In all of these three respects, JPMorgan Private Bank appears to differ
from its competitors. It has set a huge mimimum investment threshold of
$10m. It denies being a product outlet for the JPMorgan Fleming funds
arm, preferring tailored solutions, and there is much evidence to
support this claim. But the key element to its marketing, successful in
the US, but with Europe yet to be convinced, is the family focus.
Rather than investing marketing dollars in products and private banking
services, it is rolling out its Family Wealth Centre concept across
Europe, under the stewardship of New York-based Amy Braden.
The centre is a self-styled “intellectual capital” resource, which can
be tapped by clients and bankers for seminars on complex investment
strategies, succession issues, or to tackle the thornier questions of
family unity and purpose.
“Some wealthy families may want to co-ordinate family members’ banking
needs, and they do this through establishing a family office
themselves,” says Ms Braden, who reports directly to the bank’s chief
of Wealth Solutions, Michael Veuner. “For families which have multiple
assets and substantial liquidity, their own office to oversee
co-ordination of financial services can add real value.”
The multi-family office
Ms Braden is expecting a huge wave of competition from Europe’s private banks, jumping on the family bandwagon.
The expected trend, she believes, is the emergence of the multi-family
office, which private banks across the US and Europe are establishing
in order to service the richest families more economically.
It is not lost on any of these players that more than 30 per cent of
S&P500 companies are family controlled and Europe’s major economies
are also dominated by family businesses.
Again she injects a note of caution: “Many operations can be called a
family office, but they have little in common. Their areas of expertise
and how they interact with clients can be different. With the
multi-family office, clients are expecting to have someone on the other
side of the desk who will take care of all their affairs, but their
perception may be different to the reality. What they are getting is
never quite what they expected.”
Pro-active dealings
This is why Ms Braden makes the rules for her club, so there is no
ambiguity. Rather than acting as a traditional family office, her team
supports bankers and wealth advisers in their dealings with clients.
The operation concentrates on those families who choose to manage their
wealth together.
“But they need to do some pro-active things in order to achieve this,”
says Ms Braden, who advises family members on how to work well with
each other. “A family needs to establish a common goal or mission
statement. Most families we have seen have been so successful long-term
because they have a strong sense of what the family is really about.”
Preventing conflict and accommodating different objectives is clearly
crucial. “Family members can articulate similar stories,” says Ms
Braden. “But in some cases, one member says ‘we have a tremendous
legacy, and if we don’t do something about it, all us family members
can end up going in different directions.’ But this can backfire, where
one member takes a high-profile leadership role and the rest may be
unhappy.”
There are several ways in which wealthy families tap into the centre.
Many will read Ms Braden’s white paper, in which she has identified the
attributes of the most successful families she has worked with during
her 30-year career in private banking and corporate finance in New
York, Hong Kong and Tokyo. (See box below.)
Together with her brothers, Ms Braden remains a shareholder of a family
enterprise started in post-war Tokyo by her American father and
Japanese mother, and which employed her uncles. When her father retired
as CEO 20 years ago, the business hit a critical juncture. The issues
were eventually resolved, though it was a hard slog, she recalls. “We
could have emerged much stronger,” believes Ms Braden. “I didn’t know
about these principles in those days and neither did my dad. That’s why
it’s such a passion for me to gain broader exposure for them.”
As well as succession issues, it is important not to label independent
thinkers as black sheep, but to channel their creativity positively.
“The main issue that really concerns family members is the purpose of
the wealth and their role in connection with this wealth,” says Ms
Braden.
“Making money may be the passion of a first-generation entrepreneur,
but his successors may not have a talent for business. They may prefer
art, music or academic pursuits. There are lots of ways in which people
can be successful, but their success is not recognised and this can
lead to a real strain within the family. Where a family can recognise a
member’s achievements, they can use them to their advantage.”
For instance, art collected by a family member should be considered an
asset and can be hired out to a gallery. “Normally, collectors are seen
as non-productive and people ask: ‘How do you think you are going to
make a living?’.”
Exclusive club
Family members – and Ms Braden stresses that this is an exclusive
club – may also be invited by their bankers to personal investment
briefings, organised by the Family Wealth Centre on strategies such as
private equity or hedge funds, hosted by JPMorgan’s investment experts.
Although cynics may see this as an opportunity to pump JPMorgan house
products to a captive audience, Ms Braden is clearly an advocate of the
open architecture approach.
“We feel very strongly that we have a tremendous lead in world products
and services, but where these need to be supplemented with outside
services, we can bring them in on the investment side,” says Ms Braden.
The bank’s portfolio managers currently run $138bn, out of total client
assets of $266bn, on a discretionary basis.
It is this transition from fostering family values to adding value
which may prove to be the bank’s greatest challenge, says private
banking consultant Sebastian Dovey of Scorpio Partnership, which
advises institutions looking for a profitable and distinctive strategy.
“JPMorgan has done something blindingly obvious and has stolen a march
on the rest of the industry competing for international ultra wealth
market share,” says Mr Dovey. “They have shown that their investment is
in the Family Wealth Centre rather than investment marketing material.
They are visibly targeting family office territory and are putting
themselves in line with the needs of their clients, but it’s still too
early to tell whether this will lead to a client-centric rather than
product-centric focus in their underlying approach to wealth
management. Now JPMorgan will have to softly pull the debate away from
family business and into wealth issues.”
Building on genetic links
The eight proactive practices of successful families:
- Articulate a clear and powerful vision
- Cultivate entrepreneurial strengths
- Plan strategically to mitigate risks and capture opportunity
- Build unifying structures to connect family, assets and environment
- Clarify roles and responsibilities
- Communicate, communicate, communicate
- Help members develop competencies
- Provide independence, including exit options
