Vanguard transfers 1,300 staffers to outsourcing partner Infosys, which will open a Malvern center

Vanguard Group, the Malvern-based investment giant that employs more than 12,000 in Chester County, says it will transfer out of the company 1,300 workers who handle employers’ 401(k) plans for five million working and retired Americans.

The staffers will start working later this year for a contractor, a new Malvern-based unit of Infosys, the India-based technology outsourcing giant.

The workers’ Vanguard boss, Martha King, managing director of Vanguard Institutional Investor Group for the last five years, will leave the company with her staffers and become one of their bosses at Infosys. She promised “a seamless transition.”

The switch includes record-keeping, client administration, operations, and technology workers at Vanguard’s Malvern headquarters and its smaller operations centers in North Carolina and Arizona.

Employees will keep their same pay and benefits and work at existing Infosys offices nearby, for the first year.

Infosys’ plan to open a regional headquarters for its financial industry clients should “create significant long-term employment opportunities in the vicinity” and an “ongoing commitment” by Infosys to expand in the Philadelphia area, said Vanguard spokeswoman Emily Farrell.

King will become chief client officer for Infosys’ new Mid-Atlantic Center of Excellence, serving Vanguard as its “anchor client” and adding other business from its rivals.

Infosys president Mohit Joshi says half of the 20 largest U.S. money managers already use its services, and he hopes to win more.

“Our platform will create a new standard for the industry” and “drastically improve the retirement savings experience,” Joshi promised in a statement.

King, a graduate of Bloomsburg University, will be replaced as boss of Vanguard’s institutional investor group by John James, previously Vanguard’s human-resources chief. He, in turn, will be replaced at HR by Vanguard veteran Lauren Valente.

Vanguard has a history of farming some tech jobs and other positions out to contractors, who have recruited and operated, sometimes from Vanguard buildings, sometimes from other locations.

Vanguard has said that using contractors, for example in times of financial stress such as a recession, can enable the company to operate with minimal disruption by reducing workforce without mass firings of its own staff, as happens cyclically at Wall Street banks and other financial employers.

Last year, the company hired an arm of the Swiss post office to process mail at Swiss Post’s sprawling private mail facility in El Paso, Texas.

Here’s how Vanguard and Infosys say they are splitting the work:

Infosys “will assume day-to-day operations supporting Vanguard’s [direct contribution plan] record-keeping business,” including software and administration, Vanguard said in its statement.

Vanguard salespeople will continue to call on clients and prospects, design plans, manage investments, and sell advisory services to plan members. This earns Vanguard an additional fee that helps boost the company’s revenues at a time when investment managers are under pressure to cut their retirement and money-management fees.

Together the companies will set up a “cloud-based record-keeping program,” add analytics and collect data on plan members’ behavior, and support operations.

Both Vanguard and Infosys will handle phone inquiries. That is an area of large potential cost-cutting, for example, if Infosys moves phone services to its operations in low-cost India, said Dan Wiener, a New York investment adviser who publishes the Independent Adviser for Vanguard Investors newsletter.

Wiener said King has experience cutting expenses. Vanguard prides itself on driving down fees so it can charge customers less. The private, for-profit company does not disclose what it pays executives or spends on marketing.