Morning Coffee: Why many bank employees are suddenly being forced to return pay. J.P. Morgan’s opaque succession planning

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In the uncommon event that a banker needs to repay their employer, it typically means they’ve made a huge and possibly illegal mistake and are more than likely now a former employee. That’s not at all the case at UBS – its employees did nothing wrong. The bank didn't either. Yet thousands of financial advisors in the U.S. are being forced to return money to UBS after they were mistakenly overpaid throughout 2018.

An error at ADP, the firm’s payroll processing provider, resulted in improper deductions on forgivable-loan amortizations that are affecting roughly 4,000 UBS employees, according to Advisor Hub. Forgivable loans are lump-sum upfront payments – often north of $1 million – that are doled out to financial advisors when they’re poached by other firms. UBS said that “under-collections” are at the core of the issue, though none of the sources who spoke with Advisor Hub knew of anyone who had been underpaid.

Brokers told the website that many UBS veterans only owe a small amount based on performance bonuses that were tied to forgivable loans from years back. One branch manager said roughly one-third of affected employees owe just $300 to $400. But those who were recently recruited by UBS and who have a healthy book of business may be on the hook for much more. One broker told the outlet that he’ll have to pay back around $200k over the next two years due to overpayment in 2018. 

Forgivable loans essentially act as a cash signing bonus if all vesting requirements are met over the course of the contract, like hitting revenue targets and staying employed with the firm. In theory, the good news is that the issue is reportedly having a greater effect on newer hires who recently received forgivable loans as motivation to change firms – people who are conceivably flush with cash due to the sweetener loan and a year of being overpaid. However, several financial advisors previously told us that some brokers who jump ship for another firm do so because they are in a tight spot financially and don’t always put the money in the bank. Needless to say, if anyone who fits that description is among those effected, they're probably having a tough week.

Elsewhere, the pool of potential successors to J.P. Morgan CEO Jamie Dimon looks to have grown – and been diversified. The bank’s Chief Financial Officer, Marianne Lake, will leave her position to oversee all of J.P. Morgan’s consumer lending businesses, according to the Wall Street Journal. Lake will be replaced as CFO by Jennifer Piepszak, who has been heading up the bank’s credit card business. Piepszak will join Lake on J.P. Morgan’s operating committee.

The move is being viewed positively for both women as Dimon has a history of shuffling his top deputies to ensure they have a broad range of experience. Lake and Piepszak, both 49, should be well-positioned to be among the contenders to take over for Dimon when he retires.

Asked during the bank’s most recent investor day when he planned to step down, Dimon responded: “Five years. Maybe four now.” At that point, the bank’s co-chief operating officers – Gordon Smith and Daniel Pinto, both of whom have previously been mentioned as potential successors to Dimon – could be close to retiring themselves.

Of course, the typically blunt Dimon isn’t giving any hints. “We have exceptional women, and my successor may very well be a woman, but it may not,” he recently told a group of analysts.


Deutsche Bank is preparing “plan B” in the event merger talks with fellow German lender Commerzbank fall apart. One of those scenarios would reportedly include accelerated cost cuts within Deutsche’s investment bank. A member of Deutsche Bank’s advisory board stated publicly on Thursday that the firm should walk away from the talks. (Bloomberg)

Roughly 82% of Commerzbank employees are against the idea of a merger. Around 70% of Deutsche Bank staff feels the same way. (The Independent)

At least four foreign banks have now lined up to chat with Commerzbank about potential bids if talks with Deutsche Bank fall apart. (Bloomberg)

The former head of KKR’s private-equity business in the Americas is launching his own buyout firm with a $3 billion asset target. Alexander Navab is said to have lined up investors from firms including KKR rival Carlyle and Warburg Pincus, among others. (WSJ)

Longtime Goldman Sachs partner Rich Friedman is stepping back from day-to-day responsibilities over the firm’s merchant bank, where Goldman does much of its private equity investing. The keys are being given to Sumit Rajpal, who currently oversees corporate-buyouts funds, and Andrew Wolff, head of merchant banking in EMEA. (WSJ)

A third former executive from Abraaj Group has been arrested following the collapse of the largest emerging markets-focused private equity firm. Sev Vettivetpillai was arrested in London following a U.S. extradition request over accusations that he secretly funneled hundreds of millions in investor funds for personal gain. Abraaj founder Arif Naqvi and chief dealmaker Mustafa Abdel-Wadood were arrested last week on similar charges. (WSJ)

Barclays has settled a lawsuit with well-known metals hedge fund Red Kite over claims that the bank's traders cost the fund at least $850 million by engaging in abusive trading practices earlier in the decade. (Bloomberg)

Blackstone is ditching its partnership structure to become a C corporation, a move that should make its stock more attractive to institutional investors that typically don’t invest in publicly-traded partnerships. KKR made a similar move after new corporate tax laws were enacted in the U.S. in 2017. The change could benefit employees who own a bunch of Blackstone stock if they continue to perform well. (WSJ)

Don’t text with your boss if avoidable. It’ll increase the chances of extending your work hours outside of the office, among other negative outcomes. (WSJ)

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