes money-market funds, an area in which Fidelity is the industry leader based on more than $400 billion in assets. Overall, Fidelity managed $1.4 trillion as of Sept. 30.
"All of our mutual fund competitors are experiencing the same type of declines," Crowley said. "We have a strength many of our competitors don't have: We have a huge money-market operation, and those funds have been attracting new customers and new assets over the last several months."
But money-market funds don't generate as much fee revenue as mutual funds, and the FRC data show this year's drop in mutual fund assets at Fidelity has been steeper than at rivals Vanguard Group and Capital Group's American Funds.
"Fidelity's business model is based on assets under management, and the fees they generate," said Jim Lowell, a former Fidelity employee who runs the independent newsletter Fidelity Investor.
Fidelity has sought to diversify beyond its core mutual funds in recent years, moving into areas such as individual retirement planning and employee benefit management.
With market turmoil reducing money-management profit opportunities, Fidelity "could gain market share on a competitor like Vanguard that's less diversified, and relies heavily on index funds," Lowell said.
Fidelity shed about 7 percent of its jobs after technology stocks tanked early this decade, Lowell said. But within a couple years, Fidelity returned to the employment level it had before the tech bubble burst, and eventually surpassed it, largely because of the success of diversification, Lowell said.
Lawson was brought on board at Fidelity in the summer of 2007 in part to cut expenses, and last fall distributed a memo informing employees that he intended to aggressively control costs.
With Lawson's hiring, Fidelity "was already on a course to trim some significant overgrowth," Lowell said. "So these cuts today were already on the table even before the cataclysmic events in the market took place recently."
In a statement, Fidelity laid out its reasoning for the cutbacks:
"Fidelity Investments announced today that its business units will begin to implement expense-reduction activities that will commence with a layoff later this month of about 2.9 percent of its 44,400-employee work force. Fidelity also announced that it will have a second layoff in the first quarter of next year, the details of which will be finalized over the coming weeks.
"Global economic conditions and the unsettled nature of the world's stock markets all year long have required businesses around the globe and across all industries to examine their operations and make adjustments. Fidelity executives have been carefully reviewing their work units and prioritizing their business initiatives in order to ensure the company is well-positioned for the future.
"The firm's division leaders have already taken a number of steps to implement efficiencies in their organizations and to properly align available resources to make certain that Fidelity continues to provide the same superior service and quality products that the people who do business with us expect and deserve.
"These are extraordinary times, and while Fidelity remains strong and growing, prudent management warrants that we carefully examine all of our costs to make certain we come out of this economic downturn in a position to capitalize on opportunities for our customers.
"Though we regret having to implement any expense reduction that impacts valued employees who have made substantial contributions to our success, we believe this staffing adjustment is necessary."