JP Morgan has built
a reputation as the ‘go-to’ bank for the super-rich; even the
significantly wealthy have sometimes thought the bank was beyond
their reach. To counter this, and deepen its business, an important
high net worth initiative is under way in Asia
JP Morgan’s venture to tap into high net worth (HNW)
clients, those with up to $30m of investable assets, made its debut
in Asia about a year ago, in an important strategic move to broaden
business among the wealthy outside the US.
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Peter Flavel, a former
head of Standard Chartered Private Bank and a highly-rated wealth
industry leader, was hired as CEO of JP Morgan Private Wealth
Management for Asia.
The initiative has
already made “huge inroads” into the region, says Flavel.
JP Morgan Private Bank
has historically focused on the ultra-HNW private clients.
“For us, that means over
$30m of client assets, though typically $50m, and with a
significant proportion at much higher levels,” he says.
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By GlobalData” My role is focused
on the fast-growing HNW $10m to $30m client segment. It’s a level
of wealth we’ve been covering very successfully in the US, Latin
America and Europe for some time, though not to a great extent in
Asia,” he adds.
Flavel notes that when he
started, his operation had only a handful of staff in
Singapore.
“Now, in just over
12 months, we have close to 50 advisers dedicated to the HNW
segment, based in Singapore. Importantly though, it’s not about a
breakneck speed of growth,” he says.
JP Morgan private
bank aims for ‘best’
“We’re executing on a
five-year plan. And while we’re ahead of our planned run rate
targets, our focus is on measured growth over the long term,” he
says.
No details about the
number of clients are available, with Flavel insisting the goal is
“not to be the biggest but the best private bank”.
He adds, “That’s all
about quality growth. It also means our natural brand positioning
targets clients at a higher level of wealth than most of our
competitor private banks.”
JP Morgan Private Banking
managed $830bn of assets globally as of 31 March this year.
Analyst estimates suggest
the private bank itself has been responsible for the biggest slice
– at around 70%.
Private Wealth
Management, mainly in the US, takes 20% while JP Morgan Securities,
essentially the old Bear Stearns operation, contributes roughly 8%
to AuM.
An important part of the
rollout has been the JP Morgan platform.
“Our goal is to
have the best platform in the market and we continue to invest
heavily,” Flavel explains.
“Importantly, we
share our complete platform across our UHNW and HNW segments. All
our best global thinking, our conviction views, our solutions and
our alternatives platform, for which we’re well known, are fully
accessible to each client segment.”
In addition, his team
works closely with JP Morgan’s investment bank, corporate bank,
investment management arm and with the UHNW segment.
JP Morgan hires
50 advisers in Asia
So, how tough has Flavel
found recruiting those 50 advisers at a time when there’s such a
scarcity of advisory talent in Asia?
“In Asia, it seems many
people continue to focus on their hiring targets,” he says.
“Is that the right
measure of success or the right business aspiration? I don’t think
so. Ensuring you hire the best talent for the long term isn’t
simply about a 60-minute interview, finding out about their current
book size and their current package,” he adds.
“We’re not just hiring
for the current role but for long-term careers beyond the next few
years. The bank puts a huge effort in our new adviser induction
programmes with its online PBU-Private Banking University.”
Given the historic focus
by JP Morgan on UHNW clients, do his customers ever feel they’re
not rich enough to qualify, and have significant inroads been made
into this client base?
“Prospects occasionally
ask whether their level of wealth qualifies,” Flavel replies.
“We then explain the
breadth of our platform and that our complete global platform is
available to all clients.”
Unique vehicles
for HNW clients
“Indeed for our HNW
clients we make available several of our solutions usually only
available to UHNW clients elsewhere. For instance, we have unique
private equity participation vehicles which enable HNW clients to
invest at entry levels normally only accessible to
institutional-level wealth.
“It’s true though, we
seek to cover clients at higher levels of personal wealth than most
of our private bank competitors and, in so doing, we seek to be our
client’s most significant wealth relationship.”
In terms of geography,
the initiative covers the whole of Asia from Hong Kong and
Singapore offices, although it has created ‘new’ client segments –
non-resident Indians, international expatriates, and financial
sponsors and lenders, meaning locally based hedge fund and private
equity executives.
“Our coverage models
aren’t simply geographically based but also tailored to specific
groups of clients,” he says.
