Joshua Lott for The New York TimesJohnny Burris, a former private client adviser at JPMorgan Chase, says he was fired last year because he refused to push investors toward the bank’s in-house financial products.
Everything is scripted for the brokers in an elite group at JPMorgan Chase: the sales pitches; the personal voice mail message; even the preferred desk candy, Glitterati Fruit Berry.
In a three-inch-thick training manual, the bank, the nation’s largest, details how to recruit clients, pitch products and, ultimately, close the deal — or, as JPMorgan puts it, “get to Yes!”
The manual is part of an intensive, weeklong training course. But it is only the beginning for JPMorgan’s army of top advisers, who are critical to the bank’s rapid expansion into wealth management, a fast-growing and highly profitable business. Interviews with more than 20 current and former JPMorgan brokers, as well as hours of recorded conversations between a former adviser and his bosses, portray a sales-driven culture that is unusually aggressive, even by Wall Street standards.
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Document: JPMorgan Training ManualWhile financial advisers at other firms are typically free to offer a variety of investments, JPMorgan pressures brokers to sell the bank’s own products, according to the current and former employees. Several advisers who resisted said they were told to change their tactics or be pushed out.
“We were not able to do the right things for our clients,” said Brad Scott, a financial adviser who quit JPMorgan in April 2012 and now works at LPL Financial. Mr. Scott said that an executive told the brokers on a conference call, “You are not a money manager; you are an asset gatherer.”
JPMorgan disputes the characterization. It says it puts its clients’ needs first and devotes considerable resources to assembling high-quality investments, which include a mix of mutual funds managed by JPMorgan and by third-party firms.
The inner workings of the prestigious program, known as Chase Private Client, provide rare insights into JPMorgan’s wealth management business, which is central to the bank’s growth strategy.
Current and former brokers in the program contend that the bank, at times, prioritized profit to the detriment of its clients. While such criticism is not uncommon in the financial industry or other sales-driven businesses, the brokers say JPMorgan took an extreme approach.
To bolster sales, said the advisers, many of whom spoke on the condition of anonymity because they feared retribution, JPMorgan largely pushes its own bank-branded investments, which include a mix of mutual funds. While the practice can be legal, competitors have moved away from such investments after facing perceived conflicts. The concern is that, driven by fees, banks will push their own products over lower-cost options with stronger returns.
Some JPMorgan brokers said that the bank did not allow them to disclose the performance of the investment portfolios they marketed until customers bought the products, so prospective clients did not have a clear understanding of what they were buying. JPMorgan says it does provide some performance information to potential clients, but the return figures do not take the fees into account.
Some advisers also worried that the in-house products lacked the usual safeguards from the Securities Investor Protection Corporation, the private, nonprofit group that helps the clients of defunct brokerage firms. While the chances of JPMorgan failing are remote, several brokers said they wanted the added layer of protection, especially for retirees.
Other advisers, though, noted the advantages of the Chase Private Client program, citing the extensive expertise of the bank’s money managers and investment professionals. “I’ve had the opportunity to work with many different groups and managers over these past years,” said Anthony Caravetta, who has been an adviser at Chase Private Client since 2011, “and I have never once felt pressure to sell” JPMorgan products.
A JPMorgan spokeswoman, Kristin Lemkau, said the bank’s products were “well diversified and designed by expert asset managers.” She added that brokers had the option to sell third-party products if it made sense for clients.
Still, some brokers who deviated from the program said they faced repercussions.
Johnny Burris, a former financial adviser in Sun City West, a retirement community in Arizona, was called into a meeting with his managers in early July to discuss why he wasn’t selling the bank’s products, he said. Mr. Burris said he favored traditional mutual funds with strong records and the usual protections.
“At the end of the day, obviously, we always do what is most appropriate for the client,” said Andrew Held, one of Mr. Burris’s managers, according to a recording that Mr. Burris made of the conversation, which was reviewed by The New York Times. But he went on to tell Mr. Burris that it looked “a bit odd” that he hadn’t “done any JPMorgan business” in the last three months.
Late last year, Mr. Burris was fired from JPMorgan. The bank said he “was terminated for not complying with regulatory requirements and not following firm procedure.”
