JPMorgan’s internal feud over wealthy clients

This is an audio transcript of the Behind the Money podcast episode: ‘JPMorgan’s internal feud over wealthy clients’

Michela Tindera
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Take a second and think about how you keep track of your money today. Maybe you have your bank’s mobile app on your phone or use a stock trading app like Robinhood. Or maybe once a year, an accountant helps you out with your taxes. But the FT’s US banking editor Josh Franklin says that when people are really wealthy, you know, like really wealthy, things are different.

Joshua Franklin
They have more needs that need to be met, more money that needs to be managed, things like putting their money into asset management funds or helping them with their tax matters or, you know, just doing regular stock trading, inheritance planning, trust and estate planning, things like that.

Michela Tindera
Now, this includes people like Alex Rodriguez or, you know, A-Rod. The former all-star baseball player earned an estimated $400mn over the course of his decades-long career in the MLB. And since he retired in 2016, he’s continued to earn a lot.

Joshua Franklin
He has a Spac, a special purpose acquisition company. He’s trying to become a bit of a private equity investor. So I think he has ambitions for himself in terms of what he can accomplish.

Michela Tindera
And that’s all to say that Alex Rodriguez, retired baseball star, investor, entrepreneur, is a very attractive potential client for banks who regularly work with wealthy people like himself. In fact, the allure of A-Rod’s wealth has led to infighting at one of the world’s biggest banks, JPMorgan.

Joshua Franklin
It’s a battle between two separate businesses at JPMorgan over who gets to manage the money for certain wealthy and famous clients. And at the centre of that is this financial adviser named Gwen Campbell. And she’s accused her colleagues of trying to go after her clients, but with Alex Rodriguez, the main target.

Michela Tindera
Now this bitter conflict has included allegations of a broken contract, a restraining order and arbitration proceedings. And it’s recently spilled out into the open, showcasing the cut-throat competition for clients among divisions at a major bank.

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I’m Michela Tindera from the Financial Times. On today’s episode of Behind the Money: how acquisitions can lead to internal divisions in the banking industry.

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Josh, welcome back to Behind the Money. Thanks so much for being here.

Joshua Franklin
Thanks very much.

Michela Tindera
OK, Josh, let’s start with the basics here. We’re talking about a conflict happening at one of the biggest banks in the world, JPMorgan Chase. And this conflict involves two of JPMorgan’s businesses that have very similar names. So what are they and how are they different?

Joshua Franklin
Both businesses are involved in offering wealth management services to high-net-worth and ultra-high-net-worth clients. Let’s start with the bigger one.

Michela Tindera
OK. And that’s called JPMorgan private bank.

Joshua Franklin
And that has an army of about 27 hundred private bankers who help manage the money for wealthy clients. Whoever the client is, they have a relationship with the private bank as a whole. You have your main banker, but you’ll be dealing with many different people across the private bank. So it can be something like you have one person at JPMorgan Private Bank who’s helping you with your stock market portfolio, and another who’s more responsible for your tax and estate planning and things like that.

Michela Tindera
OK, sure. And what about the other one?

Joshua Franklin
The JPMorgan Advisors, they have about 450 financial advisers, of which Gwen Campbell is one. And they’re really the main person that you’re dealing with. You’re not so much a client of JPMorgan as you are a client of your financial adviser. They are doing, you know, upwards of 90 per cent of the face to face with the client.

Michela Tindera
OK. To reiterate, you have JPMorgan Private Bank, which is a division where one client works with a number of different people across JPMorgan. And then you have JPMorgan Advisors where the client really only interacts with their one wealth adviser. So do these two different units ever interact with each other?

Joshua Franklin
So in theory, they are all colleagues. They all work for JPMorgan. But the relationship is very, very complicated. And it’s been complicated for a long time now, because you’ve essentially got two different business models and two different businesses at the bank doing the same thing. And at times they’re pitching for the same clients and often coming up against each other, trying to, trying to win that business. And it’s not a harmonious relationship all the time.

Michela Tindera
So why is the bank organised like this?

Joshua Franklin
That is a very good question. And the root reason why is that it’s a result of the way the modern-day JPMorgan Chase has been built. It’s a culmination of several different mergers over many decades. And the JPMorgan Advisors business, that’s really the old Bear Stearns financial advisory business that JPMorgan acquired back in 2008 during the financial crisis.

