Selling Secrets of Phone Users to Advertisers

Now, smartphones know everything — where people go, what they search for, what they buy, what they do for fun and when they go to bed. That is why advertisers, and tech companies like Google and Facebook, are finding new, sophisticated ways to track people on their phones and reach them with individualized, hypertargeted ads. And they are doing it without cookies, those tiny bits of code that follow users around the Internet, because cookies don’t work on mobile devices.

Privacy advocates fear that consumers do not realize just how much of their private information is on their phones and how much is made vulnerable simply by downloading and using apps, searching the mobile Web or even just going about daily life with a phone in your pocket. And this new focus on tracking users through their devices and online habits comes against the backdrop of a spirited public debate on privacy and government surveillance.

On Wednesday, the National Security Agency confirmed it had collected data from cellphone towers in 2010 and 2011 to locate Americans’ cellphones, though it said it never used the information.

“People don’t understand tracking, whether it’s on the browser or mobile device, and don’t have any visibility into the practices going on,” said Jennifer King, who studies privacy at the University of California, Berkeley and has advised the Federal Trade Commission on mobile tracking. “Even as a tech professional, it’s often hard to disentangle what’s happening.”

Drawbridge is one of several start-ups that have figured out how to follow people without cookies, and to determine that a cellphone, work computer, home computer and tablet belong to the same person, even if the devices are in no way connected. Before, logging onto a new device presented advertisers with a clean slate.

“We’re observing your behaviors and connecting your profile to mobile devices,” said Eric Rosenblum, chief operating officer at Drawbridge. But don’t call it tracking. “Tracking is a dirty word,” he said.

Drawbridge, founded by a former Google data scientist, says it has matched 1.5 billion devices this way, allowing it to deliver mobile ads based on Web sites the person has visited on a computer. If you research a Hawaiian vacation on your work desktop, you could see a Hawaii ad that night on your personal cellphone.

For advertisers, intimate knowledge of users has long been the promise of mobile phones. But only now are numerous mobile advertising services that most people have never heard of — like Drawbridge, Flurry, Velti and SessionM — exploiting that knowledge, largely based on monitoring the apps we use and the places we go. This makes it ever harder for mobile users to escape the gaze of private companies, whether insurance firms or shoemakers.

Ultimately, the tech giants, whose principal business is selling advertising, stand to gain. Advertisers using the new mobile tracking methods include Ford Motor, American Express, Fidelity, Expedia, Quiznos and Groupon.

“In the old days of ad targeting, we give them a list of sites and we’d say, ‘Women 25 to 45,’ “ said David Katz, the former general manager of mobile at Groupon and now at Fanatics, the sports merchandise online retailer. “In the new age, we basically say, ‘Go get us users.’ “

In those old days — just last year — digital advertisers relied mostly on cookies. But cookies do not attach to apps, which is why they do not work well on mobile phones and tablets. Cookies generally do work on mobile browsers, but do not follow people from a phone browser to a computer browser. The iPhone’s mobile Safari browser blocks third-party cookies altogether.

Even on PCs, cookies have lost much of their usefulness to advertisers, largely because of cookie blockers.

Responding to this problem, the Interactive Advertising Bureau started a group to explore the future of the cookie and alternatives, calling current online advertising “a lose-lose-lose situation for advertisers, consumers, publishers and platforms.” Most recently, Google began considering creating an anonymous identifier tied to its Chrome browser that could help target ads based on user Web browsing history.

For many advertisers, cookies are becoming irrelevant anyway because they want to reach people on their mobile devices.

Yet advertising on phones has its limits.

Civil Practice: Auto Dealer Held Personally Liable for Selling 'Stolen' Car

A car dealer may be held personally liable for selling an allegedly stolen vehicle, an Allegheny County Court of Common Pleas judge has ruled.

DealBook: British Government Takes Step in Selling Stakes of Bailed-Out Banks

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DealBook: Selling the Home Brand: A Look Inside an Elite JPMorgan Unit

Joshua Lott for The New York TimesJohnny Burris, a former private client adviser at JPMorgan Chase, says he was fired last year because he refused to push investors toward the bank’s in-house financial products.

Everything is scripted for the brokers in an elite group at JPMorgan Chase: the sales pitches; the personal voice mail message; even the preferred desk candy, Glitterati Fruit & Berry.

