JP Morgan plans to add 750 new Chase Private Client locations this year and hire hundreds of bankers and advisors, as it targets mass affluent customers in a profitability drive.

JP Morgan plans to add 750 new Chase Private Client locations this year and hire hundreds of bankers and advisors, as it targets mass affluent customers in a profitability drive, according to its latest investor day presentation.

JP Morgan indicated a more segmented approach to consumer banking in its presentation, highlighting the profitability of higher-end customers and the opportunities in this space. The Chase Private Client subsidiary was launched in 2007 and was aimed at customers with at least $500,000 in investable assets.

The Wall Street bank has been expanding Chase's wealth management business rapidly, adding 246 branches in 2011, creating a presence in New York, Chicago, South Florida, Los Angeles and San Francisco.

In 2012, it plans to crank up the pace of this growth, adding 750 new Chase Private Client locations with a focus on California, Texas, Florida, Arizona, Washington, Tri-state, Midwest, Los Angeles and San Francisco. It will also add 900 private client bankers and 350 advisors. 

In 2010, there were just 16 CPC locations and the bank's target for this year is to hit over 1,000. In terms of client numbers, it is aiming to bring the number from around 4,000 in 2010 to over 75,000 this year. It said in its presentation that convenience was key to this client segment – as the affluent tend to be “time poor” - which is part of the rationality behind its drive to expand branches and staff numbers. 

The context of this initiative at Chase's private client segment is the altered regulatory landscape, which JP Morgan says has “permanently altered the economics” of consumer banking, and has disproportionately hit transaction-only banking. Citing research from Boston Consulting Group, Bernstein and Morgan Stanley, JP Morgan says regulatory reform has cost the industry around $20 billion, while low rates cost a further $4 billion. 

In fact, the bank says that of those customers with below $100,000 in deposits and investments, around 70 per cent are unprofitable on a fully-loaded basis in the post-regulation environment, and there is “limited opportunity” to deepen relationships with these customers. At Chase, over 30 per cent of households have more than $100,000 in deposits and investments and make up around 55 per cent of revenue, according to the presentation.

JP Morgan says the Chase business has historically spent the same amount of time with all its customers regardless of wealth segment. For example, it estimates it spent around 24 per cent of personal banker time with the lowest-end wealth segment, which makes up around 23 per cent of all Chase households. Due to this, it says there is an “opportunity to align our service models toward highest potential customers.” 

Key to succeeding in this segment is reputation and customer experience, as the bank estimates a mixture of these reasons – such as reputation or referral from a trusted source – account for 57 per cent of decisions behind beginning a relationship with a specific provider.