Flavel has little time
for assertions by rival banks that, inevitably, there will prove to
be tensions with the UHNW segment as his division competes for
clients, particularly at around the $30m crossover point.
“On the contrary, we
complement each other,” he says.
“Our HNW business fills
out our Asian wealth coverage model for existing and new clients,
as it does in other international markets. For instance, having a
quality HNW level offering means we can cover the broader family
according to their current and longer-term needs.
“For larger families we
can simultaneously advise second and third generation wealth while
our partners in UHNW continue to cover the first,” he
said.
“We can then transition
seamlessly over time as generation change takes place. Or for our
clients with large business interests, as a bank we can cover both
the UHNW owner/entrepreneur as well as their senior executives,” he
added.
“And for hedge funds we
can similarly cover the principals in UHNW as well as their senior
executive staff,” he says.
So there’s “a huge
synergy and opportunity” given the uniqueness of the coverage model
which is fundamentally built on a team-based approach, Flavel
contends.
“We’re a client-driven
business and the wishes of our clients are paramount,” Flavel
concedes.
“We also always ask
ourselves who are our best people to have on the coverage team. And
we’re always looking to bring in new specialists for specific
client needs, for instance IPOs, cross-border funding, soft
commodity specialists, etc.”
One problem with the new
division, rivals have contended, is the issue of operating
full-service client coverage economically. At other banks, some
advisers have as many as 250 customers to service at the lower
wealth thresholds.
Typically, Flavel’s HNW
bankers cover between 25 and 30 relationships which they see as a
manageable number “given the team approach”.
He explains: “Our UHNW
bankers have a much lower coverage ratio, sometimes just a
handful.”
“Our coverage model also
means when our bankers are travelling in the field they have a team
of experts back in the office helping to serve and deepen client
relationships. It’s a very banker-friendly model once you
understand the way we work,” he adds.
“Our bankers and
investors are co-pilots in serving every client relationship.
Additionally, for our clients’ credit needs, we have a dedicated
capital adviser; and for trusts, estates and philanthropic needs, a
wealth adviser,” he says.
“For transaction
servicing, two client service specialists deal with day-to-day
execution. We then add additional asset class specialists according
to the client’s specific needs,” he adds.
It means the division has
a higher adviser service ratio per client than the industry norm,
Flavel says.
“Our first class business
delivery model means several people are responsible for developing
and servicing client relationships day to day,” he adds.
HNW, UNHW
offerings complement each other
The HNW and UHNW
offerings complement each other. “As we share the product and
service platform, what we can offer is very similar,” says Flavel.
“We have some discretionary offerings built for institutional
sovereign wealth funds and family offices that may not be most
suitable for HNW wealth. Also, the quite complex trading activities
we undertake are more focused on professional UHNW trading-type
clients,” he says.
“The important point is
that all our research, due diligence and our solutions platform are
available to all our clients with the key dependency being their
personal risk appetite relative to their liquid net worth,” he
said.
“We have a particular
focus on thematic discretionary mandates and we have a higher
percentage of our client money in mandates than industry averages.
Also, many clients like the access they have to our broad
alternative asset platform, which is a key ingredient in our
diversified client portfolios,” he added.
Flavel won’t be drawn on
numbers for the arm’s targets in the market. “We believe we can
grow faster than the market, particularly as we grow our new HNW
business. We are not about growth for growth’s sake as we seek not
to be the biggest but just the best.”
The JP Morgan ‘fortress’
balance sheet “is an important part of our brand and pedigree,”
says Flavel, referring to the way the bank has come through the
financial crisis in better shape than many rivals.
The recently disclosed
trading loss at its London chief investment unit, which could rise
as high as $5m, is understood to have had only a minor impact on
its private wealth arm.
“One industry challenge,
though is a lot of HNW wealth is not being covered by private banks
today,” Flavel concludes.
“Part of the issue
is a supply-side constraint, meaning we don’t have enough quality
private bankers in Asia. As an industry we have to relearn how to
grow our own talent like a lot of banks used to 20 years ago.
“Globally we spend a lot of time and effort developing newly
graduated staff with our three-year analyst and then three-year
associate programme,” he informed.
“Our Asian private bank has had the same programme for several
years now – a great engine for developing our own talent,” he
said
