Some Citibank branches are beginning to look like credit crisis centers.
Signs promoting debt management seminars greet customers as they walk in. About half a dozen pamphlets and fliers suggesting ways of reducing debt are prominently displayed. If busy customers miss those guides, Citibank's automated teller machines are spewing messages about worrisome debt levels.
The Citigroup unit is emphasizing credit-management help at a time of declining delinquency and bankruptcy rates and low unemployment. But the executive in charge of branch banking wants to help his customers get out from under the debt they have accumulated and, in the process, solidify relationships with them.
Joseph J. Plumeri, head of Citibanking North America, points to the $7,000 outstanding on the average American's credit card accounts, the negative savings rate, and inadequate insurance coverage, which Citibank and other Citigroup affiliates might rectify.
Mr. Plumeri, who recently said he would resign from Citigroup at yearend, also heads Primerica, a unit that offers products and financial planning to middle-income consumers. He has focused on revitalizing branches with a sales orientation, and his successor, Marge Magner, says she is committed to continuing that strategy.
"Debt is a problem. Debt management is a problem," Mr. Plumeri insisted. "We have too many credit cards and too much card debt."
The statement comes from an executive of the largest credit card issuer in the world, which manages $70 billion of card loans.
That is not a contradiction, say industry experts. They see Citigroup cleverly trying to open consumers' financial closets in a helpful way that would reveal assets Citibank might otherwise not have known about.
Over the past nine months, Citibank has been testing a product called CitiPro, a free financial analysis or plan, about 15 to 20 pages in length. CitiPro was launched officially last week in Chicago, though it exists in pilot form in New York, Florida, California, Nevada, and the District of Columbia.
About 3,000 Citi representatives have been trained to administer CitiPro. Participants are asked to produce, for example, past pay stubs, income tax forms, insurance policies, and statements from savings, investment, retirement, loan, and employee benefit accounts.
The idea is to discover sources of income or investments that Citibank can capture. Its 450 domestic branches are visited by three million customers per month.
Financial plans typically "uncover 80% of a customer's assets that are outside of the bank," said Robert R. Blagojevich, chairman and chief executive officer of Invest Financial Corp., a Tampa company that provides investment services for small to midsize banks. Moreover, financial planning can produce substantial fee income. Mr. Blagojevich said one plan typically generates $2,200 of commissions from the products the bank sells.
The model for CitiPro is Primerica's financial planning approach. But Mr. Plumeri maintains that banks have a distinct advantage. "At Primerica, people look for clients," he said. "At the bank people walk in every day."
In Chicago, Mr. Plumeri said bank representatives will greet customers as they walk in, inviting them to complete a CitiPro analysis.
"The reason cross-selling has not been successful in financial services is banks don't learn about the client," Mr. Plumeri said. CitiPro allows Citi to be proactive, whereas most banks wait for customers to ask about products, he said.
After the customer information is gathered, it becomes part of a profile used by Citi to market more targeted products. It becomes part of a data base, Mr. Plumeri said, "no different than if someone had applied for a loan."
Not-for-profit credit counseling agencies that help consumers who are in serious financial straits are not at all happy with Citibank's liberal use of the term "debt management." In banking parlance, debt management describes creditors' workouts of deeply indebted customers, which often involves reducing interest rates or consolidating repayment terms for multiple accounts.
"Debt management plans are for those so far in debt they need concessions to avoid bankruptcy," said Durant Abernethy, president and chief executive officer of the National Foundation for Consumer Credit, an umbrella group of 190 nonprofit counseling agencies with 1,500 branches nationwide.
"I don't think the retail people [at Citi] realize that this term signals people in trouble," Mr. Abernethy said.
Luther R. Gatling, president of Budget and Credit Counseling Services Inc. of New York, questioned the appropriateness of a bank's offering debt management advice.
"When there are products to sell, the motivation to help consumers is wrong," Mr. Gatling said. If a customer with serious financial problems approaches Citibank, Mr. Gatling said, "is the bank going to tell the customer how to parcel out his money or is it going to be concerned about" what is owed to Citibank?
Mr. Plumeri took umbrage at that, saying: "Credit counseling agencies should say, 'Finally there is a bank that before it gives a loan takes the time to give advice.' "
Gary Schatsky, a spokesman for the National Association of Personal Financial Advisors, said financial plans from banks are likely to proliferate. Banks can assert the advantage of "location and familiarity," Mr. Schatsky said, but "the drawback is that they are viewed as a sales entity."
Mr. Schatsky does not perceive banks as competitive threats to his association's members. "The sales community won't ever be a competitor of fee-only clients," he said. "The more sophisticated clients are often looking for an adviser who is not trying to sell a product."
Citi is not the first bank to market financial planning, but it appears to be one of the first offering it to people in the middle to lower income brackets.
The New York bank appears to be "targeting people who may not be creditworthy," Mr. Blagojevich said. "That's fairly unique."
Invest Financial provides plans for customers with average net worth of $375,000. This year, 10,000 households completed an Invest program.
For the past 18 months, Chase Manhattan Bank has been offering free financial plans in its branches, and American Express Co., through its Financial Advisors unit, has been in the business for years.
Jeff Lauber, vice president of advice services for American Express Financial Advisors, predicted that more banks will jump into this market. "Advice is a key buzzword," he said. "But it will take [banks] a while to get there. It requires having a range of products to offer and extensive training, and that is a big chunk to bite off."
Amex's plans cost $250 to $10,000, Mr. Lauber said. Its 9,700 advisers are independent operators who depend on referrals and, like Primerica representatives, must hunt for prospects. One-third of Financial Advisors' clients are American Express cardmembers.
Even nonprofit credit counseling agencies are jumping into financial advising. Debt Counselors of America in Herndon, Va., is peddling a financial plan that costs $425. Steve Rhode, president of the agency, justified the hefty fee, saying that "financial planners are charging $75 an hour." He said his price is "still cheaper than filing for bankruptcy, which can cost $500 to as much as $2,000" with attorneys' fees.
This year-old program involves 15 hours of help, Mr. Rhode said. "I know $425 seems like a lot, but it is a small price to pay for a solution to your problems."