You Invest: JPMorgan Chase’s Answer to Deposit Displacement

JPMorgan Chase recently announced its entry into the digital investing market. According to CNBC:

"The bank is rolling out a digital investing service that comes bundled with free or discounted trades, a sophisticated portfolio-building tool and no-fee access to the bank's stock research. Anyone who downloads J.P. Morgan's mobile banking app or uses its website can get at least 100 free trades in the first year. When its engineers flip a switch in coming days, more than 47 million people who already use the company's banking app or website will gain access to the new service, called You Invest.”

Photo source: Jaden Urbi | CNBC

Note that (for now) You Invest is not a robo-advisor tool. The exec in charge of the app said the bank will unveil a robo-advisor tool under the You Invest brand in January, but declined to say whether the service will be free (as CEO Jamie Dimon hinted at back in 2016).

CNBC also reported that the bank is:

"Targeting two broad groups. The first are people who have never invested before, including millennials, and who may be overwhelmed with the sheer number of investment choices. The second group are people who have a Chase account but invest elsewhere."

JPMorgan Chase's You Invest is a solid move to combat deposit displacement--the displacement, or diversion, of funds away from traditional checking accounts into other accounts. According to consulting firm AT Kearney, by 2020, robo-advisor accounts will have $2 trillion in assets--half of it coming from funds currently sitting in deposit accounts.

The notion that Chase is targeting "Millennials who have never invested before and overwhelmed with the sheer number of choices" is nonsense. If you've never invested before and are overwhelmed by the number of choices you have, how does an app that provides no advice help you with those challenges? Answer: It doesn't.

You Invest is all about deposit protection, and the only real target here are Chase deposit product customers who either are investing elsewhere, or who might end up investing elsewhere over the next few years as the robo-advisor market gains traction

Chase can afford to give away the trades that You Invest customers will make for two reasons: 1) Those trades aren't really costing Chase anything anyway, and 2) Chase will be making those trades with money that was probably sitting in Chase bank accounts (my understanding is that if the bank sets up the You Invest account under its broker dealer and sets up the sweep process, they can use non-invested funds to make loans).

Ron Shevlin
Director of Research
Cornerstone Advisors