J.P. Morgan Private Bank Name & Uni#


Morgan’s Private Bank was among the handful of the most successful global private banking businesses and was known for its award-winning service and innovation. Morgan’s Private Bank was among the handful of the most successful global private banking businesses and was known for its award-winning service and innovation.

At its core, the business of private banking was to provide “high-touch,” highly tailored products and services to wealthy individuals and families. The focus of Morgan’s private wealth management effort was on capital preservation, capital growth, liquidity, and the challenges of transferring wealth across generations. It offered a comprehensive suite of services and products, including investment advice, investment management and brokerage across a range of global products and markets.  The market crisis of 2008, had Mary Callahan worried about improving risk management in her business.

Mary Callahan Erdoes (MBA 1993), CEO of JP Morgan Chase Asset Management business was contemplating risk management and the impact of 2008’s financial crisis.  Ms. Erdoes was concerned that risk managers were driven by old-fashioned, backward looking “Check the Box” mentality.  Ms. Erdoes was worried about the unknown risks in her business and wanted risk professionals with more sophisticated skills and the ability to perform “what-if” scenarios to identify hidden risks.

10% of total grade

1. The JP Morgan Private Bank offered a suite of services and products.  Name each the products and services did JP Morgan offer to its wealthy clients?  List all that apply:

1, investment advice

2, investment management

3, brokerage

4,  estate planning and related advice

5, philanthropic assistant

6, loans

10% of total grade

2. Morgan’s Private Bank was one the most successful global private banks and provided “high-touch”, highly tailored products and services to its wealthy individuals and families.  The Private Bank’s main areas of focus included: (List the service model the Private Bank used for its wealthy clients) The order does not matter:

a. capital preservation

b. capital growth

c. liquidity

d. challenges of transferring wealth across generations

10% of total grade

3. Who were the Private Bank’s competitors and describe the difference in service models offered by competitor firms?

Businesses that embedded in larger banks like HSBC, UBS,Credit Suisse; Securities firms including Goldman Sachs and Morgan Stanley; Independent firms, like Bessemer Trust, Northern Trust, Pictet & Cie in Switzerland, and a multitude of small private firms. Some of them offered only single service like  investment management or estate planning, others serviced the full range of client needs.  However, Private Banks offered a comprehensive suite of services and products.

10% of total grade

4. In 2004, Bank One merged with JP Morgan creating more opportunities to serve a larger population of “high networth” clients.  How did the bank merger change how the JP Morgan Private Bank delivered service their two main target clients?    

      The Private Bank served two client majorly:  “ultra-high net worth” clients and “high net worth” clients. In 2004, JP Morgan realized that there are more potential high net worth clients. They decided to shift their traditional highly tailored relationship-intensive service and product set to those products, services and a relationship management model that could be more satisfied clients’ needs, and could be adjusted to dicier a consistent client experience.

10% of total grade

5. JP Morgan had two distinct business models for its wealthy customers. The first catered to “ultra-high net worth” clients (personal assets in excess of – $25 million) and “high net worth” clients (assets between $5 million & $25 million). Many Private Banks had either an “open architecture” or “closed architecture” investment platform:

Describe the “Open Architecture” platform:

Open Architecture means the firm the firm did not have its own investment capability and products, but evaluated those available from a variety of external sources and chose the ones that were best suited to client needs.

Describe the “Closed Architecture” platform:

Firms with “Closed Architecture” attract clients with their its investment capabilities and styles. These firms did not offer externally managed investment products.

Describe the Managed Architecture platform:

Firms with “managed architecture” offered both Morgan Funds and externally managed fund products. Thus clients had access to Morgan’s extensive and widely recognized global investment expertise would be better served by external products. The internally available products could come from dedicated investment teams in the Private Bank or from the institutional or mutual fund areas of Asset Management.

10% of total grade

6. Explain why JP Morgan’s “managed architecture” presented unique risks to the Private Bank (use 150 words or less)

Investment management platform in Private Bank was limited by fiduciary standards standards governing self dealing and conflicts of interest. However, the clients want to make sure their funds directed to an internally managed fund where a firm would likely make more money while there might be better external options available. So Morgan have to make their clients believe that they are making good investments. The Private Bank built up an ongoing dedicated investment evaluating group to make sure their products reached the goals they promised.

10% of total grade

7. The Asset Management division within the Private Bank is where mutual funds, managed accounts and other “packaged products” were handled.  Joseph Regan became CFO of the Asset Management business in 2009 in the middle of the financial crisis.  How did Joseph Regan describe the risk model that evolved in the Asset Management unit?

Regan thought the most important responsibility of their portfolio managers is managing risks. In his opinion, the transparency and awareness of potential risks should definitely be provided, although there are competitors that try to hide the them.

10% of total grade

8. Joseph Regan had 3 goals in mind to strengthen risk management in the Private Bank.  How did Joseph Regan attempt to strengthen controls in the Private Bank? (Briefly describe the 3 goals clearly and only focus on the goals Regan thought were important.)

a, Strengthen the traditional compliance-oriented monitoring that risk management had performed.

b, Govern processes and support for the risk culture that were necessary to protect Morgan’s reputation through its own action

c, Ongoing-review for the operational risks in the Private Bank to keep their clients away from loss.

10% of total grade

9. The Global Access Portfolio was one of the few funds managed within the Private Bank targeted to provide a handful of Latin American clients with the benefits of the Private Bank’s best investment ideas. The fund started as a discretionary funds, meaning the portfolio managers made all investment decisions for their high network clients. Richard Madigan, the Chief Investment Officer ran Global Access from its inception and used four key investment strategies from which the Global Access team could choose that offered client’s superior risk-to-return performance. Explain how the two risk oversight teams operated with Global Access?

The first independent risk oversight team ran by Lencyk. He was in charge of risk management oversight across all the investment activities in the Private Bank and he reported to Regan directly. The functions of Lencyk’s team includes: a, approving the initial new products b, drafting limits for the portfolio managers, c, monitoring trade approvals, product suitability, and investment performance. d, ensuring that the governance processes were sound and compliant with regulatory standards.

The second team developed by Regan aimed on evolving the investment risk management function throughout Asset Management. Zhikharev, a market-oriented risk professional, was assigned as the risk advisor to Regan’s team of portfolio managers. Zhikharev’s team was working on improving overall returns and protecting the portfolios from major downside shocks.

10% of total grade

10. Define in your own words, using facts in the case, what went wrong in Global Access and what lessons did they learn?

Global Access reduced their equities into cash and shifted long-only equity funds and single strategy hedge funds into multi-strategy hedge funds. The tail of hedge funds lead to a vicious circle that investors wanted liquidity and asset prices plummeted. Global Access didn’t realized that the financial situation hit the bottom at the very first time. And also, I think they were not well prepared for the suddenness that beyond the models they were familiar with.I would say  staying dynamic is an important lesson Global Access learned. Besides, a mature firm shouldn’t rely on inadequate risk models and methodology too much.