Jeenah Moon/Reuters
Jamie Dimon, the chief executive of JPMorgan. The bank held its annual investor day earlier this week.
- JPMorgan said this week that it was considering deal-making in its asset and wealth management division.
- We spoke with a half-dozen industry insiders about firms the bank may make sense as targets.
- Personal finance startup SoFi, digital wealth management firm Personal Capital, Envestnet-owned Yodlee, and robo-advice heavyweights Wealthfront and Betterment emerged as firms that appear as prime targets.
- Visit BI Prime for more wealth and asset management stories.
In New York earlier this week, JPMorgan executives told analysts and investors they would consider joining forces with an outside company to help drive growth, spurring instant speculation around what it might gobble up.
"We're looking at everything," Mary Callahan Erdoes, chief executive of the asset and wealth management business, said at its annual investor day. "But we're looking for adjacent capabilities. We're not looking for scale. We don't need it. We've got what we need, we want to just keep growing what we have. We're very selective."
The commentary and slide deck that cemented Erdoes' remarks came hours after Intuit said it would buy Credit Karma, days after rival Wall Street bank Morgan Stanley and discount brokerage E-Trade announced their own tie-up, and three months to the day after Charles Schwab said it would acquire TD Ameritrade.
JPMorgan, which reaches millions of US customers with its Chase franchise but whose newly restructured wealth management unit trails competitors in size, is in a unique spot. The largest US bank by assets says it's not looking for sheer size in whatever it may acquire, but rather an addition that might make sense.
Associated Press
"We're going to be much more aggressive in acquisitions across the board," chief executive Jamie Dimon said at the bank's annual investor day.
"When it comes to M&A, we should be very, very creative," he said, adding the firm is "going to be pretty open-minded."
Robust post-financial-crisis regulation and anti-trust provisions rule out scooping up some like firms. Rules keep a big bank like JPMorgan from buying another Federal Deposit Insurance Corporation-insured bank to prevent creating US banking monopolies and eliminating choice for consumers.
In recent years, the bank has also acquired a pair of not so closely aligned businesses, for example, WePay, a payments processor similar to PayPal, and InstaMed, a fintech that aims to simplify healthcare payments.
Business Insider interviewed a half-dozen analysts and executives about which firms may make sense as acquisitions.
The online lender and personal finance company SoFi, digital wealth management firm Personal Capital, the Envestnet-owned Yodlee, and robo-advice heavyweights Wealthfront and Betterment emerged as firms that appear as prime targets. A JPMorgan spokesperson declined to comment.
JPMorgan considering deals as it navigates a crowded field of wealth management players
The New York bank has a whole menu of options as the wider wealth management industry is crowded with legacy firms and new, digital entrants competing for a younger generation of investors accustomed to ultra-cheap financial services.
"I could see them taking a page out of Goldman's playbook, buying up an RIA," Gavin Spitzner, the founder and president of Wealth Consulting Partners, said by phone, referring to Goldman Sachs' acquisition of registered investment adviser United Capital.
That may mean the Redwood City, California-based digital wealth management firm and RIA Personal Capital, Spitzner said, is a possible target. The wealth manager overseeing just over $12 billion in client assets and some 22,000 paying investment clients re-branded late last year, Business Insider first reported, as it's contended with changing customer tastes and trailed digital-only robo-advisers in client assets.
Ruben Sprich/Reuters
Erdoes oversees wealth and asset management.
The RIA space, with independent financial advisers that compete with large banks' own in-house advisers, is a growing US industry catering to customers up and down the wealth management spectrum that even Morgan Stanley is now exposed to with its E-Trade acquisition. A Personal Capital spokesperson did not respond to a request for comment.
Traditional giants of wealth advisory and brokerage offerings like JPMorgan may follow Goldman Sachs' lead into the RIA space, said David DeVoe, the founder and managing director of DeVoe & Company, a consulting firm and investment bank focused on the wealth management industry.
Wall Street may ultimately decide to take an "if we can't beat them, let's join them" approach to the independent adviser space, DeVoe said.
