Citigroup Inc. said that it plans to continue offering wealth management services through its branches after its Smith Barney combines with Morgan Stanley's brokerage in a joint venture this year, but analysts say that retaining assets and gathering new clients could be an uphill battle.
Last week Citi announced that it hired an industry veteran, Deborah Doyle McWhinney, to run Citi Personal Wealth Management, a newly created division to house its U.S. network of branch-based financial advisers and other financial planning and wealth management assets.
McWhinney, who retired in 2007 as the president of Charles Schwab Institutional, said in an interview last week that Citi Personal Wealth Management will include the wealth management "parts that Citi chose to keep," including a call center for high-net-worth customers and MyFi, an online registered investment advisory platform.
Citi wants to continue offering services to a range of clients from "emerging affluent to high-net-worth," she said.
"We want to start them with one level and service them throughout their lives. These customers have a lot of financial needs throughout their lifetime, and we want to be in a position to cater to those needs. The bank partnership is going to be very, very powerful for us in terms of developing a strong base."
Some analysts said that they were skeptical as to whether Citi would be able to cross-sell wealth management services to its wealthiest customers after the Smith Barney-Morgan Stanley venture is formed. The deal, announced last year, is expected to close next quarter.
"It is just very difficult in this type of market to attract assets, even assets that are sitting in your backyard," said Burton Greenwald, an analyst with BJ Greenwald Associates in Philadelphia. "Smith Barney has a strong brand. I don't think Citi realizes that that takes time to develop."
Geoffrey Bobroff, an analyst with Bobroff Consulting Inc. in East Greenwich, R.I., said attracting assets "could and should take time" for Citi.
Nevertheless, "the branch system still generates a fair amount of wealth traffic," he said. "There is a need for these services in certain parts of the country where Citi has a strong branch presence and an upscale book of business, like the Northeast."
Alex Samuelson, a spokesman for Citi, said that retail wealth management has always been a "deep part of the Citi's heritage." He said that the New York banking company offered an array of investment, insurance and banking products to its wealthy customers through Citicorp Investment Services before Smith Barney absorbed that unit two years ago.
McWhinney, who worked for Bank of America Corp. for 17 years, said that she is aware that this is a very difficult time to cross-sell wealth management products and services, especially through the banking channel, but she is confident that it can be done at Citi.
"What I absolutely believe is that this is a unique opportunity at a very unique time in financial services," she said. "I spent 17 years in banking. I wasn't born yesterday. These are interesting times to respond to, and investors are going through unprecedented changes. We want to create a really nimble organization that hopefully can outmaneuver the competition and offer something different and unique."
McWhinney, who is a former board member of the Securities Investor Protection Corp., said she expects to create an open architecture wealth management platform, though she will not have more specifics until she has been at Citi for 60 days.
Bobroff said Citi has "a lot of relationships with a lot of wealthy customers, but it will still be an uphill battle for customers and assets."
McWhinney said she is not in a position to predict how many assets the unit will gather, but she plans to rely on her experience to develop a strong platform.
"I have had the good fortune of working with a lot of smart people that led organizations through times of change," she said. "The hallmark of what I have learned is that you have to bring customers extremely high service levels, really excellent products offerings and fabulous employees."
She said that she expects to continue cross-selling through the branch-based advisers.
"Nothing is going to change for our advisers in the short run, but I think there will be some real opportunities over time," McWhinney said.
