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 –