As if the fiduciary standard meme isn’t enough of a debate these days, JPMorgan hopes that nobody notices how far away they are from relative suitability. In fact, the entire JP Morgan private banker model is to shovel as much $JPM product down clients’ throats as they possibly can. Mutual funds, mortgages, trust services, credit cards, etc. are all part of the dog and pony show when you become a client of the $JPM private bank. The overt attempt to stamp JPMorgan product all over a client’s portfolio is so far beyond any discussion of ‘fiduciary duty’ that it would make you laugh if you could stop crying. Here is the correspondence that we received – both the picture of the letter and the actual text. It is eye opening:

“So, where did the crack begin?

When JPM PB introduces a “metric system” about 7+ years ago, Senior Bankers were to be paid a discretionary bonus based on (1) net new AUM, (2) percentage change in revenue, and (3) net new clients. Fair enough. Except in a “tales you lose, heads I win” approach, management takes these metrics and then uses them to “quintile” you vis-a-vis your peers. Remember, I said “discretionary” bonus. Over time, the quintilling system got very opaque. Regardless of metric achievement, JPM needed to do well. Asset Management needed to do well, Private Bank needed to do well, and your team needed to do well. And of course, you needed to do well: as in high quintile. In other words, you might as well say: Mars needed to align with Saturn and the moon needed to be in lunar eclipse when bonus decisions were made.

Over the same time, an intense sales culture and product push evolved. Some of the older leaders and Senior Bankers began to understand that client retention, client service, and client advisory was not factored in to any of the metrics. Need new clients: well then, open up a custody account and get the fees discounted. Need percentage change in revenue: well then, hit it on any of the metrics. Need percentage change in revenue: well then, hit it on the big one-time transaction but be sure to shuffle the account to a junior person next year (or be saddled with a revenue decline next year when the transaction does not reoccur). The “integrated team”, which was once a trusted advisory partnership, became a source of “product push” partners from different areas (lending, alternatives, mortgages, etc).

Finally senior management has been parachuted in with people who have a sales manager mindset: all with view toward achieving month to month sales objectives. Client grids handed out with products on one axis and client names on the other: why doesn’t this client have a loan, a mortgage with us, even at one point: credit cards! Let’s look at your metrics. I need a pipeline list of your prospects, etc. etc. What new sales calls are you going on. Have you been cold calling?

All the while, solid client management people with years of experience are being pushed aside, not listened to. Compensation was easily down this year for most players. People are working hard, and the beast needs to be fed, the revenues and AUM must continue to increase. Compounding: more and more. There is no relief. there are plenty of junior people that are looking to jump in your seat. There is no respect. My manager doesn’t care about me. You must get new accounts, new AUM, increases in revenue. Hopefully enough to quintile you so you have another year to play. As for your bonus this year: well…Jupiter did not align with Mars, sorry. All the while, there is no time for good solid client advisory and relationship management: that, my friend, is not a metric. And if it is not a metric achievement, it is not valued.”

Loans, mortgages, credit cards – oh my! This certainly makes the fiduciary ‘do or don’t’ conversation pale in comparison. There is also an element of how much more blood can you squeeze out of a turnip? Once clients are loaded up with $JPM product what else can they be burdened with. This seems to be at the heart of this advisor’s issue. 

Written by:  Angela Poupart/AdvisorHub –

story written by fellow ACA member: Sheila Padden, Padden Financial Planning

John “Jack” Bogle, founder of the $3 trillion Vanguard Group and the world’s first index mutual fund, spoke to the Alliance of Comprehensive Planners (ACP) recently in Philadelphia at our annual conference.

Why did one of the investment industry’s “Giants of the 20th Century” choose to speak to us for free? He summed it up succinctly: “We are on the right side of history.”

Bogle appreciated our commitment to comprehensive financial planning based on a fiduciary relationship with our clients. “I’ve always liked the financial planning field, particularly the fee-only field,” he said.

Bogle was well aware of ACP’s emphasis on client service. “Ultimately, clients have to be served…groups like yours, people like you, are perfectly capable of being a great place to begin all that,” he said.

He also stressed the need for long-term relationships and a long-term investment perspective. “Your clients and our clients are or should be investing for a lifetime…investing for 80 years,” Bogle said. “Think of active management this way…the average portfolio manager lasts for seven years, and 50% of mutual funds go out of business every 10 years.”

He observed that the possibility of outperforming the market over that time is “substantively zero.”

And these plans need to be implemented in a way that keeps costs low, such as a passive, low-cost index approach.

“Trading is murdering,” Bogle said. “The more you trade, the less you make.”

His prescription for a better financial world fit right in with the ACP philosophy. When asked what he would do to change the financial world for the better, Bogle called for three things: 1) a federal standard fiduciary duty for investment advisors, 2) investor education, and 3) a change in corporate focus.

He explained his views on the fiduciary duty owed to customers very simply: “Anybody who touches other people’s money is a fiduciary. …Did I make myself clear there?”

Bogle said he saw investor education as one of the key services provided by ACP advisors. “You all are accomplishing this every day,” he said.

He also stated that the knowledge and hand holding provided by financial planners is invaluable. Bogle particularly noted the importance of understanding cost – lifetime cost.

Finally, he issued a challenge to current management in the financial industry. “Directors have to wake up and make sure their companies are run in the interest not of their managements, not in their political contributions, and not in their executive compensation, but in the interest of their stockholders,” Bogle said.

His lifetime of achievements in the financial services industry adds heft and credibility to his opinions. We were honored to have Bogle address our group and endorse our approach.