Big Wall Street firms are making ever more inroads into private banking, the supreme discipline of the Swiss competition. This is not without internal drama.
An internal spat at JP Morgan has now found its way into the public. At the center of the dispute are prominent and wealthy clients of the firm such as pop star Jennifer Lopez and former baseball star Alex Rodriguez, and the question of who is allowed to serve them.
A well-known client advisor at JP Morgan Advisors, the unit that originally became the largest US bank with the demise of Bear Stearns, is claiming it. The advisor, who works out of San Francisco, joined the unit in 2020 and brought along a prominent client in Rodriguez.
Lopez Leverage?
The firm's New York-based private bankers operate under their own management, and JP Morgan wants to push their business because it yields more stable returns than cyclical investment banking. As finews.com reported on various occasions, other American firms like Morgan Stanley and Goldman Sachs are making inroads, and are now threatening to wrest business away from what has long been the traditional fiefdom of Swiss private banks.
The advisor now accuses the private bankers of trying to pry Rodriguez away from her. To this end, her colleagues would also have exerted influence with Lopez, also JP Morgan, at the time Rodriguez's fiancée. The banker is taking legal action against her employer over that and other allegations.
This first came to light last December. But as the «Financial Times» (paywall) reports, another of the consultant's prominent clients, best-selling author Malcolm Gladwell, has thrown himself into the fray on behalf of his banker.
Jamie Dimon Silent
Gladwell, a decades-long client of JP Morgan wrote a letter to CEO Jamie Dimon, defending his advisor. Dimon has not responded to the letter, instead delegating the task to others and not something that sits well with Gladwell.
«I thought he was supposed to be a statesman, Jamie Dimon. This is like a game an 11-year-old would play,» Gladwell told the FT.
The Swiss Experience
The experience Dimon is going through at the moment is a very Swiss one. In private banking, when it comes to very wealthy and prominent clients, internal disputes over prestige and fees are inevitable.
Looking at UBS in this context can be instructive. In March, the world's largest private bank announced the global family office division, where the business with the super-rich was previously housed, would be set up as a new global family and institutional wealth (GFIW) division. The cooperation and distribution of fees with the UBS investment bank were reorganized. The Global Family Office head Josef «Joe» Stadler stepped down from operational management of the prestigious following that decision.
Ties That Bind
Private banking, as the JP Morgan dispute clearly shows, is a relationship business, and the closer the ties between the advisor and the client, the greater their claim to power within the bank.
Swiss private banks have been trying for some time to limit this potential for conflict by having entire teams look after important private clients, limiting the position of individual advisors from outset. US banks are likely to want to take a page out of the Swiss competition's playbook here as well.
