Advisory assets are rising at Citigroup Inc.'s post-Smith Barney brokerage after its controversial move of transaction-heavy advisers to a fee-only platform serving just wealthy clients.
"The number of households with over $200,000 in assets is up significantly year over year, and that's after downsizing some people and after attrition," said Deborah McWhinney, the president of Citi's personal banking and wealth management unit. She declined to specify a number but said the average account size is growing.
McWhinney said that Citi is not dictating minimums for client accounts but that "usually they will have about $250,000 to feel comfortable in a fee-based structure, given the level of service that we would provide." Clients below that asset level go to a call center that Citi calls the National Investor Center.
It now has nearly 400 investment advisers, down from about 600 before the bankwide strategic shift, according to published reports. "I knew not all of them could make it, and that has certainly played out," McWhinney said, "but I'm really pleased with the teams we've formed, and we've had a good reception for our external [registered investment adviser] channel, so all in all, the progress is good."
Teams vary geographically; the largest is 12 advisers, and the smallest is four. Each has a senior leader or co-leader, and leaders are either in training to obtain, or already have, the certified financial planner designation. "Other team members get a lighter version, but we're training them all on fiduciary responsibilities," McWhinney said.
The teams are in the New York tri-state area, the District of Columbia, Chicago, Florida, California and Texas, in order of market size. "Teams are made up of advisers who have different skill sets but who complement each other in terms of approaches and value propositions," McWhinney said. "We've moved from a proximity-based program to one that's based on expertise, so we can find clients the right help."
McWhinney's plan is to bolster Citi advisers' expertise with help from independent RIAs, particularly in areas where the bank's coverage is spotty, such as Northern California. The bank is still doing due diligence on which RIAs it would work with; pilot programs are to be run in the San Francisco Bay Area and in the New York area, where Citi advisers have the most potential clients and could use the support. Published reports suggest that RIAs will pay Citi referral fees.
While shunting to an 800-number the smaller clients used to working one-on-one with an adviser, McWhinney touts the acumen of Citi's call-center staff, all of whom are series-7-licensed and some of whom are certified financial planners. Besides serving sub-$250,000 clients, the call center is to work with wealthy people who want to self-direct their investments, and with wealthy clients outside its investment advisers' geographic reach.
McWhinney's program is getting praise from the new boss, Manuel Medina-Mora, who succeeded Terri Dial as the head of Citigroup's U.S. consumer banking operations in January. "He said he really likes the direction we're going in, just do it faster," McWhinney said. "His exact quote was to 'have a sense of urgency.' "
Not all Citi advisers are quite so gung-ho, according to a former Citi manager on the West Coast who asked not to be named. "Some people are happy, but many advisers have no place in the new order," he said. For those left over, the fee-only model is a challenge, especially for California advisers. This is because their fishing pools are former savings and loan branches that Citi acquired but which retain the client base they had before; these people are not the "upscale clients Citi has back East," the former manager said. "It's going to be an interesting row to hoe whether they can replace their old blend of transactions and advisory."
Citi's new model, though, merely pushes harder on the advisers who were already aggressively pursuing fee-based accounts to focus on their "A" clients, and the bank has adopted a two-year compensation structure to help them shift to fees. "Being exposed to the wire house at Smith Barney exposed us to what's profitable and what doesn't work," said Peter Darke, an adviser in senior adviser Kathy Feeney's group in Washington. "This is a great experiment."
