JPMorgan Chase began wooing First Republic's flighty wealth advisors on Monday immediately after it
America's largest bank promised the advisors, whom it is
JPMorgan Chase Chairman and CEO Jamie Dimon said in an investor call Monday that he would hold a call later in the day with First Republic wealth advisors to pitch them on staying put. He added that the bank had also flown out top executives on planes this morning at 6 and 7 a.m., including the CEO of J.P. Morgan Wealth Management Kristin Lemkau, to hold "town halls" and reassure First Republic staff of their place in the new organization.
"If you are an advisor and you're listening to me, we have the best research, best equity, best debt, best munis," Dimon said. "We have a concierge service. We take care of people. We've got excellent compensation plans. We're very steady. We got unbelievable banking products. We have unbelievable products for your business banking clients, your middle market clients, your corporate clients."
Calling First Republic's advisors "very high quality," Dimon added that, "every deal I've ever been in, everyone else is trying to hire these people at the same time. On the other hand, this is a great home for them."
Blue-chip reputation
First Republic had a famed brand, culture and bespoke resources that helped it lure away many advisors from the wirehouse and megabank world, on promises of greater autonomy and more resources to help them refine their services to the ultrawealthy.
Now its remaining advisors are part, at least as of now, of a giant Wall Street institution — in a sense returning back to that sphere.
Several industry recruiters and consultants who spoke with Financial Planning said that the initial reaction of many First Republic advisors was likely a collective sigh of relief — not unlike how Credit Suisse advisors were likely responding at first to their employer's
But that picture could change several months down the road. More First Republic advisors could leave for competitors as the reality of their changed situation sets in. Over the past few weeks, over 50 advisors have already departed, according to
Cementing initial relief
Some advisors may bite on Dimon's pitch, for now.
"These high end teams will welcome the opportunity to be part of a rock solid firm like JP Morgan. I'm sure they are very relieved," Mark Elzweig, an industry recruiter, said in an email.
"The drama of these past few weeks was no doubt draining to both advisors, and clients alike. J.P. Morgan Advisors is a high end boutique as well so it's a good cultural fit," he said.
Jason Diamond, another industry recruiter, said some advisors might seek to move because they had already found a better option elsewhere, but he thought most would be "thrilled that they finally have some clarity, and a resolution here. And not just any resolution, it's one of the best, if not the single best brand names on the street."
Diamond said he perceived that overall it seemed the two firms "both had quality brands, strong platforms, good technology, good investment platforms," although First Republic operated "more flatter and nimble" than most Wall Street firms. "They had great direct communication and lines of dialogue with senior leadership."
Even more importantly, clients' faith in the business is likely restored. "Their clients can wake up and breathe a sigh of relief, knowing that their assets are going to be safe," Diamond said.
Although the collapsed bank's wealth clients' assets were already safe in custody with Pershing, the negative perception of seeing their advisors' bank in the news day after day has taken a toll on customer confidence, Diamond said, although he declined to say if he was working with any First Republic advisors as clients.
"I think certainly you are going to see this move, this transaction between First Republic and JP Morgan stem the tide that we've seen of attrition."
Brian Hamburger, a lawyer at Hamburger Law Firm and the founder, president and CEO of industry consulting firm MarketCounsel, who has spoken daily with First Republic advisors over the past few weeks, said in an interview that he had heard from a handful today who had all indeed expressed initial relief.
"They thought that okay, well, maybe things will indeed quiet down," Hamburger said.
Clouds brewing again?
That might not last long, Hamburger said, as "the odds on the outcome here is that JP Morgan won't waste all that much time in withdrawing from the broker protocol."
That means if brokers still want to leave First Republic with the protection of being in protocol — an industry-wide agreement where participating members commit to allowing their departing advisors to port out basic client contact information — they may need to stay alert in coming weeks, before that window potentially closes.
Recruiter Phil Waxelbaum, who personally knows around 15 of the advisors who left First Republic in recent weeks, said in an interview that he expected massive continued attrition after an initial quiet period — similar to what happened with Bear Stearns, which lost huge numbers of advisors after JPMorgan Chase
"I think Jamie and his team has every intention of treating them well," Waxelbaum said of First Republic advisors. "JPMorgan has to rapidly build a resource to support them, and you can't move that fast."
Waxelbaum added that he had moved advisors out of J.P. Morgan Advisors in the past because they complained of problems with the platform, like taking two weeks just to open a client account. "JP Morgan's technology and platform are one of the critical reasons advisors leave, because it doesn't attract anybody."
However, for cost reasons, even though First Republic's tech platform is reputed to be superior, it will likely be scrapped and merged into the one that all the
"The kid that you adopted from somewhere … shows up with a chest full of really bright shiny toys. And you tell them, hey, those have got to go back to the orphanage, you get to play with this hand-me-down crap that our existing kid already has," Waxelbaum said — adding that the First Republic advisors could also experience a different culture, under Lemkau's direction, that clashes more with their sophisticated sensibilities.
With all that happening, Waxelbaum predicts massive attrition by the end of the year from both the former First Republic advisors and existing advisors at J.P. Morgan Advisors who may experience a sudden competition for resources with the newer folks in the office as executives rush to please and retain them.
JPMorgan Chase's Chief Financial Officer Jeremy Barnum said on the Monday call that, "not surprisingly, we've had a number of advisor teams from First Republic reach out on an unsolicited basis over the past several weeks who are interested in joining JPMorgan, which, as a starting point, we think is encouraging from a retention perspective. And then, furthermore, there are still nearly 150 advisors with the firm."
As of Monday, the First Republic website
Dimon acknowledged that some attrition was expected but said he expected to maintain the
"I think it's going to be wait and see for the first six to eight weeks, and then we'll get a better sense of what's going to happen. Some of those people that are close to going, I suspect they will go. Others who are on the fence, I think will stay," industry recruiter Michael King said.
First Republic financial advisor Daniel Selcow quit the bank on Monday after
