Eight weeks after rescuing First Republic in a deal that widened its lead as America’s biggest bank, JPMorgan is sorting through its prize — and already losing some top bankers with ties to the wealthy clients it badly wants.
About 50 wealth advisers and staff have left in recent weeks, potentially taking their clients with them. Two big teams in New York moved to Flagstar Bank (the beneficiary of another regional bank collapse, as the emergency buyer of Signature Bank) and others have jumped to Citizens Bank, according to people familiar with the matter.
Managing money for the super-rich has become the hottest business on Wall Street in the past few years, throwing off steady fees that shareholders prize and regulators bless. JPMorgan is a titan in almost every business it’s in, but punches below its weight here. Bulking up has been a priority for CEO Jamie Dimon.
An ambitious gambit to overtake competitors like Morgan Stanley and Merrill Lynch never got off the ground. In 2021, a team of executives was busy working on a potential takeover of Raymond James, people familiar with the matter said. The deal would have snapped up the biggest standalone wealth manager — and the only gettable one; Edward Jones, a lower-octane rival, is privately held — though it never went anywhere.
Snagging First Republic out of government receivership offered another path. That bank catered to the super-rich and those set to join their ranks, like rising financiers and startup executives on a path to major wealth. On Wall Street these clients have a name — HENRYs, “high earners, not rich yet” — and First Republic courted them hard.
Among those already gone from JPMorgan are Jason Birnbaum and Gary Farro, who managed hotshot teams in New York and are moving to Flagstar, people familiar with the matter said. Elise Wen, a San Francisco banker with an enviable client list, left for Citizens, even as her former boss at First Republic, Mohamed Fahmi, was given a post-merger battlefield promotion by JPMorgan.
Turnover follows most mergers, but the shotgun weddings in the banking sector this spring face unique challenges. How smoothly the integration goes will determine whether they were the bargain-basement gifts that the market thinks they were.
Whiplash is widespread among employees and clients who spent white-knuckled weeks wondering if their jobs and money were safe. First Republic offered unusually high compensation for its bankers, money JPMorgan isn’t likely to match come bonus season, executives said.
JPMorgan is the best-run bank in America, somewhere between good and unmatched at almost everything it does. But one challenge has been wealth management.
Its wealth-management offering catering to the “mass-affluent” (read: medium-rich) has 5,000 financial advisers managing $630 billion. Compare that to 17,000 advisers managing $4.6 trillion at Morgan Stanley, a bank one-third the size of JPMorgan and with exactly zero branches that might bring customers in off the street. Or 19,000 advisers and $3.5 trillion of assets at Bank of America, which is about JPMorgan’s size and with a similar branch network.
To be fair, rivals’ figures include ultra-rich private banking clients, which JPMorgan manages separately (more on that arrangement below), so the numbers aren’t quite apples to apples. But with its strong brand — which got even stronger during the regional-banking turmoil — and massive network, JPMorgan should be bigger in this business.
Overlapping client segments and internal competition may have held it back. In 2021, a JPMorgan wealth adviser accused higher-end private bankers within the firm of trying to poach her clients, including Alex Rodriguez.
And it has seemed at times to operate more as a marketing machine than a traditional investment business. Executives have fiddled over the years with the minimum wealth levels required to be bumped up or down a service level — in ways that sometimes manage to offend the clients they’re courting. (Recall my former colleague Emily Glazer’s delightful 2016 story on how JPMorgan raised the minimum ticket to qualify for its top-tier private bank and pissed off a lot of Manhattan lawyers.)
“Clients have the choice of the adviser they want to work with, and some want to work with more than one,” a JPMorgan spokeswoman said.
Room for Disagreement
A spokeswoman said that 89% of First Republic wealth-management employees have accepted jobs at JPMorgan. And even with attrition, the takeover is likely to be a win: Once an estimated $2 billion in restructuring costs are behind it, JPMorgan estimates First Republic will add $500 million in annual profits — a touch under 2% of total earnings, but not bad.