Nearly one year ago, on Jan. 14, 2004, JPMorgan Chase and Bank One announced plans to merge the two banking companies. Although the merger was officially finalized on July 1, the two entities are still in the process of melding operations, including both mutual fund families, and transitioning Bank One's private client services division catering to wealthy individuals into the JPMorgan fold. Up until the merger, JPMorgan only catered to the mega-wealthy market through its private banking unit.
On the leadership team of JPMorgan Private Client Services sits Jeff Cusack, formerly of Bank One, now the executive vice president and head of sales and marketing for the unit. Cusack is in charge of financial planning, education and training, business development, and product management, including mutual funds, separately managed accounts and alternative investments. The latter isn't a fancy name for hedge fund investments. Instead, the alternative investments banner has been applied to several "hard" assets, including oil and gas, real estate, farm and ranch investments such as timber land, and even alligator farms -- all of which grew out of the trust business of Bank One.
Cusack's background includes building and managing separate account programs at Shearson Lehman, Smith Barney and Charles Schwab before joining Bank One to lead its private client services sales and marketing group 16 months ago.
Cusack recently talked with Money Management Executive Editor-at-Large Lori Pizzani about his responsibilities and how he believes JPMorgan's competitive advantage will allow the firm to become the future elite provider of broad-based wealth management services for high-net-worth clients. The following is an edited version of their conversation.
MME: What is the most important lesson you've learned since your transition to the banking side of wealth management?
Cusack: It really wasn't a lesson, but more of an "aha!" In the broker/dealer world, we would spend so much time prospecting and trying to get a "close" on clients with a lot of money.
But in the banking world, it is all about the relationships that have been initiated by developing long-term loan relationships with clients, such as where we've helped people to start their own business by loaning them money. We can focus on the size and depth of some significant relationships.
MME: While bankers traditionally believe that client relationships start with a loan, what is the best way for a bank to begin an investment relationship with a client?
Cusack: In the banking world, we are good at providing trust services. But even that's not enough. You have to provide the three key elements: trust, banking services and investments.
Lots of banks, including JPMorgan, have room for improvement on the investment side; the investment component helps us deepen our relationships with clients.
MME: When you were first merging the two units, how did Bank One's and JPMorgan's wealth management programs compare?
Cusack: JPMorgan did not offer private client services prior to the merger, so there was no overlap in supporting the $1 million-to-$25 million client segment.
As a result, the potential is quite significant. Now we have some 3,000 people across our JPMorgan Private Client Services group, including 650-700 front-office people in the areas of trusts, investments, financial planning, banking and alternative asset management like farms and ranches.
MME: What about making additional acquisitions to more quickly give more scale to your business?
Cusack: It's nice, but we don't need to do that. We are extremely strong the way that we are. We don't have the need to do it.
MME: Was there ever a concern that clients wouldn't accept a fusion of Bank One and JPMorgan?
Cusack: Our clients are delighted. They love the brand and the access to additional capabilities, such as private placements and alternative investments, and the intellectual capital on the JPMorgan Fleming Asset Management side.
MME: Have you encountered any challenges specific to the separate account side of the unit?
Cusack: I have built very successful separate account businesses in the past. The biggest challenge here is that there is an awful lot of moving parts within the business. We now have more capabilities to bring to our clients, and we are rebranding and building at the same time. For example, we offered our clients 10 third-party separate account managers and have added 20 this year, with four just in the last few weeks.
MME: What are your goals for 2005?
Cusack: I am really excited about this place. I've dealt with investment vehicles that target the high-net-worth marketplace. Although everyone is now chasing the high-net-worth market, they don't have all of the ingredients that we have. You really need strength in all three areas: banking, trusts and investments.
Beyond just having those capabilities, you need real integration among them. Often, companies have silos. A trust area may be great, but often, trust officers report up and out of the unit. The same holds true for banking services and investments.
In 2005, I want to continue the progress we've made in having an integration of the offerings. So we are training the advisers who work directly with clients and building out our capabilities.
MME: What kind of training are you referring to?
Cusack: We started the PCS University. I have hung my hat on education and building our capabilities, but not through cross-selling or promotion, but, rather, through cross-education. I don't believe in training but in education. Education is a culture, not an event.
A banker may not be comfortable discussing beyond his area of expertise and may not be comfortable bringing in, say, an investment person. So to educate the bankers and others, we launched a two-day program in 2003 to teach what's going on in the trust business, the banking business, financial planning 101, investments 101, banking 101 and offer cross-training to all of our people.
We will shortly be hosting our second annual PCS University in Dallas, Chicago and Columbus, Ohio. This way, these folks will know when to recognize an opportunity. You are only as good as the people that you have at the point of sale.
We have found that the high-net-worth segment really would like a single provider of services. But a banker has to know when to bring in a trust expert, etc. It's important to begin with good products and have all the products a client may want, so that you can offer the client a variety of choice. That said, where the differentiation will be is with the service model. I don't necessarily believe products create a competitive advantage.
MME: Where do you see the JPMorgan Private Client Services program five years from now?
Cusack: I believe we have a real chance to be the No. 1 private client services provider. On the banking side, being a leader is understanding the trends in the market. We have found, for example, that business owners share a set of specific financial needs that are distinct.
You know, when I was in the mutual fund world and the brokerage world, we used to say that banks didn't know what they were doing. Brokerage firms have definitely had a good run, but I think the tide has turned. It's not about others just making acquisitions. Lots of our competitors have all of the parts.