Mr. Burris says JPMorgan fired him because of his resistance to selling the bank’s products. He has since filed an arbitration claim against JPMorgan for wrongful dismissal.
Ms. Lemkau, the JPMorgan spokeswoman, defended the bank’s practices, noting that Mr. Burris secretly taped his colleagues. “We believe it is unethical and unfair for Mr. Burris to use these piecemeal conversations to make his case,” she said. Mr. Burris said he recorded the conversations because he was concerned about his career after being pressured to sell JPMorgan products.
Within JPMorgan, Chase Private Client is considered a prestigious perch. The program’s customers typically must have $250,000 in deposits or $500,000 in investments.
In recent years, the bank has poured millions of dollars into the program, which offers retirement advice and investment products through a vast network of retail branches. By the end of 2012, Chase Private Client had 1,218 locations, up from 262 a year earlier. Mr. Caravetta said Chase Private Client investments gave clients “the ability to leverage our intellectual capital.” That way, he said, “clients don’t have to play adviser lottery as they do with some other investment firms.”
As JPMorgan expands the program, it is cutting back in less profitable areas and those crimped by new regulations, like trading. On Tuesday, the company said it would eliminate 4,000 jobs in consumer banking through attrition, largely from the lower-level positions in the bank’s branches, rather than from its pool of financial advisers.
To staff Chase Private Client, JPMorgan often looks within its ranks. Brokers with top sales records are routinely approached, the current and former financial advisers said.
When Mr. Burris was asked to join the program, one of his managers, Philip Haigis, indicated that there were a few “glitches,” according to tapes of the conversation. He said that Mr. Burris was not selling enough in-house products.
The bank, Mr. Burris’s bosses explained, examines the amount of JPMorgan-branded portfolios of mutual funds that brokers sell. “If you look at our firm, 50 percent of all our sales go” to those investments, Mr. Haigis said. Furthermore, he said, such products draw less scrutiny from the Financial Industry Regulatory Authority, which polices Wall Street.
“Chase makes investment recommendations based on what’s right for the client, not how heavily a product may be regulated, and managed products are subject to significant regulatory oversight,” said Ms. Lemkau, the JPMorgan spokeswoman.
Mr. Burris tried to explain to Mr. Haigis that his strategy achieved better returns.
“If you build all these individual portfolios, you also are the one that has to manage and tweak them and move them,” Mr. Haigis responded.
“That’s our job — that’s what we’re paid to do,” Mr. Burris said.
“Or you could be paid to let other people do it,” Mr. Haigis said.
JPMorgan would not make Mr. Haigis or Mr. Held, the other manager, available for comment.
Despite his bosses’ concerns, Mr. Burris was elevated to the elite program.
After joining the program, brokers attend training. The new recruits sit through sessions with titles like “Positioning JPMorgan Investments” and “Banking Product Overview.”
Mr. Burris and Mr. Scott, the former JPMorgan adviser who now works at LPL Financial, said that during their training, they were discouraged from discussing the returns of the bank’s products and told that they should focus instead on the overall story. “Chase Private Client is part of a firm with a proud history,” the training manual said. The bank played “an important role in helping manage the credit crisis through the acquisition of Bear Stearns.”
Shortly after his training, Mr. Burris was again called into a meeting about his sales.
In June 2012, Mr. Held acknowledged that the “bank-managed products are not the be-all, end-all.” But, he said, they are the same product offered “to clients that have $50 million. So there’s a lot of thought, a lot of intellectual capital and a lot of value.”
He added, “You need to be presenting the private-bank, JPMorgan products and managed investment solutions.”
“I’m not questioning your sales numbers,” Mr. Held said, according to Mr. Burris’s recording. “What I’m saying to you is you’re not embracing the JPMorgan private-bank platform,” he said, later adding: “You’re not doing the presentation that you were trained to do in New York.”
Mr. Burris, who now works at Oppenheimer Company, was fired four months later.
Article source: http://dealbook.nytimes.com/2013/03/02/selling-the-home-brand-a-look-inside-an-elite-jpmorgan-unit-2/?partner=rss&emc=rss