In December, JPMorgan restructured its wealth business to bring advisers across Chase Wealth Management and JPMorgan Securities under one unit. The private bank, for clients with more than $25 million to invest, is separate.
Across all of wealth and asset management, the firm has around 1,000 investment specialists across asset management, and 6,500 wealth advisers. In the US, it has some 3,700 advisers across 5,000 branches. The firm reported some $2.4 trillion across both wealth and asset management as of December 31.
Spitzner also said Yodlee, the financial-data unit owned by wealth-tech behemoth Envestnet, may also make sense as an acquisition.
JPMorgan and other financial services firms, including Personal Capital, already partner with Yodlee, which Barron's reported earlier this month was up for sale. Financial services firms use Yodlee as a tool to pull together customers' data, like credit and debit card transactions, in one place so that customers - and the firms themselves - can view clients' various accounts.
A Yodlee spokesperson said the company does not comment on rumor or speculation in the market as a matter of corporate policy.
Last month, lawmakers called on the Federal Trade Commission to investigate Yodlee for improperly selling consumers' financial data. Yodlee said in a statement that Yodlee complies with "law and regulations and in accordance with leading industry practices for data security and privacy," the Wall Street Journal first reported.
Possible forays into fintech and robo-advice
Another company JPMorgan might consider could be SoFi, the San Francisco-based tech firm that got its start refinancing student loans for graduates of top-tier business and medical schools.
Asa Mathat for Vox Media
Noto is the chief executive of SoFi.
The business, which now includes mortgages, personal loans and a nascent wealth management offering, might help JPMorgan fill out some of its offerings, according to Ram Ahluwalia, chief executive of PeerIQ, a data and analytics firm focused on consumer credit, and a close observer of the financial technology industry.
SoFi "fills out a lot of product gaps for them," Ahluwalia said. "And it would give them a different way to engage the customer."
It could offer access to its 700,000 members, most of them digital-first millennials similar to the ones JPMorgan tried to target with its digital-only app, Finn, only to shutter it last year when it failed to gain traction.
SoFi was one of the first companies to identify and target a demographic of consumers and workers known by the acronym HENRY, or those who are "High Earners, Not Rich Yet."
SoFi, founded by Mike Cagney and now run by former Goldman Sachs banker and Twitter exec Anthony Noto, last raised money in May 2019 at a $4.8 billion valuation, according to data compiled by PitchBook. The company raised $500 million in the round led by the Qatar Investment Authority. A SoFi spokesperson declined to comment.
JPMorgan may also look to robo-adviser firms to complement its existing self-directed You Invest offering, said Robert Le, a fintech analyst at Pitchbook. That would include robo-advisers Betterment and Wealthfront, Le said in an interview. Both are what industry watchers would call mature startups, both a little more than a decade old.
New York-based Betterment and Palo Alto, California-based Wealthfront manage some $20 billion and $21.5 billion in assets, respectively. Betterment last raised capital in 2017, according to Crunchbase data that pegs its total money raised as $275 million. Wealthfront meanwhile last raised money in 2018 for total funding of some $204 million. A Betterment spokesperson did not respond to a request for comment.
Kate Wauck, Wealthfront spokesperson, said "it's not surprising that Wealthfront is being mentioned in these conversations," and that "we're heads down on building out the next set of features for our cash account and focused on becoming the largest next-gen banking service in the US."
While JPMorgan said it was not trying to make a play for sheer scale, "I think some of the underlying technology could be useful," Le noted. The biggest benefit would be taking on the robo-advisers' products and talent, he said.
JPMorgan may also look to make a play for a firm focused on environmental, social, and corporate governance-based investing (ESG), said Anisha Kothapa, an analyst with CB Insights.
The firm said in its investor day presentation that it was looking to apply an ESG framework to 100% of its assets under management in its asset management arm, and is looking to deploy new ESG-focused strategies in its wealth management unit.
"They want to increase engagement with companies around this idea of ESG," she said.
- Dakin Campbell contributed reporting
