Morgan lures brokers with ‘safe-cracking’ tools

J.P. Morgan Chase & Co. of New York has been pushing open the doors of a handful of the top wirehouses and independent advisers, and dangling a package of tools to help brokers grab wealthy investors.

The goal is to put a top-shelf wealth management program, from funds to managed accounts to tax-aware investing, into the hands of representatives, including those at wirehouses such as New York-based Salomon Smith Barney Inc. and Prudential Securities Inc.

Also targeted are independent advisers with Lockwood Financial Group of Malvern, Pa., and Charles Schwab & Co. Inc. in San Francisco.

drawing on a pool

Executives with JPMorgan Fleming Asset Management are leading the push for the new program.

They’ve built a team that draws on talent from across the bank and are expanding their sales force at a time when some investment houses are cutting back (InvestmentNews, May 20).

And they say that their product, in a market filled with wealth management kits, stands out.

Outside observers view the new program from different perspectives. The first regards the heft and substance of J.P. Morgan’s name and history. “The firm is drawing on its internal strength. That’s wealth management,” says Matt McGinness, a senior analyst with Cerulli Associates Inc., the Boston consultant. “This kind of offer is right on target.”

The company’s name recognition is key to brokers and advisers selling to clients, says Chris Tomacek, managing partner with Lockwood. In fact, Lockwood and J.P. Morgan are teaming up this Thursday in the Atlanta suburbs to hold a meeting for four advisers and their clients, says Mr. Tomacek. Another is scheduled for June in Philadelphia.

The new program focuses on tax-aware investing, It has 11 strategies, including tax efficient, large-cap, growth and value.

But some advisers aren’t so sure about multidiscipline accounts such as Morgan’s.

“This is the investment advisory industry’s way of splitting hairs,” says Robert Isbitts, president and chief investment officer of Emerald Asset Advisors LLC in Weston, Fla. “The potential tax efficiency may be overwhelmed by the complexity” of the program, he says.

Mr. Isbitts’ company is part of the Lockwood network but is not one of the advisory businesses to be represented at the meeting.

He says that the program’s minimum account size, which is typically $250,000, however, is not quite the target for some brokers and advisers who cater to the rich. Brokers with high-net-worth clients typically have higher minimums. “We don’t see the advantage,” he says. “At $250,000, do you need something like this?”

Investors at that level may be more likely to worry about taxes after seeing growth in their portfolios, says Mr. Isbitts.

His firm’s minimum for a new client is $1 million, he says. And the smallest position he takes in a security is $5,000.

J.P. Morgan plans to expand the program to about 20 investment styles, says George C.W. Gatch, president of mutual funds and a managing director with JPMorgan Fleming.

The program has three parts: marketing, consulting and financial planning. Mr. Gatch says that one key selling point is a “transition report” that shows a client’s portfolio designed on a tax-efficient basis.

Such perks as meetings with clients and a quarterly newsletter are not standard and go to select advisers and brokers.

adding talent

Morgan is investing talent in the new program. Susan Hirshman, formerly with the company’s private bank, is a financial planning strategist. She’s even spending time on the phone with brokers who call in with financial planning questions.

Also on call is Stuart Schweitzer, a global investment strategist for the company’s mutual fund group.

Mr. Gatch says that there are 16 regional salespeople pitching the wealth management program strictly to broker-dealers, and the company is looking to hire about five more.

Declining to give specifics about such key details as the growth of assets under management or number of accounts, Mr. Gatch says only that this month will be the best for the eight-month-old program.

Concerning fees, he is just as vague, saying that they are “determined by advisers.” J.P. Morgan, of course, gets a fee for its funds and separate accounts.

Mr. Tomacek of Lockwood, however, states clearly that if the meeting with advisers, clients and J.P. Morgan is a success, there will be more meetings in the fall.