The New York Times Ought to Stop Its Wild Bank Chase

duffff!It’s easy to hate bankers these days. The latest outrage? According to a March 2 article in The New York Times, the financial services giant JPMorgan Chase encourages its so-called private client advisers to suggest in-house investment products to its well-heeled clientele. The gall! And this was no thinly reported story, either. The Times got its scoop from an inside man—Johnny Burris, one of those very advisers. Make that former advisers. Mr. Burris, you see, was fired last year, and therefore has no axe to grind. Wait, what?

In one of the stupidest stories to come out of The Gray Lady in recent memory, reporters Susanne Craig and Jessica Silver-Greenberg took 1,500 words to accuse—and convict—JPMorgan Chase of the despicable crime of cross-selling. I’m a big fan of the Times, and of these two capable reporters, but the blame-the-banks-for-everything philosophy of the joint is endangering its credibility. Some bankers do bad things, that is true. But a bank trying to push its own products on its own customers—otherwise known as “doing business”—isn’t one of them. Someone who shops at Paul Stuart shouldn’t be surprised when the salesman tells him he looks good in a Paul Stuart suit.

The private client business is one of the fastest-growing at Chase, making it an obvious target for intrepid reporters seeking a new way to express the paper’s stock-in-trade outrage on behalf of the little guy. (If clients with $500,000 who choose to consolidate their banking and investment business with one provider can qualify as “little guys.”) In 2012, the unit added 84,000 clients who brought $9 billion in net new deposits and investments with them. And more than half of those new funds came from customers who’d previously held under $100,000 with the bank. In other words, the majority of the unit’s success has come from people who want Chase to handle more, not less, of their financial matters.

Let’s get back to the crime of pushing in-house product on this unsuspecting clientele. It seems Mr. Burris, whom the Times photographed in a starched white shirt outside the Chase offices as some sort of Gordon Gekko of Sun City West, couldn’t bring himself to sell Chase’s own product as part of the deal.

If you’re a Chase private client, you see, you have access to the offerings of JPMorgan Asset Management, which manages $1.4 trillion for investors. Mr. Burris apparently took one look at the unit’s offerings, which ranked third in Barron’s latest ranking of fund family performance, and … hold up, now! It would be one thing if the company was encouraging its clients to buy crappy in-house product instead of superior third-party alternatives. But who, exactly, is getting the shaft when the bank offers its clients access to industry-leading performance? Yes, JPMorgan Chase makes more fee income if clients go with the in-house brand. That’s the whole point of the unit. But clients aren’t getting double-charged or anything—they’d be paying fees to whoever manages their money. Is it really so hard to believe that the company thinks the best way to make long-term money from their clients is to make long-term money for them?

The Times hedges its position on this scandalous state of affairs with this bit of fancy footwork: “While the practice [of pushing bank-branded investments] can be legal, competitors moved away from such investments after facing perceived conflicts. The concern is that, driven by fees, banks will push their own products over low-cost options with stronger returns.” First of all, what the hell does “can be legal” mean? It is legal. Period. And second, that “concern?” It’s called being a customer. Anyone buying anything has to keep in mind that the people selling it to them might be pushing their own product over better, lower-cost options. At what point does the Times—which clearly thinks we need to be protected from making our own dumb choices—allow for some responsibility to rest with the buyer? Apparently, having a $500,000 portfolio doesn’t make you worthy of your own judgment.

I could go on, but you get my point: the Times article took a cheap shot at a big ol’ bank and missed. What we are left with is one disgruntled former employee and the “scandal” that a financial services company might try to cross-sell its own product to customers who have chosen to be in a position to be cross-sold. Mr. Burris also secretly recorded conversations with colleagues—a move that “can be” illegal in some states—because he was worried about his job security. He was right about that. But it’s still a dick move.

Nelson D. Schwartz, an apparently less excitable Times reporter than Ms. Craig and Ms. Silver-Greenberg, wrote a related article a year ago, on March 10, 2012. But he actually nailed the real issue at hand. It’s not that those poor gullible folks with $500,000 entrusted to Chase might—quelle horreur!—find themselves being offered in-house product, but that the whole move to serve this “mass-affluent” segment of the population might come at the expense of services provided their less well-heeled clientele.

You will recall, of course, the government’s long-overdue crackdown on debit card and overdraft fees that banks (including Chase) had long used to enhance their returns on lower-margin (i.e., less affluent) customers. Mr. Schwartz cited a JPMorgan Chase investor presentation from last February that showed the new rules would slash 35 percent from the revenues the bank earned from customers with balances of $5,000 or less, versus just 5 percent from households with balances of $500,000 or more.

You guessed it. When that fee revenue was decimated, banks naturally went in search of greener customers. And why wouldn’t they? Chase insists that the increased focus on the affluent won’t come at the expense of resources dedicated to the hoi polloi, but could you fault the bank if it did? These are for-profit institutions, after all. You’ve got to make your money somewhere. Chase sees its private client business as a $1 billion opportunity, so this really is a big deal for the bank. But it’s not going to get there if the company doesn’t actually make its customers happy. “We have to deliver good products and services—which includes good investments returns—to our customers,” said Barry Sommers, who heads the division. “Two and a half years ago, we had 10,000 clients. Today we have more than 120,000.”

Before everyone gets their knickers in a twist for my audacity at defending a bank’s right to try to earn money from its customers, let me get a few things out of the way. Yes, I wrote a 2009 biography of JPMorgan Chase CEO Jamie Dimon that was criticized for being too positive about a banker in the midst of the financial crisis. Yes, I’ve written several articles about the company since. But I’m a freelance writer, for God’s sake—people pay me money to write about things I know. And I know more about JPMorgan Chase than I know about most things.

That doesn’t mean I’m blinded by closeness to my subject. I worked on Wall Street before I was a journalist, and I left it because I didn’t want to hang around a bunch of people who only cared about money. Being a financial writer didn’t actually solve that problem for me—I still have to hang around with them, the only difference being that I don’t earn as much as they do—but I hope it does at least suggest that I can write about them with perspective. The London Whale, you say? Now that’s a scandal. And mortgage fraud and abuse—some of which JPMorgan is guilty of—have no place in a decent society. I’m a fan of Elizabeth Warren, too.

But I’m also someone who doesn’t think that all corporations are evil and that everyone selling you something is trying to screw you over. Is it really a scandal to suggest to your private client advisers that they push in-house product on customers who are perfectly capable of making up their own minds about the merits of such a pitch? Give me a break. That’s the kind of argument only a broker who got fired would try to make. And that’s what Johnny Burris did. The real sucker in this story isn’t the Chase customer, but The New York Times itself.

The <em>New York Times</em>  Ought to Stop Its Wild Bank Chase