J.P. Morgan Chase & Co. has shifted its online discount brokerage unit, Brown & Co., into its private bank and investment management business in an effort to expand its wallet share as wealthy investors look to roll over their retirement assets.
The New York banking company announced during its quarterly conference call that it had moved Brown & Co. out of its retail side. Elizabeth J. Fisher, the president and chief executive officer of Boston-based Brown & Co., said that positioning the online brokerage next to Morgan Chase's private banking and investment management unit gives it more opportunities to cross-sell.
"This company has terrific proprietary products, and we are looking to bring more of those products to Brown's base of customers," she said. "There are a lot of synergies here."
During the next year, she said, the firm will aggressively try to cross-sell online brokerage services, as well as other Morgan Chase products, to investors who are rolling over their IRA accounts. Ms. Fisher said Brown & Co. has a base of wealthy and active clients whose accounts average $40,000 of assets.
"J.P. Morgan Chase has a series of defined benefit and defined contribution clients that are going to be looking to roll over their retirement savings soon." she said. "This can make the transition much smoother and much easier."
Geoffrey Bobroff, an East Greenwich, R.I., wealth management analyst, said many other companies, including Merrill Lynch & Co., have aligned their online brokerage operations closely with their private banks in an effort to cross-sell.
"What is true with the truly wealthy is that they want to take a little money and play with it," he said. "They like to go off and do things on their own. So if they can't do active brokerage with you, then they will take their money to another discount broker. This keeps relationships intact."
Ms. Fisher said that even when Brown & Co., which manages 200,000 accounts overall, with $20 billion of assets, was on the retail side it sold services to Morgan Chase's private banking customers but that the realignment allows assets to be gathered more efficiently.
In May 2001, Brown & Co. shut 11 offices and laid off 81 employees, leaving the discount broker to centralize services in Boston and Tampa call centers but then it began aggressively building its customer base. In February, it completed its purchase of Dreyfus Brokerage Services from Mellon Financial Corp. The deal added 75,000 accounts and $6 billion of assets under management.
Analysts said online trading volume is down 30% to 40% across the industry and that discount brokers are desperately seeking any type of edge they can find.
"This has been a difficult run for online brokerage," said Burton Greenwald, a Philadelphia-based analyst. "There aren't a lot of transactions out there. You have to build with strong customers and cross-sell to them."
