Private banking architects: Mary Callahan Erdoes – broadening clients’ investment horizons

From October through December 2008, we were taking in as much as $1 billion a day at the private bank,” says Mary Callahan Erdoes, chief executive of JPMorgan Asset & Wealth Management. 

It was such a vast sum of money that systems were struggling and clients were panicking, she recalls. 

“We had to train every single person who worked at the private bank to know and understand the Acats [Automated Customer Account Transfer Service] system so they could calm clients down and explain that money was safe while it was moving from their former brokerage accounts over to accounts with us – even if it appeared to be out in the ether while that happened.” 

There was good reason such large sums were ending up with JPMorgan. Yes, JPMorgan was seen as the safest bank on the street when Lehman Brothers collapsed, but its private bank, run by Erdoes at the time, was seen not just as safe but as smart – because Erdoes had made it so. 

When she joined JPMorgan in 1996 as head of fixed income for high net-worth individuals, foundations and endowments, the wealth management industry in the US was the domain of nimble but scrappy brokerage houses on one side and conservative trust companies offering planning and concierge services on the other. 

“Private banking was trusts and estates, wealth transfer, banking – but nothing really impressive on the investments side,” says Erdoes. 

That was not her vision. Erdoes was a mathematics whizz, taught by her grandmother to balance a chequebook at six, influenced by her investment banker father, attending Georgetown to become the only woman to complete a mathematics major at that time and then heading to Harvard for an MBA. 

Before joining JPMorgan she was responsible for credit research, trading and individual portfolio management at fixed-income specialty advisory firm Meredith, Martin & Kaye. She had yet to turn 30.

So when Erdoes got to JPMorgan, her only focus was how to get the smart investment ideas she respected to high net-worth clients, particularly when smart ideas were typically reserved for institutions. 

Her mentor, she says, was Jimmy Lee, who was running the firm’s investment bank in the 2000s. She opens a closet in her office where a poster of Lee is taped. 

“He made me put it there,” she jokes. “He pushed me to be bolder, to try harder.” 

It is hard to imagine she needed nudging. Erdoes is known for working all hours and regularly getting on planes to visit clients to discuss investments, working twice as hard if performance takes a hit.

This focus on smart ideas and being the best bank for high net-worth clients on the street led Erdoes to develop a dedicated capital markets group within the private bank when she was picked to head it in 2005. 

It had its own senior team of asset class experts around the world, sharing market insights and creating bespoke investment ideas and strategies using the bank’s network of buy-side, sell-side, inside and outside partners. 

“We wanted to be the investment bank for people’s personal balance sheets, to be buyers of things rather than a brokerage house that was a distributor of things,” says Erdoes. 

She also introduced the daily 8am morning meeting, now an institution at the bank.   

At that meeting, all advisers and employees are invited to hear the daily views from the capital markets group, to talk about portfolio optimization and planning, with “investments being at the heart of it.” 

The meeting acts like a training session, ensuring the entire division is the smartest on the street. 

During the peak of the crisis, that meeting happened three times a day. 

“Everyone who worked here knew where the money was going, why people were rolling CP paper, for example – every moving piece of what was happening – and they knew it well enough to then be able to educate their clients,” she says. 

Another message every employee heard on those calls, she adds, was that there was to be no commentary about how other banks were faring. 

“It was an important time not to be disparaging,” she says. Particularly as the bank was only accepting assets it felt were a long-term fit. 

Over 2008, it added $80 billion to its assets under management (AuM). 

The crisis became a “very deep dive for young people at the firm,” says Erdoes and helped embed the reputation of JPMorgan as the Ivy League of private banks, hiring only the smartest bankers (everyone hired has to have investment experience) and where the smartest money goes. 

One change she introduced also influenced an industry-wide shift for clients: access to private equity and hedge funds. JPMorgan had been an early and big adopter of alternative investments, buying a 55% stake in alternative investment firm Highbridge in 2004 and becoming the largest hedge fund manager in the world in 2007. 

Through the capital markets group, private equity and hedge fund top performers that had never opened doors to private client money began working exclusively with JPMorgan. In 2009, when Erdoes moved into her current role, which includes overseeing the whole alternative asset management business that today runs $125 billion, she became known as being able to negotiate access with the toughest managers in the industry. 

Indeed, Erdoes is perhaps the most powerful woman in finance. When she joined JPMorgan the whole bank had 15,000 employees, revenues of $6.8 billion and just $208 billion in AuM. Today, Erdoes oversees a unit that has 25,000 employees, revenues of $14 billion and $2.8 trillion in AuM. 

“Two decades ago, we set out to turn a bank into an investments house that does banking by hiring the smartest investment people we could find,” says Erdoes. 

In doing so, she elevated an entire industry.