A few bits of news coming out of JPMorgan reveal quite a bit about the king of private banking's shifting approach to high-net-worth families and institutional investors alike.
First, JPM is increasingly bearish on the mass-market and even mass-affluent retail banking business. It takes $100,000 in assets to make the typical customer even remotely profitable, they say.
This indicates that, unlike other investment firms married to retail banks, they are not terribly interested in cross-selling mutual funds to people with less-than-spectacular checking account balances.
(Citi, Wells Fargo, and Bank of America, take note!)
Laying out just how unprofitable the mass market can be may drive a stake in the heart of speculation -- from me and others -- that these smaller investors are a vibrant untapped opportunity for nimble advisors to conquer.
If it requires a load of crippling and now illegal fees to get JPM to even consider these accounts worthwhile, then we're not looking at a really sustainable business here.
Of course, part of the problem is that banks like this are not exactly nimble players.
JPM consumer CEO Todd Maclin says "branches are not all that expensive relative to ... all the other expenses we have in running this place, given our scale."
For an independent advisor or even a small bank, the office is a major cost center. If JPM is so top-heavy with headquarters, then it's no wonder they feel like they have to court only the biggest fish out there.
According to Maclin, the Chase Manhattan retail branches are actually a form of "loss leaders" that exist primarily to lure high-net-worth clients into the private bank unit -- and tie up real estate that competitors like Citi and BofA could use against him.
We also see this top-heavy strategy going on in JPM's institutional services unit, where retirement plan sales have just been reallocated from a market-to-market split to one that matches sales staff to individual plan advisors.
Given the concentration of assets among plan advisors, this shifts JPM resources to favor the big aggregate accounts.
Once again, they're courting the biggest fish in their pond. History will decide whether overfishing becomes a problem.