International man of means

From the Far East to the US, and now responsible for Europe, the Middle East and Africa, Declan Sheehan, an Irishman now living in London, has been there and done it. But with a brief to put JPMorgan on the map for private investment, he has a little way to travel yet, reports Anna Bawden. JPMorgan Private Bank is capitalising on its institutional investment banking background to offer that little bit more to wealthy individuals. For Declan Sheehan, head of the bank in Europe, the Middle East and in Africa (EMEA), the provision of investment banking service to all private clients is one of the key ways in which the company differentiates itself. Clients are offered an impressive range of add-on services that smaller private banks would not be able to provide, but JPMorgan is not alone in providing access to M&A specialists, investment banking research, corporate banking services and fixed income/equity specialists. UBS, Credit Suisse and other major rivals also offer such capacity. Mr Sheehan recognises this, but argues that it is the depth of JPMorgan’s expertise that is different. He points out that other private banks are not global players in fixed income, equities and M&A. He hopes this exploitation of institutional expertise will help boost the bank to become a powerhouse in European private banking. With just $40bn in European private banking assets out of a total $605bn under management globally, it has a long way to go. Strong capability in alternative investments is also an important element of differentiation. “You won’t get access to the best deals if you are only investing $50m, $100m or $200m,” says Mr Sheehan. “We manage $7bn in private equity for private clients. With our funds of private equity funds, we get to see almost every deal.” Mr Sheehan himself has a breadth of experience which, he says, is symptomatic of the bank’s approach to private clients. He began his career with JPMorgan in New York in 1985, before being posted to Hong Kong, Tokyo, Geneva and, most recently, London. His experience in both fixed income and equity trading gives him a different perspective of the industry than some of his rivals, who have often spent their entire careers in private banking. The bank’s policy of utilising investment banking experience comes to the fore in its rivalry with UBS. “UBS is the most consistent in its commitment to the onshore market, but their clients have, on average, SFr700,000 (e480,000), where ours have $10m-plus,” says Mr Sheehan. “We are aiming at two different sectors of the onshore market in Europe.” Direct access JPMorgan also differentiates its personal service, providing its clients with direct access to a bulk of institutional expertise. In a departure from the status quo, the client relationship manager (CRM) is not the sole point of contact for clients. Clients also have regular contact with specialists, ranging from traders to fiduciary experts. “By having the CRM as the sole point of contact, biases would be reflected in the client’s portfolio,” Mr Sheehan explains. “So if the CRM was previously a currency trader, the client’s portfolio is likely to have a lot of currency exposure. By surrounding the client with a range of specialists, such biases are dampened, if not removed.” These fiduciary experts can then be used to help the client choose best-of-breed products for their investments. According to Mr Sheehan, while critical mass is vital, if you want to succeed in private banking, this does not mean that private clients only have access to JPMorgan products. “Because we have a fiduciary duty to our clients, we need to step back and evaluate to what extent JPMorgan products are best of breed,” he says, in what could be construed as a jibe at the competition. “We are absolutely not a distribution outlet for JPMorgan products.” For example, he says of open architecture: “You have got to be committed at the very beginning to consistent research on the funds you provide. You cannot possibly research 6000 fund managers effectively.” Nor does he agree with the supermarket approach taken by some rivals. “It would cannabilise our own investment engine; it can make you indiscriminate in your choices, and you are not completely independent, because of trailer fees and so on.” He does, however, believe there are some cases where the use of third-party products is appropriate. “Open architecture is most compelling for more specialist strategies or where there is a big difference in performance between managers. In European large cap or US large cap, there is very little difference between managers. In hedge funds and private equity, the dispersion between managers is much larger.” JPMorgan Private Bank will sell any fund in the investment universe, but it recommends between 100 and 165 mutual funds, private equity funds and hedge funds. Of these, 10 to 15 per cent are third-party funds. For discretionary portfolios, the proportion of externally managed assets rises to 60 per cent. Nowhere is this more important than in the European powerhouse of Germany, which external players have traditionally found a hard nut to crack, and where, with Credit Suisse and UBS renewing their efforts to capture market share, JPMorgan will be up against some very stiff competition. But JPMorgan is just moving into this key onshore market, previously served out of Geneva and London. And Mr Sheehan thinks it will succeed where so many others have failed because it will use local strategic partnerships to meet German high net worth and ultra-high net worth individuals’ needs. “We believe that they have been particularly starved of best-of-breed international investment opportunities delivered in a tax-efficient manner, and that the ability to provide those with an eye towards the entire wealth picture of those clients will be a terrific advantage,” he says. While the bank is well on the way to achieving its targets in France, Italy and Spain, it is some way off in the UK. This is despite the fact that, unlike his counterparts at rivals Citigroup Private Bank, Credit Suisse and UBS, Mr Sheehan is based in London. Mr Sheehan sees the secret of JPMorgan Private Bank’s success in the Mediterranean as being culturally in tune. Thus, in France, claims Mr Sheehan, JPMorgan is seen as a French bank, in Italy, as an Italian bank, and in Spain, as Spanish. He adds that the bank has gained market share by providing clients with investment options that are tax-sensitive to their local environment. After just 18 months in the job, with a remit covering pretty well all of the bank’s major wealth management markets outside the US, Mr Sheehan’s priority is onshore Europe, where he aims to double revenue by 2005-6. This means annual top-line growth of 20-25 per cent – a hard target to meet in a market where JPMorgan lags behind UBS in terms of assets under management and onshore European presence. Mr Sheehan, however, is confident of achieving his goals. “We want to be the pre-eminent private bank for clients with cross-border and local wealth needs, particularly in the UK, Germany, France, Italy and Spain.”

A world of experience Managing director of JPMorgan and head of JPMorgan Private Bank in Europe, the Middle East and Africa, Declan Sheehan, an Irish citizen who now lives and works in the heart of London, is a graduate and Master of Arts of Trinity College Dublin. He studied Economics and Mathematical Economics. His career at JPMorgan, which began in structured assets trading in New York in 1985, has taken him to a handful of the world’s biggest names and the furthest flung cities – London, Hong Kong and Tokyo. Prior to assuming his current position, he was based in Hong Kong as head of private banking for Asia. Mr Sheehan, now a director of JPMorgan International Bank, served as a director of JPMorgan Securities Hong Kong Limited from 1997-2001, and as a director of the Securities Investor Protection Fund (Japan) from 1998-1999, having been one of the founding sponsors of company.