J.P. Morgan Securities goes on recruiting offensive

Firm signs on to broker protocol as it moves to make sure its name is more prominent in the eyes of top advisers

Mar 6, 2014 @ 12:01 am

By Mason Braswell

JP Morgan Chase, J.P. Morgan Securities, recruiting, broker protocol
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J.P. Morgan Securities is stepping up its game and hoping that top financial advisers will take notice.

The firm, which operates as the retail brokerage arm, has made a number of notable moves in recent months to make sure that its name is more prominent in the eyes of top advisers. After bringing on nearly $1.2 billion in assets from veteran advisers, it signed the Protocol for Broker Recruiting last month and has been enlisting most top-name recruiters to help spread the word.

"They are reaching out to recruiters and trying to be competitive with deals and different things, and they want to see a lot of [prospects],” said Rich Schwarzkopf, whose eponymous recruiting firm was hired two months ago by J.P. Morgan Securities. “They said they would be accommodating, so they're doing all the right things and saying all the right things.”

The firm has about 450 advisers, many of whom came to the firm after JPMorgan purchased the distressed The Bear Stearns Co. Inc. in 2008 during the financial crisis.

(Related: Wirehouse breakaway market seen thawing)

Although the bank itself is well-known, the boutique private-banking arm hasn't been on as many advisers' radar because it joined J.P. Morgan relatively recently, according to Rick Rummage, a career consultant with The Rummage Group.

“I think they were just trying to maintain after the great recession,” he said. “Now they're making sure their deals are competitive and making sure their platform is competitive along with their product offerings because at the end of the day, people have to know they're in the market, and most advisers didn't.”

Recruiters expect that joining the protocol, which provides a level of legal protection to brokers who take certain client information when they change firms, is an important step in making the firm more attractive.

Mr. Rummage said that he had one adviser who decided not to go to J.P. Morgan Securities because he had a competitive offer from a firm that had signed on to the protocol.

“If you have protocol firms you can go to, and still get a nice upfront check and be in a better situation, why take the risk of having to deal with any legal disputes?” he asked.

Firms that have signed on to the protocol — there are about 1,100 — can still sue advisers for taking client information if they move to a non-protocol firm.

(Related: Morgan Stanley, Merrill Lynch in broker-recruiting truce)

“The people that go into the protocol are firms that feel that they have more to gain from recruiting than to lose from attrition,” said Mindy Diamond, president of Diamond Consultants, who placed an adviser at J.P. Morgan Securities since the firm signed on to the protocol.

The benefit of the protocol will only apply to J.P. Morgan Securities brokers and not the firm's bank channel advisers, according to the list of members.

The firm hasn't disclosed specific recruiting targets.

J.P. Morgan Securities' business model is to keep a smaller-size force that focuses on ultrawealthy clients with $10 million or more in investible assets.

They generally focus on established brokers who already have more than $500,000 in revenue, recruiters said.

When the firm bought Bear Stearns, the unit had about 550 brokers.

The firm's current tally is much smaller than wirehouse competitors, but in line with numbers at other private banks such as Credit Suisse Group AG, which has about 350 brokers.

Recruiters were uncertain whether the move was designed to increase head count at J.P. Morgan Securities or replace advisers who moved to other firms.

“They still want it to be a boutique, but they're committed to aggressive [recruiting],” Ms. Diamond said.

Mr. Rummage said he sees a real focus on growth but doesn't know a specific target.

“They definitely want to grow,” he said. “A lot of firms say that they don't want to go above a certain number until they reach the number.”

The firm declined to make J.P. Morgan Securities officials available for comment.

Spokeswoman Emily Sackett said that the firm regularly evaluates its recruiting process and that joining the protocol was another step to make it a more seamless and attractive program.

Several recruiters, who spoke on the condition that they not be identified, voiced concern that it had been difficult at times to entice brokers to move to J.P. Morgan Securities, given some of the negative press that its parent company had faced in the past year, including a $2 billion settlement over claims that the bank ignored signs of fraud surrounding Bernard Madoff.

“There's no question that the press around the JPMorgan bank has an impact,” Ms. Diamond said. “If you work for J.P. Morgan Securities or the private bank, your business card still reads JPMorgan.”

J.P. Morgan Securities lost at least two large teams last year, according to moves tracked by InvestmentNews' Advisers on the Move database.

A $1.5 billion team of Joseph Carmody, Mehmet Kirdar, Michael O'Hara and Scott Siegel left to go to Morgan Stanley in August.

Mr. Siegel declined to comment on the move because he didn't have permission from his firm to speak publicly.

J.P. Morgan Securities lost a team with $1.2 billion in assets to UBS Wealth Management in March 2013, according to the database.

Ms. Diamond, however, noted that many firms have suffered similar ups and downs in the press in recent years and that the problems for JPMorgan are moving “out of sight and out of mind.”

J.P. Morgan Securities' decision to sign on to the protocol could make the landscape for recruiting among smaller private banks more competitive, she said.

Some firms, such as Deutsche Bank AG and U.S. Trust, the private bank owned by Bank of America Corp., could feel pressured to join.

“There are fewer and fewer non-protocol firms,” Ms. Diamond said. “It's a real issue because there are advisers who are precluded from going where they necessarily believe is the best place to grow their business.”

(An earlier version of this article misstated when Rich Schwarzkopf's firm was hired by J.P. Morgan Securities. It was in January, not February.)

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