Wealth management firms won't thrive without size and scale, according to Joe Kenney, JP Morgan Private Wealth Management's CEO, who outlines his division's US growth plans.

The boutique advisory firms and multifamily offices may be having their day in the sun, but big will ultimately prove to be better, according to Joe Kenney, chief executive of JP Morgan’s Private Wealth Management division.

The trend toward more registered independent advisory firms will continue for one or two more years, but will “start reversing thereafter,” Kenney predicted in an interview with Family Wealth Report.

“Some very good companies will emerge,” Kenney said, “but at the end of the day they will need size and scale because clients will demand information, resources, access that may not exist in the marketplace but may need to be created.”

JP Morgan will be putting Kenney’s words into action this year, adding 179 advisors to bring its total up to 1,250, a 16 per cent increase. The Private Wealth Management division currently has 86 offices in 23 states and plans to add new offices in Orange County, California, Washington, Oregon and Florida over the next two years, Kenney said.

“We think there is an extraordinary opportunity to invest in the business,” Kenney said, adding: “The market is over-banked but underserved, and our teams are going to be focused on advice in the major markets.”

JP Morgan also wants to capitalize on “the tremendous amount of money in motion,” Kenney said.

The firm is targeting high net worth clients with at least $5 million in investable assets, especially corporate executives of publicly traded companies and owners of private companies with no succession plan who are looking for an exit strategy.

In addition to renewed mergers and acquisition activity in the middle market creating liquidity, Kenney pointed to heightened concern among high net worth prospects following the financial crisis.

Trusts

Some clients who had trusts at other financial institutions which were named corporate trustees, he said, became concerned that they may outlive the trust. As a result, he said, JP Morgan’s perceived stability became a strong selling point.

In addition, having access to credit and bank loans from JP Morgan Chase has been “incredibly important” to Private Wealth Management’s growth, Kenney said.

In fact, Chase is increasing its banking presence in California, one of Kenney’s prime target markets for growth.

The bank announced Thursday it would add 90 new branches across the state this year. Wirehouses, trust banks and RIAs are JP Morgan’s primary competition, Kenney said.

So what differentiates JP Morgan, which does not publicly report assets under management but has $150 billion in assets under supervision?

The “depth and expertise” of the company’s global resources, said Kenney.

In addition to trusts and estates, wealth planning advice and access to global markets and products, JPMorgan is also emphasizing active investment management, Kenney said.

“Clients are finally waking up to the fact that they can no longer take their portfolios and just ‘set it and forget it,’” he said. “We are talking to them about tactically tilting their strategic asset allocation to give them the ability to take advantage when the market hits bottom. They can add risk back to the portfolio, but it doesn’t always have to be equities. Risk can be in high-yield, distress, currencies or commodities.”