The sudden departure last week of Deborah McWhinney from her role as head of Citigroup's personal banking and wealth management unit raises questions for brokers, advisers, customers and the company's executive management team as the unit pursues the highly coveted mass-affluent market.

McWhinney, who joined Citi in March 2009 after a successful run atop Schwab Institutional, will now take over as head of Citi's global digital merchant acquiring group, according to an internal memo circulated Feb. 14, reporting to Paul Galant, the chief executive of Citi's global enterprise payments group.

The abrupt management shake-up leaves Citi with a dilemma, according to financial services analysts and former Citi employees. Will the bank stay with the fee-based adviser strategy that sparked a massive defection of brokers and their accompanying books of business now that its champion has moved on?

And will McWhinney's eventual replacement have the guts, skill and upper-management support to do whatever is necessary to soothe the concerns of its remaining brokers and advisers, and right its personal banking and wealth management unit to keep pace with innovative competitors who are aggressively targeting about 13 million potential clients with between $50,000 and $250,000 in investable assets?

McWhinney's departure "is very surprising," said Alois Pirker, an analyst at Aite Group. "They defined a strategy, a pioneering fee-based model that's not very common, and a change like this so early on certainly puts the whole effort in question."

"I just wonder if this is just an executive move or if the whole strategy is in question," he said.

McWhinney would not comment for this story.

A former Citi manager who did not want to be identified said that it was shocking that someone in charge of such a high-profile sales management group would be "moved to some kind of back-office position," especially considering McWhinney's experience and the magnitude of the changes she implemented in the personal banking and wealth management business.

"To be put in a digital-operations-type thing, I don't know why she'd take it," the ex-Citi manager said. "Maybe it is a good opportunity. She doesn't need the money. It's hard to say what the real story is, and we may never know. What we do know is that her strategy didn't sit real well with the retail bank broker program, which is the lion's share of their business."

And while Galant praised McWhinney for her "excellent job of setting strategy and driving execution" during her two-year run atop the unit, the numbers tell a different story.

Besides the defection of between 150 and 200 brokers — and their clients — following the spinoff of its Smith Barney brokerage unit in 2009, Citi missed analyst estimates in its latest quarter by 3 cents a share, with its securities and banking unit sales, down 37% sequentially, and fixed-income sales, off 58% sequentially, at least partially responsible.

From a big-picture perspective, some analysts wonder if Citi is just conceding the personal banking and wealth management market to competitors, particularly in the U.S., considering 59% of its total sales and 76% of its net income last quarter was derived from international operations.

"What's troubling is that as a big retail bank, [Citi] doesn't have a mass-affluence strategy," Pirker said. "Whatever importance this unit had is just taking a nosedive with her stepping aside. It all still depends on who they bring in, and I suspect that if they were going to give it up right away, they would have let McWhinney just kind of wind it down."

Ironically, one of the options still available to Citi is scraping the fee- and team-based adviser strategy in favor of a pure online strategy like the one Bank of America Merrill Lynch launched last month that was the brainchild of Sallie Krawcheck, the former head of Citi's Smith Barney adviser unit.

Merrill Edge offers banking and investment accounts through B of A ATMs and branches as well as online, mobile and call center support for the mass-affluent market.

"Krawcheck and her whole group from Citi who were working on myFI, its old online strategy, learned all the hard lessons at Citi, and then rolled out a slightly different version at Merrill Lynch," Pirker said. "It was there for Citi all along."

As for McWhinney, Galant said her background in the payments industry at Visa International and B of A makes her an ideal choice to lead a crucial group in Citi's global enterprise payments unit, which was launched just this past October. As head of digital merchant acquiring, McWhinney will attempt to parlay her wealth management skills into signing up new merchants, online and off, willing to pay either a fixed fee or percentage per transaction for Citi's back-end services for credit card and debit card payments.

"The people that I run into in merchant acquiring come from all different backgrounds," said Adil Moussa, an Aite analyst. "There's no one set of skills you need to be successful. Sales is sales is sales. When you're dealing with merchants, you're dealing with human beings. As long as you have a good value proposition, they'll sign up with you."

B of A, First Data and Chase Payment Tech dominate the digital merchant acquisition terrain right now, with Citi ranking somewhere near the bottom of the top 20 providers, according to Moussa.

Meanwhile, Citi's personal banking and wealth management unit remains in limbo, still shellshocked by the departure of its leader and searching for an identity.

"Considering they haven't even named an interim replacement and didn't have a replacement already in mind, I think it suggests that maybe management feels there's not a ton there to be worried about," Pirker said.

"If they have an ace up their sleeve and can find the right person, maybe it will give them a second" chance, he said. "But right now, it doesn't look good."

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