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May 05, 2023 at 05:05 PM
There seem to be more questions than answers when it comes to how the recently acquired assets of First Republic will fit into JPMorgan’s wealth management operations, according to several industry experts.
JPMorgan still “has many decisions to make about how to integrate First Republic’s [private] wealth management business,” Danny Sarch, president of Leitner Sarch Consultants, told ThinkAdvisor earlier this week.
According to the bank, First Republic’s financial advisors — who numbered 229 as of May 1 — are set to join J.P. Morgan Advisors, which is part of JPMorgan’s Consumer & Community Banking (or CCB) unit.
“Within J.P. Morgan Wealth Management, clients can invest with an advisor in an office (J.P. Morgan Advisors) or in a branch (branch-based advisors). They can also work with an advisor remotely via video (J.P. Morgan Personal Advisors). Lastly, they can invest with us digitally (J.P. Morgan Online Investing),” a spokesperson explained. J.P. Morgan also has a Private Bank, which is part of JPMorgan Asset and Wealth Management.
Another issue concerns First Republic advisors’ relationship with Pershing for clearing services. “At some point, presumably, they would be required to change to the JPM broker-dealer… [but] when?” Sarch asks.
Also, “will First Republic advisors be given retention bonuses as an inducement to stay?” he asks. “These are the biggest decisions.”
Compensation consultant Andrew Tasnady, managing partner of Tasnady Associates, agrees.
“If merged, the compensation design will be a key decision. JPMorgan can put the incoming advisors on the JPMorgan compensation plan, allow them to keep their current plan, or decide to take the opportunity to move to some type of merged plan for all the combined advisors.”
This would give the combined group the chance to create a hybrid arrangement, as Wells Fargo did “with its 2008 acquisition of Wachovia/AG Edwards,” Tasnady said. “Another option would be to consider moving both [groups] to a new compensation plan.”
How these compensation decisions are resolved, of course, will depend on several factors and the business strategies going forward. Overall, JPMorgan’s deal “should certainly help the average … advisor on the high end, from what I understand,” he explained.
Advisors In Flux
Another important issue is how many First Republic advisors will actually end up at JPMorgan, according to Timothy Welsh, head of Nexus Strategy. “I don’t think this [deal] has much of an impact on JPMorgan’s wealth business,” Welsh told ThinkAdvisor by email. “Rather, the big impact will be on the advisors currently at First Republic.”
In Welsh’s mind, the key questions are: “Will JPMorgan roll out the red carpet, signing bonuses, etc., to encourage them to come along? Otherwise, we may see even more [advisor] departures.”
