JPMorgan bankers try to lure away Morgan Stanley’s tax fund clients

JPMorgan Chase’s army of private bankers are trying to convince their rich clients to move billions of dollars from Morgan Stanley’s tax strategy funds on to the bank’s own platform, according to people familiar with the matter.

The instruction came after JPMorgan announced an expansion in September of its own so-called “tax-smart” platform whose offerings include tax-loss harvesting — the process of selling securities at a loss which can then be used to offset taxable gains, and customised ETF portfolios.

The use of tax-loss harvesting has boomed in popularity on Wall Street this year with Parametric, owned by Morgan Stanley, one of the most popular providers.

Earlier in 2022, JPMorgan’s private bank had identified about $15bn in client funds with Parametric that could migrate over to its own platform, one of the people familiar with the matter said. JPMorgan will continue to offer Parametric funds to its clients.

JPMorgan and Morgan Stanley declined to comment.

Morgan Stanley acquired fund manager Parametric in 2021 through its $7bn acquisition of Eaton Vance. JPMorgan had also bid to buy Eaton Vance, the Financial Times has previously reported.

After missing out on Eaton Vance, JPMorgan ultimately bought Boston-based financial technology company 55ip in December 2020, which formed the cornerstone of the banking giant’s new tax platform being pitched to clients.

Direct indexing firms such as Parametric allow investors to create bespoke portfolios tailored to their personal preferences. This can range from creating a basket of investments to mimic the performance of an established index to managing tax losses.

Among the arguments JPMorgan’s bankers are making to clients when considering a move from Parametric is that JPMorgan’s new product is cheaper and also can provide more regular reports for investors, the people familiar with the matter said.

For JPMorgan, having its own service means they can operate it at a lower cost and also is less reliant on a rival like Morgan Stanley, should the bank ever try to raise prices or restrict access to JPMorgan clients, say the same people.

JPMorgan has 55ip available to outside investments advisers. Since the bank acquired the company in 2020, the number of accounts on its platform have grown from 5,000 accounts to 25,000 — about 95 per cent of which are from third party-registered investment advisers — one person familiar with the matter said.