Michela Tindera
And then remind us, what happened with Bear Stearns?

Joshua Franklin
So Bear Stearns was an investment bank and a Wall Street broker that was one of the early dominoes to fall during the 2008 financial crisis. And it ended up being acquired by JPMorgan in a deal that was orchestrated by the US government to bail out Bear Stearns, essentially. So it wasn’t exactly a longtime-planned acquisition from JPMorgan. It’s a bit of a shotgun acquisition, a shotgun marriage for JPMorgan and Bear Stearns. And 14 years on since JPMorgan bought Bear Stearns, they’re still having teething problems with integrating this business. So that’s why you have this internal competition in the way that you do and that JPMorgan has this legacy big private bank and then this newer, you know, adviser business that they acquired through the Bear Stearns acquisition. And they’re running up against each other.

Michela Tindera
OK. And bringing us up more to the present day, these two businesses at JPMorgan are now stuck in this dispute. So tell us more about Gwen Campbell. Who is she?

Joshua Franklin
Yes, she is a longtime financial adviser, featured on many, you know, top 100 financial adviser lists from a number of publications. She has also worked at some of the biggest banks in the world. She worked at Goldman Sachs, UBS and Merrill Lynch before she ended up at JPMorgan and really is well known for, you know, advocating for her client getting the best deal that they can from the banks that she’s working for.

Michela Tindera
OK. And in 2020, she left her job at Bank of America Merrill Lynch and came over to work at JPMorgan in this wealth advisers business.

Joshua Franklin
So this was a really prized hire. And the reason why, a big reason why they wanted to hire her was because of the clients that she had. Alex Rodriguez is one of her most prominent clients, but she also had a number of other wealthy clients. And her overall book of business that she ended up bringing over to JPMorgan when she moved from Merrill Lynch was about $1.4bn in assets and loans.

Michela Tindera
Well, that all sounds swell. What does Gwen Campbell allege went wrong?

Joshua Franklin
So, the seeds to this drama were laid even before Gwen Campbell ended up starting in October of 2020. She’d already had reservations and worries about JPMorgan’s private bank, maybe, you know, trying to work with her clients in a way that she wouldn’t welcome. And so she actually raised those concerns to JPMorgan before she was hired and had a side letter to her employment contract, basically stating that the approach to dealing with her clients that she also shared with the private bank would be to have a kind of status quo arrangement where the dynamics wouldn’t change. And then shortly after she joined, she found that that agreement that she’d had in place wasn’t being honoured. And she’s argued that the private bank has tried to solicit her clients for business.

Michela Tindera
So essentially what she’s saying here is that the bank didn’t follow what was agreed upon in this side letter that was part of her employment contract. So what does she allege the JPMorgan Private Bank has done that’s breached her contract?

Joshua Franklin
So she’s alleged that the bank, the private bank has sought to undermine her in front of her clients, badmouthed her behind her back and also offered loans to her clients in a bid to take more of the, more of their assets from Gwen Campbell at JPMorgan Advisors to the private bank. And in all of this, Alex Rodriguez has really emerged as the main target of the private bank in Gwen Campbell’s telling of this. He seems to be the client that JPMorgan’s private bank has most targeted and gone after.

Michela Tindera
So we should add in here that, according to Josh’s reporting, representatives for Alex Rodriguez did not respond to requests for comment about these events. OK. And what’s Gwen Campbell been doing about all of this?

Joshua Franklin
So it’s, this kind of spilled out into the public in December of last year. So almost 12 months ago when Gwen Campbell took the first of what’s now been several actions against JPMorgan. So she actually filed a, for a restraining order in California court against JPMorgan, asking a judge to put in place the restraining order so that the bank would not interact with any of her clients. This request was ultimately rejected by the California court. But through that, there was court filings that really did outline a lot of Gwen Campbell’s complaints and grievances.

Michela Tindera
OK. And then what’s happening now with all this?

Joshua Franklin
The main one that’s still ongoing is the arbitration proceedings, proceedings seeking financial damages for breach of contract by JPMorgan, which will be used to decide whether or not JPMorgan needs to pay financial damages to Gwen Campbell for breach of contract. And the contract that Gwen Campbell is claiming the bank breached is this agreement that she had when she joined JPMorgan that the bank would not try to change the relationship that she already had with her clients. And all the while, she’s still a JPMorgan employee working for the bank in San Francisco.

