Barry Sommers, head of
The move marks a heightened effort to position bank brokerage as a sophisticated planning service for wealthier clients, analysts say. In a release at the time of the announcement, Charlie Scharf, head of retail financial services at the bank and Sommers’ boss, conceded that “we can do far more for the affluent clients who already like doing business with Chase,” at branches and via ATMs.
Affluent clients, those with $500,000 or more in investable assets, make up just 8% of the bank’s entire customer base - yet account for two-thirds of all deposits and investments.
Chase reckons that it has, one way or another, 5% of its wealthy clients’ wallet share. But the potential is much higher should Sommers be successful. Scharf says that investment services had the potential to double its pretax profits to $1 billion annually.
Sophie Schmidt, senior analyst at
One challenge, Schmidt says, it to make sure Chase’s branches are up to the task of hosting high-end investment meetings with wealthy clients. Currently, some 70% of investment client meetings at Chase take place in branches, she says, and 30% occur at clients’ offices.
Whether or not Chase is a little late to the party is another question. “It’s in effect a ‘me too’ strategy on their part,” says a consultant in New York who asked not to be identified. “I’m sure they feel they lack that segment and this is an attempt to get a toehold in asset management through their branch network going forward.”
The consultant also mused that while Chase’s bank brokerage division was probably underperforming and could use a little help from a wirehouse-trained leader, Wall Street veterans can have a hard time embracing corporate strategy when it appears to compromise brokerage performance.
However, Scott Stathis, managing director and COO at
Stathis, too, notes that Sommers faces a significant challenge accomplishing the lofty goal of doubling pretax profits. “He’s certainly got his work cut out for him because everyone else is doing the same thing [targeting affluent individuals], so it’s interesting what he’s going to do differently. It’s a tough nut to crack.”
However, Stathis adds that just because Chase is lagging its major competitors in aggressively targeting wealthy customers, “that’s no reason not to do it. Promoting [Sommers] sends a clear message that’s what they’re focusing on.”
After all, adds Paul Werlin, president of
The real question, one that it’s too soon to answer, is how: “There are a lot of changes that need to take place to transition from transactions to deeper client relationships,” Schmidt says. “It’s a pretty big undertaking that’ll keep them busy for a few years.”