It's a tough time to be in financial services. The list of companies failing or filing for bankruptcy in the past year includes American Home Mortgage, Ameriquest, New Century Financial Corp., and about 50 other lenders, firms whose largest creditors include some of the biggest names on Wall Street.

And the hits keep coming. Countrywide Financial, the nation's biggest mortgage lender, narrowly avoided bankruptcy by borrowing $11 billion. And Bear Stearns survived only after JPMorgan agreed to acquire the firm at a fire-sale price.

Meanwhile, financial services companies are laying off employees by the thousands. Citigroup plans to cut 9,000 positions, Merrill Lynch will eliminate almost 3,000 jobs, and Bear Stearns could see the elimination of 10,000 jobs once JPMorgan completes its buyout. According to a Bloomberg News estimate, financial services companies globally have cut, or announced plans to cut, 83,000 positions.

Grim Prognosis

Clearly the fallout from the rapid decline in U.S. housing sales and prices, and the subsequent collapse of the subprime mortgage industry, has been far-reaching. In April the International Monetary Fund reported that losses stemming from the mortgage crisis could hit $1 trillion. Unlike the economic downturn of 2001, firms are seeing sustained periods of unprofitability. For example, Merrill Lynch reported a $2 billion loss for the first quarter of 2008, its third consecutive quarterly loss. By contrast, the firm reported only one quarterly loss in 2001.

Even companies with minimal exposure to the subprime mortgage disaster reported a decline in profits in the first quarter compared to a year ago — MetLife, for example, reported a 37 percent loss.

And the financial services sector shows no sign that things will get better soon. “If you believe the analysts, they are slashing earnings estimates by a lot for 2008,” says industry observer David Geracioti, editor-in-chief of Registered Rep magazine. “Companies like Morgan Stanley, Merrill Lynch, and others — they are going to be earnings-impaired for a long time.”

Budget Surgery

What's going to stop the bleeding? In part, meeting planners. Many are being asked to cut budgets, cut attendance, delay programs, consolidate meetings, shift sites, and examine every expenditure. Interviews with senior-level meeting managers, suppliers, and other observers suggest that while the industry is not seeing wholesale cancellations of meetings or incentives, planners are preparing for all possibilities. And they're doing what they do best — getting creative.

“We started watching our meetings spend even prior to this subprime mortgage situation by scrutinizing internal meetings particularly,” says Gary Pearson, director of corporate meetings and events, AON Service Corp., in Chicago. “We've been looking at client meetings and events too, but not as heavily. We are continuing to have meetings but we're looking more closely at the number of attendees, the number of days, where the meetings are being held for travel purposes, and the food and beverage costs at those meetings.”

The companies getting hit really hard are those most closely tied to the subprime mortgage fiasco. “That business has just stopped,” says Carol Lynch, vice president, group global sales, Starwood. With the rest of the financial services sector, “we aren't seeing an increase in cancellations,” Lynch says, “but we are seeing constriction.”

Interviews with several meeting department heads at large financial services companies serve to illustrate Lynch's point:

• One company had scheduled a 200-person, two-day meeting in Boston. In a budget-cutting move, the company turned the event into four regional day meetings.

• A large Midwestern company is looking at changing its annual recognition conference by extending the qualification time and holding the conference every 18 or 24 months.

• Another well-known firm is thinking about putting off two large upcoming incentive meetings until 2009.

“You're not necessarily seeing complete cancellations, but a different way of doing things,” says one planner.

Ounce of Prevention

“My meetings are being directly affected by budget cuts,” says Boston-based Jessica Crimmins, director of MetLife's Financial Solutions Group and the Business Strategy and Development Department, “Corporate is trying to be leaner and more efficient and wants to be proactive so that we don't have to act in the middle of a crisis.”

One of the large education meetings that Crimmins manages, the annual Financial Planning/MetDesk Symposium, attracts 400 to 500 attendees. This year's budget was cut by 30 percent compared to 2007. Crimmins achieved $150,000 of mandated cuts by, among other things, choosing a cost-effective destination (Anaheim, Calif.), becoming more creative — and economical — with food and beverage, and reducing spending on keynote speakers.

“Now comes the interesting part,” says Crimmins. “I usually get at least 400 people to this meeting. Am I going to get that kind of attendance this year?”

Incentive Immunity

While internal meetings and events seem to be taking a hit, the same may not hold true for incentives and client events. Countrywide Financial, poster company for the mortgage debacle, foreclosed on tens of thousands of loans and has laid off more than 11,000 employees since last summer. Adverse publicity about an upscale business summit the company had booked in Avon, Colo., in March prompted the company to cancel the event, as well as other similar meetings planned for the rest of the year.

But one industry planner believes that while the Countrywide example got a lot of notoriety, it serves as more of a cautionary tale than an example of what is happening throughout the financial services industry. “Everybody is still doing incentives and customer events, and they're going keep doing them because they are a necessary part of the business,” she says. “The ironic thing [about Countrywide] is that when they canceled, it probably cost them just as much in cancellation fees as it would have if they had held the event.”

“We're still doing incentives,” says the meetings department head at a large financial company. “And we still have some business units that are looking international, even with the weakness of the dollar. None of that has changed. But we are spending more wisely and looking closely at our budgets.”

Isabel Mahon, director of global sales, Fairmont/Raffles/Swissôtel, has seen a few programs from the financial sector “put on hold,” she says, “but for the most part planners are still booking incentives for the future.” That doesn't surprise her. “With an economic downturn it becomes even more important to incentivize,” she believes.

But companies are doing some fine-tuning when it comes to incentives. One meetings manager noted that his company has changed the qualification standards for a 2009 program. “We used to provide a benchmark qualification level, which meant that a qualifier could hit that level and coast the rest of the year,” he explains. “Now we've put a limit on the number of qualifiers, so we have a constant race to the finish, which means [producers looking to qualify] are more apt to continue to sell those products.”

Starwood's Lynch says that while financial services firms are continuing to book incentives, some of the programs are now “smaller and shorter. My sense is some companies are changing qualification standards so that we're looking at fewer attendees. And some are cutting costs by dropping a night from a program.”

Companies in the insurance sector may be feeling less pain. At Humana, there has been no impact on the meeting schedule as of yet, according to Chuck Lane, director, incentive travel and public relations, for the Green Bay, Wis., healthcare insurer. “Everything is full speed ahead,” he says.