Michela Tindera
Wow. So we should probably point out that something sort of similar happened at JPMorgan just earlier this year. Can you tell us what happened there?

Joshua Franklin
There was another dispute that didn’t involve Gwen Campbell, about which part of the bank — whether or not JPMorgan Private Bank or JPMorgan Advisors — should manage money for a client who had recently inherited a very significant fortune, hundreds of millions of dollars from a relative. And there was, again, another turf war between the two sides. And I was told it got pretty ugly. And in the end, Jamie Dimon, the CEO of JPMorgan Chase, ended up intervening personally and said to both sides, “look, we don’t have the market share for these kinds of turf wars. Figure it out”. And in the end, in that case, it was left up to the client to decide which part of the bank they wanted to work with.

Michela Tindera
So then why isn’t Jamie Dimon intervening here to resolve this issue?

Joshua Franklin
It’s an excellent question. I can really only speculate, but in this case, I would suspect what’s complicating matters is the ongoing litigation and arbitration proceedings in Gwen Campbell’s case, which make things more complicated for someone like Jamie Dimon to get involved.

Michela Tindera
Is this having any sort of impact on JPMorgan’s business, financially speaking?

Joshua Franklin
What’s interesting about both of these business — JPMorgan Private Bank and JPMorgan Advisors — they’re both so-called growth initiatives for JPMorgan. Jamie Dimon and JPMorgan executives publicly have talked a lot about how much they wanna grow in these areas. So JPMorgan Advisors, they have about 450 financial advisers right now. They’ve talked publicly about more than doubling that in the next few years. The private bank as well is trying to hire many private bankers to attract new assets, expand in other parts of the United States. So they’re both growth areas. So it . . . but it’s not a great advert for the dynamic of the business when you’ve got this hanging over.

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Michela Tindera
OK. Well, we should say here that a JPMorgan spokeswoman provided a statement to the FT that said that the bank has been putting significant focus and investments into JPMorgan Advisors — that’s Gwen Campbell’s part of the firm. The statement went on to say that they’ve put in place rules that, quote, “allow us to bring clients the expertise they need while ensuring that they and our financial professionals are treated fairly”, end quote.

So, Josh, what do you think this sort of conflict says about the banking industry? I mean, you know, as we discussed, the history of this JPMorgan Advisors is that it was an acquisition from Bear Stearns after the financial crisis.

Joshua Franklin
It shows how difficult it is to manage these enormous institutions. JPMorgan is, you know, the biggest US bank by assets. So the kind of toughest case. But it really does show since the 2008 financial crisis, the biggest US banks have only gotten bigger in terms of assets and in terms of operations as they’ve gone into more and more activities. So they’re just very, very hard to manage.

Michela Tindera
And why is it so hard to do?

Joshua Franklin
With almost any acquisition, one of the biggest hurdles to clear is whether or not there’s a cultural fit between the two businesses. So there’s such strong cultural attachment to these places, to the brands that they come from. So even at Bank of America, there was such a strong attachment from, to the Merrill Lynch brand, to the people who had kind of grown up in that business. And that’s been a kind of rocky thing, as, as Bank of America has kind of, you know, pushed to one side the Merrill Lynch branch to focus more on Bank of America.

Michela Tindera
And what’s next for Gwen Campbell and her fight?

Joshua Franklin
We’ll see whether or not we make it all the way to arbitration proceedings in July of next year. Or if the bank wants to just pay some money to try to make this go away if that’s possible. As we reported, Gwen Campbell did write a letter to JPMorgan’s board of directors in April, which we saw a copy of. And she said to the board that continued litigation was not her preference and that she wanted to have what she saw as the terms of her employment contract honoured. But she said that if that was not possible, there was the option to part ways and to resolve the matter in a way that, for her money, reflected the value of the billion-dollar book that she brought with her to JPMorgan when she joined.

Michela Tindera
Well, Josh, thank you so much for being on the show again.

Joshua Franklin
Ah no, it was absolute pleasure. Thanks very much for having me on.

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Michela Tindera
Behind the Money is hosted by me, Michela Tindera. Saffeya Ahmed is our producer. This episode was edited by John Buckley. Topher Forhecz is our executive producer, sound design and mixing by Sam Giovinco. Cheryl Brumley is the global head of audio. Thanks for listening. See you next week.