Some current and former brokers at JP Morgan have said they were encouraged to push the bank’s own products in favor of external products, the New York Times reported.
The comments, including some made by Geoffrey Tomes, who left JP Morgan last year and became an advisor at Urso Investment Management, relate to products like the Chase Strategic Portfolio. Created in 2008, this is a program sold through Chase US retail branches which gives investors access to 26 JP Morgan Asset Management investment portfolios.
“Within the JP Morgan Private Bank, we use both JP Morgan and third-party managers in our portfolios. Our due diligence team uses a rigorous process to select the best managers for our client portfolios,” a spokesperson for the bank told Family Wealth Report.
“When JP Morgan has best-in-class products, we use JP Morgan managers, but if JP Morgan does not have the right products for our clients, we use third-party managers or we will customize a solution. A significant portion of client portfolios is invested with third-party managers.”
It does not break out the proportions of third party and proprietary fund holdings for clients at the private bank, but the spokesperson said advisors receive “no incentive – financial or otherwise – for giving preference to Chase Strategic Portfolios or JP Morgan products.”
According to the report, the bank itself earns an annual fee of up to 1.6 per cent of assets in the Chase Strategic Portfolio, as well as a fee on the underlying JP Morgan funds.
The concept of “open architecture” – which is an attempt to decouple product manufacturing from advice – has been one of the biggest debates to dominate the industry in recent years.