All shall have prizes. Some deserve them more than others.
If you haven’t won an award this year, you’re doing something wrong. We are at peak award season, when it seems that just about everybody with a pulse is posing with a lump of Lucite at yet another gala dinner – whatever that is – pretending that this will be a career highlight. It won’t.
Setting aside the obvious problem that the panel of “judges” overseeing these awards is almost always patently unqualified to decide, say, on the best corporate actions processor in Bhutan, there is another, more serious issue with the business of handing out gongs to all and sundry. When you start giving prizes based on age, gender or race – why not religion, too? – you are going to find yourself in very choppy waters.
Forty under forty. Fifty over fifty. You know the thing. But one list particularly caught my eye this year: American Banker’s “Most Powerful Women in Finance”. Granted, I haven’t yet seen awards for “Most Powerful Left-Handers” or “Most Powerful Redheads”, but these are probably on the way.
There was a time when American Banker was a serious, well-respected publication. That time has passed. Its list consists of a series of breathless puff pieces, lacking any objectivity or analysis, which could have been written by the in-house PR departments of the “winners”. The profiles stopped short of including their favourite recipes for strawberry shortcake…but only just.
One profile, written by a “journalist” called Matthew Blake, was particularly vomit-inducing. At #15, we had Teresa Heitsenrether, J.P. Morgan’s head of securities services. Blake was clearly overwhelmed: when mentioning J.P. Morgan’s AuC number, (wrongly quoted as USD33trn, when the Q3 number was actually USD27.2trn), he added: “(yes, trillion)”.
But there were more troubling aspects of the profile. Blake portrayed Heitsenrether as a cross between Mother Teresa and Pollyanna. Here’s a quote: “Heitsenrether has at times been the only woman at the table. Today, she is one of seven women on JPMorgan Chase’s 18-person operating committee. She also plays a leading role in the company’s Women on the Move program to help women advance careers in finance. (Her father worked at the Commodity Futures Trading Commission.) Having “different perspectives around the table” is important, she said.”
But here’s the thing. Under previous management – good, bad, and indifferent – J.P. Morgan’s securities services business had put together one of the most impressive line-ups of top female talent, unrivalled at any other custody bank. Let’s not forget that Heidi Miller was one of the first women to run a securities services business of any scale. At the next level down, there was a wealth of talent: Maryann Simmons, Devon George-Eghdami, Stephanie Miller, Emily Portney, Kelly Mathieson, to name a few.
All are gone – Women on the Move indeed. According to those who have worked with her or for her, Heitsenrether does not like “different perspectives” around the table. From the moment she arrived, it was immediately clear that she considered the custody and administration businesses to be inferior to prime brokerage, which she had run. Employees reportedly lived, and continue to live, in fear of being fired, which they are often reminded could happen to them.
Some of this could be forgiven if Heitsenrether had actually transformed the securities services business. She has not. Despite winning chunky deals from BlackRock, AuC under her watch has only grown by 28pct, and revenue by 21pct, since 2016. J.P. Morgan is horribly off the pace with its digital efforts, only managing to launch a data platform earlier this year. In a related setback, its outsourcing contract with the UK’s Aviva Investors, which stretches back to an original deal with Morley Fund Management in 2003, was transferred to BNY Mellon, in part because of its inferior digital and data strategy. In response, J.P. Morgan hired Ileana Sodani from BNY Mellon to improve its sales processes.
Under Heitsenrether, J.P. Morgan has drifted. Despite its size, it has virtually no leadership positions in any sector. Nowhere is this more apparent than in the highly competitive alternatives segment, where it is little more than an also-ran. This is puzzling, having had a string of highly qualified managers running that business, such as Bob Caporale, Liz Nolan, Stephanie Miller, and Joan Kehoe (all of whom have moved on). But it seemed to lose its way for a number of reasons: its inability to pick winners as clients, its disastrous M&A activity (the 2004 acquisition of Tranaut being a particular low point), inter alia.
But nothing stands out more than its five-year association with Arcesium, which started in 2017 with a wholesale transfer of J.P. Morgan’s alternatives clients on to the Arcesium platform. By 2020, J.P. Morgan had taken a stake in the firm, which was founded to provide technology for the back offices of D.E. Shaw and Blackstone. But the alliance has not proven to be much of a success for J.P. Morgan: its only reported win in the last two years has been a mandate from Hill Country Asset Management, a Texas-based start-up with a one-page website.
To be fair, the business was already in trouble before Heitsenrether arrived. J.P. Morgan believed that investment bankers and traders were the best people to run the securities services business. A succession of these – including Carlos Hernandez, John Horner and James Kenny – came and went without trace. When and how were staff, and their experience, actually valued? Really good people no longer want to go to J.P. Morgan, or stay there, because they understand the toxic environment.
It’s been a long time since J.P. Morgan has been one of the “big three”, except in terms of the size of its AuC book (a meaningless metric). If anything, Citi has overtaken it in terms of value-added products and services, quality of staff, and the scope of its coverage. Nowadays, many of its largest clients use it only because of its universal bank capabilities, rather than the quality of its investor services offering. After nearly a decade of poor leadership at the top of the house, it will be a hard road back – and there’s no indication it’s equal to the challenge.