JPMORGAN CHASE: NAVIGATING STRUCTURAL MARGIN COMPRESSION
Strategic Leadership Memo
June 2030 | CEO Edition
TO: JPM Executive Management
FROM: Office of CEO
RE: The 2028 Intelligence Crisis and Our Response
We have just completed the first half of 2030, and the market has rendered a clear verdict on our strategy: JPM is executing well in a shrinking pool.
Let me be direct about what's happened:
The Setup (2023-2027): We invested $15 billion in AI, believing we could achieve structural competitive advantage in advisory, trading, and risk management. This investment was rational. The thesis was defensible. The execution was excellent.
The Reality (2028-2030): Our competitors invested in the same AI capabilities. We remain the most sophisticated, but so do seven other global systemically important banks. Our operational edge has been competed away. More importantly, AI has democratized advisory services, collapsing margins across the industry.
The Implication for the next 5 years: JPM cannot return to historical profitability levels through operational improvement alone. We must fundamentally restructure our business model.
THE NUMBERS THAT SHOULD CONCERN US
Let me present the data that our board has been wrestling with:
Margin Compression Reality: - Wealth management advisory margin: 45% (2023) → 27% (2030) = -66% decline - Investment banking advisory margin: 68% (2023) → 52% (2030) = -40% decline - Trading margin (FX/commodities): 3.2% (2023) → 1.8% (2030) = -44% decline - Consumer lending margin: 4.1% (2023) → 2.9% (2030) = -29% decline
Headcount Productivity Increase: - Revenue per employee: $892K (2023) → $1.24M (2030) = +39% improvement - This is good. It masks the underlying problem.
The Underlying Problem: - Total firm revenue: $119.4B (2023) → $128.7B (2030) = +8.1% growth - Total firm profitability: $24.7B (2023) → $19.8B (2030) = -19.9% decline - Return on Tangible Equity: 12.1% (2023) → 8.7% (2030) = -320 basis points
We have the most efficient bank in the world, but we are less profitable than we were in 2023.
WHAT WENT WRONG WITH THE AI BET
I need to take responsibility here because I championed this strategy.
Our assumption was: "If JPM invests 2x what competitors invest in AI, we will achieve structural operational advantage and can maintain premium margins."
This was wrong. Here's why:
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AI is not proprietary. Unlike past technological shifts (Nasdaq exchange technology in the 1990s, electronic trading in the 2000s), AI is available to all competitors simultaneously. The models are published in academic papers. The compute is available from AWS, Azure, and GCP. The talent is global.
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AI commoditizes advisory services. Past technological shifts made advisors more productive (electronic trading made traders faster). AI makes advisory services themselves obsolete. A machine can build a portfolio as well as a JPM wealth advisor. The margin compression is structural, not cyclical.
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We competed with ourselves. By deploying AI wealth management tools, we basically told our customers: "You don't need to pay us 150 basis points for advisory. Pay us 30 basis points for algorithms." We won the competition with our own advisory team.
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Market share gains came at negative margin. Our deposit share increased from 12% to 14% (good), but the rate we pay on those deposits increased 280 basis points (bad). We gained customers who were price-sensitive. They're not profitable.
The lesson: Technology investments that are available to all competitors create operational efficiency for the whole industry, not competitive advantage for the individual firm.
THE STRATEGIC RESET
Here's what we need to do. It's not pleasant, but it's necessary.
Part 1: Acknowledge the Scale of the Problem
JPMorgan's profitable business model requires 9-10% ROE to justify its cost of capital. We're at 8.7% and falling. The trajectory says we'll be at 7.5% by 2032 if we don't change something fundamental.
The market will eventually reprice us accordingly. We can lead this repricing, or we can lag it.
I recommend we lead it.
Part 2: Restructure the Advisory Franchise
JPM's wealth management division has been the profit engine for 15 years. We manage $3.2 trillion in AUM.
The problem: We built the advisory margin pricing on a false premise—that human advisors provide a premium that justifies 150-200 bps in fees. AI has disproven this.
