J.P. Morgan & Co. has plans to join a host of other banking companies and investment firms that are trying to capture some of the fortunes being made in Silicon Valley.
The $260 billion-asset New York company just opened a private banking office in Palo Alto, Calif., in the heart of Silicon Valley. A bigger, permanent office that will house Morgan investment bankers as well as private bankers will open in Palo Alto next year.
The move is part of a yearlong effort at Morgan to open its storied private bank to a bigger group of prospective clients. Once geared exclusively toward individuals with a minimum of $5 million of assets to invest, Morgan's private bank has recently been willing to take in new clients with as little as $1 million to invest if they demonstrate the potential to have far more money in the future.
The emerging affluent who are making their fortunes in the dot-com world have become the perfect target market, consultants said. "That's where all the new millionaires are," said James Folwell, who tracks private banking for Boston-based Cerulli Associates. "The amount of money flowing around out there is ridiculous."
Morgan's competitors agree.
Citigroup's private bank opened an office in Palo Alto two years ago and has had one in San Francisco for 10 years. U.S. Trust Co., the New York firm that recently agreed to merge with Charles Schwab Corp., plans to open a private banking office in Palo Alto "in several months," a spokeswoman said.
"It was important to get our people as close to the client base as possible," said Leigh Wasson, a Morgan vice president who is in charge of the new 12-person Silicon Valley private banking office. "People are saying, 'I have to be a part of this.' "
Morgan investment bankers specializing in the technology, media, and telecommunications industries have been working in another temporary facility in Palo Alto for months, Ms. Wasson said. They will work closely with the private bankers. "It is an opportunity to develop relationships in the venture capital community," she said.
Jean Blomberg, senior vice president and head of private banking for Silicon Valley Bancshares in Santa Clara, Calif., said there has been a steady stream of new entrants in the market as big private banking companies compete for the emerging wealthy in the region.
Silicon Valley Bank, which started offering private banking services six years ago, says it is not afraid of the big guys. "There's enough money to go around for everyone," Ms. Blomberg said.
Consultants said companies like J.P. Morgan, faced with a surge in competition from on-line companies, mutual fund providers, and brokerage houses, have had to reconsider the way they do business.
Signs of the times include the decision of 147-year-old U.S. Trust to sell itself to Charles Schwab - a newcomer to on-line trading - and Merrill Lynch & Co.'s about-face in Web trading last year.
"The up-market companies are realizing they need to reach down-market, and the down-market companies are reaching up," said Mr. Folwell. "The older companies are finding it necessary to abandon their cultures."
Morgan already has eight private banking offices in the United States. It opened new locations in Dallas and Philadelphia in 1998 and is to open in other locations, a spokeswoman said.
The opening of the Silicon Valley office coincides with a new advertising campaign touting Morgan's private banking services. Print ads created by the Messner, Vetere, Berger, McNamee, Schmetterer agency began running last week in national newspapers including The Wall Street Journal and The New York Times. Radio ads are to start this week.
The print campaign, which is similar to a series of ads that highlighted J.P. Morgan's corporate image, comes a year after Morgan's private bank began making mass mailings in selected markets, offering free samples of its private banking services - financial profiles and portfolio advice - to find new customers. A spokeswoman for Morgan's private bank said the company wants to appeal to those who may not have considered themselves attractive to Morgan as business prospects.
Observers said Morgan will not struggle to find a niche in Silicon Valley, despite its image as a stuffy and old-fashioned company. That perception might even help. "They certainly have some snob appeal," Mr. Folwell said.