During the long and brutal self-immolation of Wells Fargo, the practice of "cross-selling" took on a villainous persona, suddenly becoming the favored tool of evil bankers in ripping off poor, unsuspecting everyday Americans.
The vilification of cross-selling can be put almost squarely on the shoulders of 'Ol Johnny Stumpf. The former Wells Fargo CEO went out of his way to defend the practice at every possible opportunity and even mentioned his love of it when the conversation was on a different topic altogether. Stumpf and his scandal made cross-selling something of a dirty byword in 2016, a sales tool that bankers were wise to avoid discussing at dinner parties or on the record with reporters.
But it's 2017, Trump's America! And cross-selling is...well, still considered arather shady business.
According to a well-researched report from Bloomberg, cross-sellers at JPMorgan never even blinked while watching Wells Fargo take a savage beating in the public square. In fact, the sales pressures at JPM are reportedly more intense than ever and the country's largest bank has made no secret over the years that employees should steer wealth management clients to JPM products and specific outside funds that kick back JPM fees. And business has been seemingly booming...
A review of company filings and transcripts of investor calls indicates that JPMorgan has been the only big bank to break out revenue figures tied to cross-selling. Selling across the bank’s four main units contributed $7.5 billion in revenue in 2014, or more than 7 percent of all revenue, the bank said at a 2015 investor conference, the last time it provided such a figure.
That's a nice number. But making all that coin from cross-selling in a post Wells Fargo scandal world is the kind of thing that PR-savvy CEOs would rather not discuss. It would be reckless to go The Full Stumpf and admit how horny you are for cross-selling, and a real bummer if anyone has evidence of you talking it up back in the day...
“Cross-selling is a big deal. And we do an exceptionally good job at cross-selling. We think we’re among the best out there,” Chief Executive Officer Jamie Dimon told an investor conference in September 2012, referring to the bank’s retail business. Fifteen months later he told another conference: “We do as much cross-sell as a Wells Fargo.”
And Jamie might have been right. The OCC has been looking into cross-selling for years, and the investigation has been fueled with more urgency since the Wells Fargo revelations. According to Bloomberg, regulators had their sights set on different prey before Wells Fargo made itself an irresistible target last year.
In 2012, a review of JPMorgan by the OCC, which wasn’t made public, warned the bank that its cross-selling practices for pension funds violated the clients-first requirement, a person familiar with the matter has said. JPMorgan declined to comment on the warning.
U.S. securities regulators have also examined the cross-selling activities of JPMorgan’s asset-management business. They found that the bank had violated securities regulations by failing to tell investors that it favored its own products over others. To resolve the matter, in December 2015 the bank paid a record $307 million asset-management settlement to the SEC and the Commodity Futures Trading Commission. The bank admitted disclosure lapses and agreed to provide more transparency.
The next month, JPMorgan’s private bank settled regulatory claims that it had misled clients by telling them it paid advisers “based on clients’ performance” when, in fact, it considered other factors. The bank didn’t admit or deny wrongdoing.
It's hard to fathom that JPM's cross-selling thirst resulted in the kind of widespread fraud that plagued Wells Fargo - and since the practice is legal JPM is arguably just doing everything it's allowed to do in pursuit of profits - but if a scandal emerges from the OCC investigations, Jamie Dimon's vocalized love of cross-selling could come back to haunt not only his bank, but the Trump administration's nascent interest in blowing up the DoL fiduciary rule.
Even this White House would be hard-pressed to weaken consumer protections if the two biggest retail banks in the nation were to be caught bilking customers in consecutive years. And a second wave of anti-bank populist rage would have very serious deleterious effects on Trump's already hamfisted attempt to defang Dodd-Frank.
So our advice for finance executives that feel "the thickening" when they look at cross-selling and its possibilities remains the same in 2017 as it was in 2016: Keep it in your suit pants.