In a three-inch-thick training manual, the bank, the nation’s largest, details how to recruit clients, pitch products and, ultimately, close the deal — or, as JPMorgan puts it, “get to Yes!”

The manual is part of an intensive, weeklong training course. But it is only the beginning for JPMorgan’s army of top advisers, who are critical to the bank’s rapid expansion into wealth management, a fast-growing and highly profitable business. Interviews with more than 20 current and former JPMorgan brokers, as well as hours of recorded conversations between a former adviser and his bosses, portray a sales-driven culture that is unusually aggressive, even by Wall Street standards.

While financial advisers at other firms are typically free to offer a variety of investments, JPMorgan pressures brokers to sell the bank’s own products, according to the current and former employees. Several advisers who resisted said they were told to change their tactics or be pushed out.

“We were not able to do the right things for our clients,” said Brad Scott, a financial adviser who quit JPMorgan in April 2012 and now works at LPL Financial. Mr. Scott said that an executive told the brokers on a conference call, “You are not a money manager; you are an asset gatherer.”

JPMorgan disputes the characterization. It says it puts its clients’ needs first and devotes considerable resources to assembling high-quality investments, which include a mix of mutual funds managed by JPMorgan and by third-party firms.

The inner workings of the prestigious program, known as Chase Private Client, provide rare insights into JPMorgan’s wealth management business, which is central to the bank’s growth strategy.

Current and former brokers in the program contend that the bank, at times, prioritized profit to the detriment of its clients. While such criticism is not uncommon in the financial industry or other sales-driven businesses, the brokers say JPMorgan took an extreme approach.

To bolster sales, said the advisers, many of whom spoke on the condition of anonymity because they feared retribution, JPMorgan largely pushes its own bank-branded investments, which include a mix of mutual funds. While the practice can be legal, competitors have moved away from such investments after facing perceived conflicts. The concern is that, driven by fees, banks will push their own products over lower-cost options with stronger returns.

Some JPMorgan brokers said that the bank did not allow them to disclose the performance of the investment portfolios they marketed until customers bought the products, so prospective clients did not have a clear understanding of what they were buying. JPMorgan says it does provide some performance information to potential clients, but the return figures do not take the fees into account.

Some advisers also worried that the in-house products lacked the usual safeguards from the Securities Investor Protection Corporation, the private, nonprofit group that helps the clients of defunct brokerage firms. While the chances of JPMorgan failing are remote, several brokers said they wanted the added layer of protection, especially for retirees.

Other advisers, though, noted the advantages of the Chase Private Client program, citing the extensive expertise of the bank’s money managers and investment professionals. “I’ve had the opportunity to work with many different groups and managers over these past years,” said Anthony Caravetta, who has been an adviser at Chase Private Client since 2011, “and I have never once felt pressure to sell” JPMorgan products.

A JPMorgan spokeswoman, Kristin Lemkau, said the bank’s products were “well diversified and designed by expert asset managers.” She added that brokers had the option to sell third-party products if it made sense for clients.

Still, some brokers who deviated from the program said they faced repercussions.

Johnny Burris, a former financial adviser in Sun City West, a retirement community in Arizona, was called into a meeting with his managers in early July to discuss why he wasn’t selling the bank’s products, he said. Mr. Burris said he favored traditional mutual funds with strong records and the usual protections.

“At the end of the day, obviously, we always do what is most appropriate for the client,” said Andrew Held, one of Mr. Burris’s managers, according to a recording that Mr. Burris made of the conversation, which was reviewed by The New York Times. But he went on to tell Mr. Burris that it looked “a bit odd” that he hadn’t “done any JPMorgan business” in the last three months.

Late last year, Mr. Burris was fired from JPMorgan. The bank said he “was terminated for not complying with regulatory requirements and not following firm procedure.”

Mr. Burris says JPMorgan fired him because of his resistance to selling the bank’s products. He has since filed an arbitration claim against JPMorgan for wrongful dismissal.

Ms. Lemkau, the JPMorgan spokeswoman, defended the bank’s practices, noting that Mr. Burris secretly taped his colleagues. “We believe it is unethical and unfair for Mr. Burris to use these piecemeal conversations to make his case,” she said. Mr. Burris said he recorded the conversations because he was concerned about his career after being pressured to sell JPMorgan products.

