JPMorgan making its move for the mass affluent

JPMorgan Chase & Co. wants to squeeze more business from its mass-affluent customers, and it’s asking Barry Sommers, the former head of its brokerage unit, to lead the effort.
Mr. Sommers, who came to JPMorgan via The Bear Stearns Cos. Inc., where he was co-head of its private-client-services unit, has been made chief executive of retail affluent and investment services, a newly created job, reporting to Charlie Scharf, head of retail financial services.
Greg Quental, also a Bear Stearns veteran, will become the new CEO of J.P. Morgan Securities Inc., replacing Mr. Sommers and reporting to Phil DiIorio, global head of products and practices for the private-banking business.
J.P. Morgan Securities has 415 brokers currently, but some have been added recently. According to a JPMorgan internal memo, the unit has added 125 new “advisers from top-tier wirehouses and RIAs.”
In his new role, Mr. Sommers will be overseeing a larger group. Across its more than 5,100 branches, JPMorgan has 2,700 employees licensed to sell mutual funds and other investments.
The management shift is occurring because JPMorgan wants to make sure to get more from its wealthy customers, those who are worth at least $500,000, but less than the amount a typical private-banking client might have.
According to internal estimates, out of JPMorgan’s 20 million customers, 8% are considered affluent. However, pointed out a JPMorgan spokesman, these 8% have much more wealth than they share with their bank — as much as two-thirds of the total wealth in the country.
“If we can do a better job of serving them, we will earn the right to have more of their assets,” said Tom Kelly, a JPMorgan spokesman. He said that the firm will start by offering deposit products and investments, and also loans if they’re required.
“Deposits and assets are a big part of the relationship,” Mr. Kelly “We’re happy to get loans, too,” he added, especially jumbo mortgages.
Mr. Scharf, Mr. Sommers’ new boss, said in a release today: “I am confident that our initiative will help us serve customers better and could increase pretax profits by $500 million to $1 billion annually.”
Last year, JPMorgan earned about $16 billion before taxes. Non-interest revenue totaled about $49 billion, a significant increase from the prior year; but asset management, administration and commission fees fell by about 10%, to $12.5 billion.
JPMorgan is not alone in trying to capture more of the affluent business. Morgan Stanley Smith Barney LLC’s newly created private bank has plans to attract as many as 500 bankers by the end of next year, according to Bloomberg News. Its focus appears to be on loans, according to the story. A source cited in the story said that Morgan Stanley hopes to triple its loan balances to between $50 billion and $60 billion by year-end 2014.
For its part, JPMorgan had more than $200 billion in loans on its books at the end of last year.

Related Topics: Financial Planning, JPMorgan Chase & Co.