JPMorgan Accused of Double Standard in Broker Recruiting
JPMorgan Chase & Co. appears to have a double standard when it comes to claiming protections under the Protocol for Broker Recruiting, according to a
The company abides by the decade-old , which allows brokers to take limited client-contact data with them when they jump to another protocol-signing firm, when it is doing the hiring but excludes advisors in its private banking business from taking data with them when they leave, according to the article.
While the U.S. banking giant is hardly the only firm to be accused of flirting with hypocrisy when it comes to Protocol enforcement, the story highlights how the blurring of the lines between brokerage and private banking in the wealth management industry is raising challenges for the firms and the brokers that the pact was meant to protect.
J.P. Morgan insists that its membership in the protocol applies only to the legacy Bear Stearns business that it picked up during the financial crisis, meaning it protects only about 450 advisors, according to the article. Advisors who try to leave its larger private banking business, where morale has been slammed by new production and client net worth requirements, have been pursued in court by the bank.
Civil litigation and arbitration battles are now the name of the game at JP Morgan Private Bank, according to the article and our own sources. Indeed, a Financial Industry Regulatory Authority arbitration panel ruled two weeks ago that JP Morgan defamed six private bankers who were overseeing $2.2 billion of client assets before jumping to Morgan Stanley.
The lines of controversy are further blurred by the fact that traditional broker-dealers such as Morgan Stanley are flaunting their banking chops (and encouraging their brokers to solicit deposits from clients and extend loans), while JP Morgan, Citigroup and other traditional private banks are putting new emphasis on their investment chops. Another rapidly changing distinction: Brokers and bankers have traditionally worked under very different compensation and business-building schemes, with the former paid on building their books while the latter spent more time shepherding the trusts and estates of referred bank clients.
“What JPMorgan advisors do versus what JPMorgan private bankers do is the exact same thing in terms of services and attention,” Roger Gershman, an industry recruiter with Consultants Period, said in an interview. “[Bankers] at JPMorgan are forced to go out and prospect for new business all the time like JPMorgan Securities brokers or Merrill Lynch brokers.”
When the former $2.2 billion JP Morgan team went to court in an attempt to defeat the bank’s request to temporarily restrain their move, they argued that like brokers they built most of their client book and had the right to approach those clients to move with them.
Merrill Lynch, meanwhile, has been arguing that brokers have no Protocol rights for customers who they inherited from other brokers or from internal Merrill-provided leads.
In short, according to a lawyer quoted in the Bloomberg article, protocol-signing big firms are attempting to claim so many “carve-outs” that it may be time for a “Protocol 2.0” to be crafted.
That is likely to be too late for JP Morgan advisors, who tell us that the bank has become more restrictive about information they can access about even their own production numbers in a move to restrict their ability to negotiate with other firms.
“Be on the lookout for lots of moves from this place,” a source told us after the Bloomberg piece was published. “Lawyers are getting lots of calls, The firm is so worried that they are not giving “scorecards” (showing production) anymore.”