J.P. Morgan Reorganizes U.S. Wealth Unit

13 Dec    Investing News

(Corrects first and fifth paragraphs to say that both bank-based and J.P. Morgan Securities office-based brokers are paid off a grid while private bankers receive a salary plus bonus.)

J.P. Morgan Securities’ approximately 450 brokers are being combined into a single J.P. Morgan Chase & Co. business unit weighted by bank-based wealth advisors, employees were told in memos and internal phone calls on Wednesday afternoon.

The new U.S. Wealth Management business will include 4,000 advisors in 3,500 bank branches and the 450 brokers in 21 J.P. Morgan Securities offices, together with employees of the bank’s fledgling YouInvest online brokerage business. It will be led by Kristin Lemkau, most recently J.P. Morgan Chase’s chief marketing officer, who earlier worked at the bank as a public relations official.

The goal of the reorganization is to increase the banking goliath’s paltry share of the global wealth market through more focused management oversight, according to brokers and other insiders who were briefed on the reorganization. JP Morgan has about a 1.0% share of the high-net-worth market and an 8.0% share of the “ultra-high-net-worth” market, officials said at a recent investors conference.  (Wall Street generally considers $10 million as the minum asset base for the “ultra” sector.)

Chris Harvey will remain head of the bank’s core retail brokerage business, which Chase seeded when it absorbed Bear Stearns & Co. during the financial crisis.

The changes will not affect compensation policies, target-client bases or product platforms for financial advisors, but could allow J.P. Morgan Securities to slightly increase its broker count, Harvey told some advisors who spoke with AdvisorHub. J.P. Morgan’s  brokers are paid on a revenue production-based grid while its private bankers who cater more exclusively to the “ultra” crowd are compensated with a salary-plus-bonus formula that some aggressive brokers’ disparage.

Harvey, who had reported to U.S. Private Bank head David Frame, will report to Lemkau under the new alignment. Chase Wealth Management head Eric Tepper and Kelli Keogh, head of digital wealth management, also report to Lemkau.

In a sign that J.P. Morgan expects to lead its wealth management charge by focusing on its core banking clients, Lemkau will report to Gordon Smith, chief executive of the consumer and community banking division and co-president of the parent bank company. She will sit on the consumer bank’s operating committee, and on the operating committee of the asset and wealth management division that is led by Mary Callahan Erdoes.

Frame, who replaced Bear Stearns veteran Barry Sommers as head of client-facing wealth businesses at the beginning of 2019, will continue to run the domestic private bank focusing on the ultra-high-net-worth segment, and international private banking will similarly continue to be overseen by Nicolas Aguzin.

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