JPMorgan Bankers Irked by “Client Segmentation” Strategy
Upper-echelon private bankers at JPMorgan Chase & Co. have been told to dump less productive clients if they are not hitting a growth bogey of 10% a year.
The new edict, originated by U.S. Private Bank Chief Executive Kelly Coffey, affects bankers who generally work on teams with clients who have at least $10 million in assets. If they are not meeting the 10% growth hurdle, they should refer lower-tier or stagnating clients to JPM’s private wealth advisor group, which typically employs single advisors to service clients who have $5 million or less.
The growth advice aligns with a broad trend at many retail financial companies to narrow their focus to the very wealthy who will use a range of bank services. Wells Fargo Advisors, for example, is giving bonuses this year to brokers whose “book” is at least 75% comprised of clients with more than $250,000 and has reduced payouts on clients with less than $65,000.
Merrill Lynch gives no compensation to brokers for working with clients with less than $250,000, and encourages such clients to be transferred to Bank of America’s no-frills Merrill Edge business.
The private banker who told us of the new policy says it is short-sighted and does not allow him to accommodate some clients even though they may have long-term relationships.
“Advisors who have built their books over five, six, seven, ten, twenty years and have formed good relationships with clients and families are now being essentially told….’Take the clients who aren’t growing and move them,’” he said, speaking on condition of anonymity. “I think that’s a real big issue.”
A JPMorgan spokesman declined to comment.
JPMorgan’s private banking unit has three tiers: a private wealth advisor group for the smaller clients with around $5 million or more, the core private bank, which serves $10 million and up, and a family office-style service for the super rich. The private bankers are paid on a salary and bonus model and are separate from the brokers in the legacy Bear Stearns unit and the brokers under JPMorgan Chase Private Client.