What JPMorgan's First Republic Deal Means for Its Wealth Unit

The number of millionaires in the Bay Area has surged over the past decade, with 285,000 high-net-worth individuals located in the region around San Francisco, according to investment migration firm Henley & Partners.

Potential Challenges

Still, First Republic has seen an exodus of advisor teams in recent weeks as concerns about the bank mounted.

Dozens of advisors have jumped to rivals including Morgan Stanley, UBS Group AG and Royal Bank of Canada. Last week, a team of 30 from First Republic joined Cresset Capital Management, a Chicago-based investment advisory firm.

In an April 24 earnings call, First Republic CEO Michael Roffler said it had retained nearly 90% of wealth professionals as of April 21. Teams that have departed were responsible for less than 20% of total wealth management assets as of March 31, he said.

JPMorgan risks losing many First Republic advisers without offering a bonus and resolving some of advisors’ concerns with the transition, said Danny Sarch, who recruits for the wealth-management industry as president of Leitner Sarch Consultants.

“It’s a big, big challenge for JPMorgan,” Sarch said. “The First Republic advisors really had a wonderful marriage with the bank in a way that was well thought-out from the beginning and very attractive.”

Still, Wall Street analysts struck an optimistic tone about the transaction on Monday.

Wedbush analyst David Chiaverini called it “the diamond of the season of the FDIC-assisted deals over the past two months,” given First Republic’s wealthy client base.

“FRC has a high-net-worth client base, which is increasingly being sought after by other banks and wealth managers,” Chiaverini said in a note on Monday.

–With assistance from Silla Brush, Hannah Levitt, Sally Bakewell and Bre Bradham.