JPMorgan makes it a family affair

In all of these three respects, JPMorgan Private Bank appears to differ from its competitors. It has set a huge mimimum investment threshold of $10m. It denies being a product outlet for the JPMorgan Fleming funds arm, preferring tailored solutions, and there is much evidence to support this claim. But the key element to its marketing, successful in the US, but with Europe yet to be convinced, is the family focus.

Rather than investing marketing dollars in products and private banking services, it is rolling out its Family Wealth Centre concept across Europe, under the stewardship of New York-based Amy Braden.

The centre is a self-styled “intellectual capital” resource, which can be tapped by clients and bankers for seminars on complex investment strategies, succession issues, or to tackle the thornier questions of family unity and purpose.

“Some wealthy families may want to co-ordinate family members’ banking needs, and they do this through establishing a family office themselves,” says Ms Braden, who reports directly to the bank’s chief of Wealth Solutions, Michael Veuner. “For families which have multiple assets and substantial liquidity, their own office to oversee co-ordination of financial services can add real value.”

The multi-family office

Ms Braden is expecting a huge wave of competition from Europe’s private banks, jumping on the family bandwagon.

The expected trend, she believes, is the emergence of the multi-family office, which private banks across the US and Europe are establishing in order to service the richest families more economically.

It is not lost on any of these players that more than 30 per cent of S&P500 companies are family controlled and Europe’s major economies are also dominated by family businesses.

Again she injects a note of caution: “Many operations can be called a family office, but they have little in common. Their areas of expertise and how they interact with clients can be different. With the multi-family office, clients are expecting to have someone on the other side of the desk who will take care of all their affairs, but their perception may be different to the reality. What they are getting is never quite what they expected.”

Pro-active dealings

This is why Ms Braden makes the rules for her club, so there is no ambiguity. Rather than acting as a traditional family office, her team supports bankers and wealth advisers in their dealings with clients. The operation concentrates on those families who choose to manage their wealth together.

“But they need to do some pro-active things in order to achieve this,” says Ms Braden, who advises family members on how to work well with each other. “A family needs to establish a common goal or mission statement. Most families we have seen have been so successful long-term because they have a strong sense of what the family is really about.”

Preventing conflict and accommodating different objectives is clearly crucial. “Family members can articulate similar stories,” says Ms Braden. “But in some cases, one member says ‘we have a tremendous legacy, and if we don’t do something about it, all us family members can end up going in different directions.’ But this can backfire, where one member takes a high-profile leadership role and the rest may be unhappy.”

There are several ways in which wealthy families tap into the centre. Many will read Ms Braden’s white paper, in which she has identified the attributes of the most successful families she has worked with during her 30-year career in private banking and corporate finance in New York, Hong Kong and Tokyo. (See box below.)

Together with her brothers, Ms Braden remains a shareholder of a family enterprise started in post-war Tokyo by her American father and Japanese mother, and which employed her uncles. When her father retired as CEO 20 years ago, the business hit a critical juncture. The issues were eventually resolved, though it was a hard slog, she recalls. “We could have emerged much stronger,” believes Ms Braden. “I didn’t know about these principles in those days and neither did my dad. That’s why it’s such a passion for me to gain broader exposure for them.”

As well as succession issues, it is important not to label independent thinkers as black sheep, but to channel their creativity positively. “The main issue that really concerns family members is the purpose of the wealth and their role in connection with this wealth,” says Ms Braden.

“Making money may be the passion of a first-generation entrepreneur, but his successors may not have a talent for business. They may prefer art, music or academic pursuits. There are lots of ways in which people can be successful, but their success is not recognised and this can lead to a real strain within the family. Where a family can recognise a member’s achievements, they can use them to their advantage.”

For instance, art collected by a family member should be considered an asset and can be hired out to a gallery. “Normally, collectors are seen as non-productive and people ask: ‘How do you think you are going to make a living?’.”

Exclusive club

Family members – and Ms Braden stresses that this is an exclusive club – may also be invited by their bankers to personal investment briefings, organised by the Family Wealth Centre on strategies such as private equity or hedge funds, hosted by JPMorgan’s investment experts.

Although cynics may see this as an opportunity to pump JPMorgan house products to a captive audience, Ms Braden is clearly an advocate of the open architecture approach.

“We feel very strongly that we have a tremendous lead in world products and services, but where these need to be supplemented with outside services, we can bring them in on the investment side,” says Ms Braden. The bank’s portfolio managers currently run $138bn, out of total client assets of $266bn, on a discretionary basis.

It is this transition from fostering family values to adding value which may prove to be the bank’s greatest challenge, says private banking consultant Sebastian Dovey of Scorpio Partnership, which advises institutions looking for a profitable and distinctive strategy.

“JPMorgan has done something blindingly obvious and has stolen a march on the rest of the industry competing for international ultra wealth market share,” says Mr Dovey. “They have shown that their investment is in the Family Wealth Centre rather than investment marketing material. They are visibly targeting family office territory and are putting themselves in line with the needs of their clients, but it’s still too early to tell whether this will lead to a client-centric rather than product-centric focus in their underlying approach to wealth management. Now JPMorgan will have to softly pull the debate away from family business and into wealth issues.”

Building on genetic links

The eight proactive practices of successful families:

• Articulate a clear and powerful vision
• Cultivate entrepreneurial strengths
• Plan strategically to mitigate risks and capture opportunity
• Build unifying structures to connect family, assets and environment
• Clarify roles and responsibilities
• Communicate, communicate, communicate
• Help members develop competencies
• Provide independence, including exit options

Says Ms Braden: “Taken together and consciously cultivated into lifelong habits, these practices spell effective governance – enabling family enterprises to create and deploy wealth on a long-term basis.”

Braden: advises families on

how to work well together