Within JPMorgan, Chase Private Client is considered a prestigious perch. The program’s customers typically must have $250,000 in deposits or $500,000 in investments.

In recent years, the bank has poured millions of dollars into the program, which offers retirement advice and investment products through a vast network of retail branches. By the end of 2012, Chase Private Client had 1,218 locations, up from 262 a year earlier. Mr. Caravetta said Chase Private Client investments gave clients “the ability to leverage our intellectual capital.” That way, he said, “clients don’t have to play adviser lottery as they do with some other investment firms.”

As JPMorgan expands the program, it is cutting back in less profitable areas and those crimped by new regulations, like trading. On Tuesday, the company said it would eliminate 4,000 jobs in consumer banking through attrition, largely from the lower-level positions in the bank’s branches, rather than from its pool of financial advisers.

To staff Chase Private Client, JPMorgan often looks within its ranks. Brokers with top sales records are routinely approached, the current and former financial advisers said.

When Mr. Burris was asked to join the program, one of his managers, Philip Haigis, indicated that there were a few “glitches,” according to tapes of the conversation. He said that Mr. Burris was not selling enough in-house products.

The bank, Mr. Burris’s bosses explained, examines the amount of JPMorgan-branded portfolios of mutual funds that brokers sell. “If you look at our firm, 50 percent of all our sales go” to those investments, Mr. Haigis said. Furthermore, he said, such products draw less scrutiny from the Financial Industry Regulatory Authority, which polices Wall Street.

“Chase makes investment recommendations based on what’s right for the client, not how heavily a product may be regulated, and managed products are subject to significant regulatory oversight,” said Ms. Lemkau, the JPMorgan spokeswoman.

Mr. Burris tried to explain to Mr. Haigis that his strategy achieved better returns.

“If you build all these individual portfolios, you also are the one that has to manage and tweak them and move them,” Mr. Haigis responded.

“That’s our job — that’s what we’re paid to do,” Mr. Burris said.

“Or you could be paid to let other people do it,” Mr. Haigis said.

JPMorgan would not make Mr. Haigis or Mr. Held, the other manager, available for comment.

Despite his bosses’ concerns, Mr. Burris was elevated to the elite program.

After joining the program, brokers attend training. The new recruits sit through sessions with titles like “Positioning JPMorgan Investments” and “Banking Product Overview.”

Mr. Burris and Mr. Scott, the former JPMorgan adviser who now works at LPL Financial, said that during their training, they were discouraged from discussing the returns of the bank’s products and told that they should focus instead on the overall story. “Chase Private Client is part of a firm with a proud history,” the training manual said. The bank played “an important role in helping manage the credit crisis through the acquisition of Bear Stearns.”

Shortly after his training, Mr. Burris was again called into a meeting about his sales.

In June 2012, Mr. Held acknowledged that the “bank-managed products are not the be-all, end-all.” But, he said, they are the same product offered “to clients that have $50 million. So there’s a lot of thought, a lot of intellectual capital and a lot of value.”

He added, “You need to be presenting the private-bank, JPMorgan products and managed investment solutions.”

“I’m not questioning your sales numbers,” Mr. Held said, according to Mr. Burris’s recording. “What I’m saying to you is you’re not embracing the JPMorgan private-bank platform,” he said, later adding: “You’re not doing the presentation that you were trained to do in New York.”

Mr. Burris, who now works at Oppenheimer & Company, was fired four months later.

Midsize-Firm Study Suggests Culture Is a Big Selling Point

By Leigh Jones All Articles 

The National Law Journal

February 22, 2013

Maintaining a collegial culture is the key advantage that midsize law firms believe they enjoy in recruiting lawyers, according to a study by Georgetown University Law Center.

The study, a collaboration between the law school and law firm referral network TAGLaw, revealed that 70 percent of midsize law firms ranked having a strong culture as the first- or second-best way to woo prospective hires.

"Midsize firms are really seeing that as a competitive advantage -- particularly as large firms are having a lot of challenges managing their cultures," said Lisa Rohrer, director of executive education and a research fellow at the Center for the Study of the Legal Profession at Georgetown University Law Center.

The survey results, released Tuesday, were provided by leaders at 68 law firms with between three and 500 attorneys. The median size was 40 attorneys. Of those responders, about half were located in North America and one-quarter each in Europe and Latin America.

