JPMorgan Ditches Proxy Advisors for AI Tool

JPMorgan Chase is fundamentally altering its shareholder voting strategy in the United States by moving away from external proxy advisory firms. The bank's asset and wealth management division will instead utilize a proprietary artificial intelligence tool named Proxy IQ to guide its voting decisions.

This transition positions JPMorgan as the first major investment firm to completely eliminate reliance on outside advisors for its US voting process. The implementation is scheduled for April 1, following a transition period in the first quarter. With $7 trillion in client assets under management, the bank's voting power influences thousands of corporate governance decisions annually.

JPMorgan Chase's asset and wealth management division is abandoning its long-standing practice of using external proxy advisors for shareholder voting advice. The bank announced it is the "first major investment firm to fully eliminate any reliance on external proxy advisors for our U.S. voting process," according to an internal memo. This strategic pivot is designed to reinforce the bank's commitment to voting solely in clients' best interests using its own information advantage.

The transition to the new system is set to take full effect on April 1, following a transition period during the first quarter of the year. The decision comes as the bank manages a massive portfolio of $7 trillion in client assets. This volume gives JPMorgan a vote in thousands of shareholder decisions, covering general governance matters that extend beyond simple financial questions.

Previously, the industry standard involved relying on proxy advisory firms for data collection, advice, and voting recommendations. However, JPMorgan is moving these functions in-house to maintain tighter control over the process.

In place of external human advisors, the asset and wealth management unit is deploying an in-house AI platform called Proxy IQ. According to the internal memo, the tool will cover all aspects of the voting process. JPMorgan stated that Proxy IQ "extends the high bar of independent analysis that our portfolio managers, research analysts and stewardship teams have always applied to every vote."

The platform utilizes the bank's existing in-house expertise to handle every detail of the voting process, including:

• Data selection
• Research selection
• Analysis of voting criteria

Proxy IQ is capable of aggregating and analyzing proprietary data from more than 3,000 annual company meetings. This capability allows the bank to process vast amounts of information internally without external consultation.

The move away from proxy advisors aligns with recent political scrutiny of the industry. The Trump administration signed an executive order in December calling for increased oversight of proxy advisors. The order stated that "Proxy advisors regularly use their substantial power to advance and prioritize radical politically-motivated agendas."

Two specific firms, Institutional Shareholder Services (ISS) and Glass Lewis, were named in the executive order and were previously used by JPMorgan. While JPMorgan did not explicitly cite the executive order as the reason for the switch, the timing reinforces the bank's stance on maintaining independent control over its voting influence.

CEO Jamie Dimon has previously emphasized a commitment to winning the AI arms race, supported by the bank's substantial $18 billion technology budget. This investment in AI suggests a broader trend of financial institutions bringing operations in-house to leverage technological advantages.

JPMorgan Chase's adoption of Proxy IQ marks a significant departure from industry norms regarding shareholder voting. By leveraging artificial intelligence to replace external advisory services, the bank aims to secure greater independence and alignment with client interests. As the April 1 deadline approaches, the financial sector will be watching closely to see if other major investment firms follow JPMorgan's lead in the AI-driven governance space.