The honeymoon for First Republic Advisors after the acquisition by JPMorgan Chase has lost its luster. This wasn’t a choice, but a situation thrust upon them. About 70%+ of advisors including private bankers departed in the early days of the transition, the minority have weathered the storm, hoping for the best.
Let us examine the pros and cons currently for FRB advisors at JPMC:
1) JPMorgan offers outstanding brand name recognition, and offers a better, more diverse platform to offer clients than FRB as a boutique firm – size matters.
2) Clients have seen little to no disruption (for now but it is to come).
3) The same FRB advisors are mostly in place offering the same service provided under FRB for now.
4) For clients, it feels like the same culture as FRB for now but that is about to change.
- JPMC hinted that it would raise payouts for referred clients from 25% to 50%, now we know this won’t happen, nor should advisors expect any referrals at all. Now since so many private bankers have left, advisors are left having to service clients at this 25% rate.
- FRB advisors once enjoyed a lavish allowance for travel and expenses, JPMC has slashed T&E to $25,000 max for a $5-10M producer and less for smaller producers.
- Client Service Associates were being generously compensated well above market at FRB, advisors should expect that CSAs will be receiving market-standard wages, at a substantial reduction. Advisors pay out of their own pocket.
- Several advisors have complained that they have been poached already by the private bank. What happens when the next $100M client is pursued – who gets priority treatment? The JPMA division covers the mass affluent market but is looked down upon as the less profitable 50% commissioned brokerage model.
- Heavier operations and compliance oversight, JPMC monitors biometrics, calls, emails, Zoom’s, the background of your screen – the most hawkish in the business to date.
- Repapering – few advisors have started the process and so far the process has been very slow, advisors should expect that KYC and the repapering process will be a very cumbersome and painful experience for your clients.
To quote one FRB advisor, JPMC is “a risk management firm, no longer a wealth management firm.”
In pursuit of risk management and profits, the strategies deployed fail to benefit hardworking advisors who should have control over their client relationships. This shift also leaves clients with rather generic wealth management services at a premium cost. JPMC might place faith in the allure of its brand name and its ‘too big to fail’ stature, but as advisors continue to depart and clients choose to leave, this may not suffice.