The new model: - Tier 1 Wealth Management: For clients with >$100M in AUM, maintain human advisors. Premium service. Charge 80-120 bps. (5% of clients, 65% of AUM) - Tier 2 Wealth Management: For clients with $10M-100M in AUM, hybrid model. Algorithm + advisor review. Charge 40-60 bps. (20% of clients, 25% of AUM) - Tier 3 Wealth Management: For clients with <$10M in AUM, algorithmic. No human advisor. Charge 15-25 bps. (75% of clients, 10% of AUM)
This will reduce our total wealth management revenue ~$18 billion annually and reduce our advisory margin from 27% to 19%. But it will increase AUM by 22% (because lower fees will attract deposits) and improve customer lifetime value.
Net impact: We trade premium margins for scale. It's the right move.
Part 3: Exit or Minimize Commoditized Businesses
JPM's investment banking division includes a lot of low-margin business: - Equity capital markets (raising capital for companies): 3.2% margin, declining - Fixed income capital markets: 2.8% margin, declining - M&A advisory: 52% margin (still good, but down from 68%)
We should: - Exit equity capital markets (divest or spin off). This is a $2B revenue, <2% margin business. Let someone else have it. - Consolidate FIC (fixed income capital markets) to pure risk management and execution. Reduce the advisory component. - Protect and grow M&A advisory. This is where we still have edge. Charge premium fees ($5-10M per deal). Do 150 deals annually instead of 300. This improves profitability.
Part 4: Double Down on Core Deposit Banking
The one structural advantage JPM will always have: We have the most valuable deposit franchise in America.
With a 14% deposit market share, we have a moat that competitors cannot easily replicate. Deposits are sticky, profitable, and essential for funding a bank.
Strategy: - Don't compete on deposit rates. We don't need to. We have 14% of the market. - Increase fees on deposit accounts by 40 bps (across all retail tiers). This is below market and reflects the value we provide. - Build out treasury management products (cash management, liquidity optimization) for corporate customers. This is highly profitable (34% margin) and stickier than advisory. - Invest in payments technology. As the largest bank, we should dominate payment infrastructure.
This could add $4-5B to annual revenue and improve margins because deposits + treasury management is a higher-margin business than advisory.
Part 5: Reduce Costs Further (Ruthlessly)
We've already cut 15% of headcount through AI automation. We need to cut another 10% through: - Consolidate retail banking branches from 4,800 to 3,200 (branch banking is obsolete for most transactions) - Reduce middle office headcount another 15% (compliance and risk can be automated further) - Eliminate redundancy between JPM and the regional bank subsidiaries (we own OneWest, Chase Bank, etc.)
Target annual cost savings: $2.8 billion by 2032.
THE NEW MARGIN PROFILE
If we execute this strategy, here's what JPM looks like in 2032:
Segment Margins (vs. 2030 actual): - Wealth Management: 19% (vs. current 27%) — lower margin, higher volume - Investment Banking: 48% (vs. current 52%) — lower volume, higher selectivity - CIB Trading: 2.2% (vs. current 1.8%) — slight improvement on lower volume - Core Deposit Banking: 42% (vs. current 38%) — higher with increased fees and treasury products - Consumer Banking: 28% (vs. current 24%) — improved through branch rationalization
Overall Firm: - Projected Revenue: $135B (vs. $128.7B today) - Projected Profitability: $21.2B (vs. $19.8B today) - Projected ROE: 9.2% (vs. 8.7% today)
This is still not a 12% ROE firm. But it's a defensible, high-quality, moderately profitable bank. The stock might trade at 1.15x book value and 11.5x forward earnings.
ORGANIZATIONAL CHANGES
By Q4 2030: - Announce the wealth management tier restructuring - Begin branch rationalization (close 200 branches) - Divest equity capital markets business
By Q2 2031: - Complete wealth management transformation - Launch new treasury management product suite - Reduce middle office headcount by 1,500
By Q4 2031: - Achieve the new margin profile - Reset shareholder expectations with new guidance (5-6% organic growth vs. historical 8%)
THE TOUGH CONVERSATION
Some of you may ask: "Isn't this just capitulating to commoditization?"
The answer is yes. And it's the right move.
JPMorgan's advantage has always been that we execute better than competitors. That's still true. But "executing better" in a commoditizing industry means accepting lower margins and finding advantage in scale, distribution, and capital efficiency—not in premium advisory margins.
The next five years will define whether JPM becomes "the Vanguard of banking" (scale, low cost, distributed) or "the exclusive club" (high margin, selective, concentrated). I believe the former is more defensible.
This is not the strategy we imagined in 2024. But it's the strategy the market is forcing us toward. Better to lead than to follow.