Culture can mean different things to different firms, Rohrer said. In general, it means the glue that holds a firm together, she said. "It's how they treat each other, how they think of themselves separately from their own individual books of business."

Among other findings, the firms tended to avoid relying on lateral hires and especially mergers as growth strategies, with 90 percent citing organic growth as a major future revenue driver. Some 57 percent planned to rely on lateral hires; only 19 percent expected to expand through mergers.

That lack of interest in mergers was partly due to a desire to remain independent, with many respondents citing preserving culture as an important reason not to merge.

Asked what measures they had taken since 2007 to improve profitability, 14 percent of the firms with revenue increases of 10 percent or more had done so by freezing or cutting associate pay. Of the firms that had increased revenue by 10 percent or less, 40 percent had frozen or cut associate pay. Ninety-two percent of the firms reported that most of their lateral hires lived up to expectations.

The strategic issues of the greatest concern to the firms was aging or retiring partners, particularly at firms with 10 percent growth or less since 2007. Of those firms, 45 percent reported that issue as the most worrisome.

Maker of Buckyballs Says It Will Stop Selling Them

The maker of the magnetic toys called Buckyballs announced on Monday that it would stop selling them this week because of a legal and public relations dispute with federal regulators.

In a statement, the company, Maxfield & Oberton Holdings, said the decision was caused by a “long-running and costly legal dispute” with the Consumer Product Safety Commission, which said that Buckyballs and similar products made from rare-earth magnets were dangerous because children have been severely injured after swallowing them.

In July, the safety commission took the relatively rare step of filing an administrative complaint against Maxfield & Oberton, demanding that the company stop making the product, warn consumers that Buckyballs are dangerous and offer them a refund. Eleven other manufacturers voluntarily recalled their products and halted production.

“Given the precedent-setting legal case before us and the continued badgering by the C.P.S.C., Buckyballs will go the way of Crystal Pepsi and the DeLorean,” Craig Zucker, the company’s chief executive and founder, said in a statement.

Buckyballs’ Web site has a clock ticking off the seconds until the time sales are shut down on Thursday, an event called the Buckypocalypse.

Buckyballs’ problems are not confined to federal regulators. The estate of the inventor Buckminster Fuller, for whom the toys are named, has filed a lawsuit against the company in California federal court for misappropriating his name.

On Nov. 5, Maxfield & Oberton was dealt a setback when the judge in the case, Lucy H. Koh, denied its motion to dismiss the case. The attorney for Mr. Fuller’s estate could not be reached for comment.

In an interview, Mr. Zucker described the Fuller lawsuit as frivolous but said that it nonetheless was another challenge for his small company. The company had seven employees and 150 sales representatives in the summer; by the end of the week, it will have just one employee, he said.

The decision to stop sales ends what had been a story of entrepreneurial success by two friends from Brooklyn, who came up with the idea of marketing rare-earth magnets as Buckyballs in 2009. The magnets, which come in a variety of sizes, can be linked into a seemingly endless number of shapes and designs; they were an instant hit.

But the safety commission said children were swallowing the powerful magnets, which can attract each other in the intestines and cause blockages or tears. The commission estimated that there were 1,700 instances a year over the last three years in which rare-earth magnets had been swallowed and had prompted an emergency room visit.

Mr. Zucker maintained that Buckyballs had been marketed to adults and that the packaging had been covered with safety warnings. But in deciding to file an administrative complaint, the commission said the warnings simply had not been enough to prevent children from swallowing the magnets.

Scott Wolfson, a spokesman for the safety commission, said the complaint against Maxfield & Oberton continued because the company had not yet agreed to recall its products and refund its customers.

The agency is also pursuing similar claims against two other companies, Zen Magnets of Denver and Star Networks USA of Fairfield, N.J., which sells Magnicube Magnet Balls and Magnet Cubes. Star Networks had agreed to stop selling its products but reversed its decision, Mr. Wolfson said.

Company officials could not be reached for comment.

Shihan Qu, founder of Zen Magnets, said the company was considering selling the magnets individually, rather than in packs of a few dozen, as a possible way to avoid a clampdown by federal regulators.

“Banning magnets is ridiculous,” he said in an e-mail. “Magnets work exactly as they should, and are only dangerous if misused.”