There are no "smoking guns," no memos, no internal documents, just the word of former salespeople and customers and unnamed senior executives with access to Jamie Dimon. That does not mean that JPMorgan Chase [profile] did not take a hit this morning from the New York Times.

The Gray Lady accuses the bank mutual fund giant of steering customers into its own funds at the expense of its customers. The paper also attibutes the basest motive to JP Morgan Chase: it was "making up for lost profit."

The paper's questions hone in on JPMorgan's 3,100 branch broker force and its products, such as the six-model Chase Strategic Portfolio, which is made up of "roughly" 15 proprietary and non-JPMorgan mutual funds. The product holds some $20 billion in AUM and charges as much as 160 basis points in fees. The paper based its article on internal JPMorgan documents it claims to have reviewed.

The allegation comes as JP Morgan is already under attack over trading losses in an unrelated part of its business. Notedly, the paper points its finger at Jes Staley as the architect of its proprietary fund sales strategy, and reports that CEO Jamie Dimon "balked at the idea of pushing the bank's investments."

Staley and Dimon compromised by agreeing to "build out the fund group while allowing brokers to sell outside products."

The headline alone cannot be welcome news for George Gatch's team: "Former Brokers Say JPMorgan Favored Selling Bank’s Own Funds Over Others."

The paper also attacks the bank's marketing efforts, claiming that its sales materials exaggerated JP Morgan Funds' performance, and pointing out that hypotheticals created by JPMorgan top actual performance in the portfolios by as much as 152 basis points. The result:

JPMorgan is gathering assets in its stock funds at a rapid rate, despite having only a small group of top-performing mutual funds that are run by portfolio managers.

Geoffrey Tomes, a former JPMorgan salesperson who is now at Urso Investment Management, gives the article's money quote:

I was selling JPMorgan funds that often had weak performance records, and I was doing it for no other reason than to enrich the firm ... I couldn't call myself objective.

Matthew Goldberg, a second former JPMorgan broker (he is now at Manhattan Wealth Management Group), told the paper that "It said financial adviser on my business card, but that's not what JPMorgan actually let me be ... I had to be a salesman even if what I was selling wasn't that great."

The paper also works in the copy of an internal memo from an unnamed supervisor in a New Jersey branch to an advisor who convinced a client to place $75,000 with JPMorgan Funds. The header? "KABOOM".

"Nice to know someone is taking advantage of the best selling day of the week!" he wrote. Read the rest. 

Edited by: Sean Hanna, Editor in Chief


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