As the overinflated and overheated stock market finally starts to waddle and sputter to a halt, much to the chagrin of the "academics" at the Federal Reserve, the party for asset managers is simultaneously coming to an end. As we are approaching the end of a decade of euphoria that has resulted in new asset management firms popping up left and right, money managers are looking to rein in spending in order to maintain margins in the face of additional competition.

For instance, the Wall Street Journal reports that Oppenheimer and Invesco are slated to reduce their workforce by about 1,000 employees after they merge next year. T. Rowe Price is supposed to close an operation center in Tampa and BlackRock is starting to clamp down on the cost of its internal staff meetings and travel.

Amanda Walters, a senior manager at Deloitte consulting group Casey Quirk, told the WSJ: “Asset managers were complacent. People are now asking, ‘How can I sustain my business?’”

Incentive bonuses for asset managers this year are expected to rise 5%, which is less than the 7% they rose in 2017. Next year, it’s estimated that these bonuses will actually decline by 5%.

These types of money managers were already under fire coming into the year as many well known hedge funds and actively managed funds were notably underperforming the S&P 500, leading many people to seek out returns from passive funds or funds tied to indices. This lit a fire under the competition in the active manager world.

Only about 30% of asset managers were able to expand their assets and boost revenue faster than costs, while at the same time investing in themselves, between 2014 and 2017. That is down from about 50% between 2011 and 2014. This reduction occurred at the same time that the US stock market was rallying. At the same time, pay in the industry also grew.

2018 also changed things because the markets became more volatile and investors started to become more cautious.

Alan Johnson, managing director at compensation consultant Johnson Associates, stated simply that “2019 will be the start of much tougher years for asset managers.”

At PIMCO, staff is expected to see compensation rise by single digits in 2018, down from increases in 2017. The company's CEO told its staff at a meeting on October 29th: “We had a great year in 2017. We can’t repeat that every year and we need to acknowledge this.”

Others are simply slated to lose their jobs in the coming year. Actively managed asset firms are reducing staff as a result of the volatility in the markets. For instance, JP Morgan is laying off about 100 employees in its asset management division as a part of a "push to simplify the business".

The previously mentioned layoffs at T. Rowe Price are mostly going to be call center roles that are low on the totem pole as more questions are being answered online. Some managers at BlackRock are looking to fill open positions quickly before the jobs may disappear after year-end. BlackRock recorded its lowest net inflow into asset management products in two years in the third quarter - and it’s first overall net outflow since 2015.

With these types of drastic steps already expected for 2019 with the stock market still just a couple of percent off of all time highs, dare we ask what steps these companies would have to take if we wind up in an actual recession?