While it has caused massive upheaval for transaction-heavy advisors at Citi’s post-Smith Barney brokerage operation, program head Deborah McWhinney says the effort to move all of its advisors to a fee-only platform serving only wealthy clients is starting to bear fruit.
“I’ve been very pleased with the growth of our advisory assets,” says McWhinney, president of Citi Personal Banking and Wealth Management, in an exclusive interview with Bank Investment Consultant.
While she declined to give actual figures, she says that the average account size is growing. “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,” she says.
McWhinney says Citi isn’t dictating any minimums as far as client accounts are concerned, but “usually they will have about $250,000 to feel comfortable in a fee-based structure, given the level of service that we would provide,” she says. Clients below that asset level will go to a call center Citi calls the National Investor Center.
Citi now has close to 400 investment advisors, down from around 600 before the bank-wide strategic shift, according to published reports. “I knew not all of them could make it, and that has certainly played out, but I’m really pleased with the teams we’ve formed and we’ve had a good reception for our external RIA channel, so all in all the progress is good,” McWhinney says.
Teams vary geographically, with the largest being 12 advisors and the smallest being four. They have a senior lead or a co-lead, like a typical independent firm McWhinney worked with as a president of Schwab Institutional prior to joining Citi, and leaders are either in training for or already have a CFP designation. “Other team members get a lighter version but we’re training them all on fiduciary responsibilities,” McWhinney says.
The teams are in the New York tri-state area, Washington, D.C., Chicago, Florida, California, and Texas, in order of market size. “Teams are made up of advisors who have different skill sets, but who complement each other in terms of approaches and value propositions,” McWhinney says. “We’ve moved from a proximity-based program to one that’s based on expertise, so we can find clients the right help.”
Citi advisors are currently being trained to put a team together—Citi is now actively recruiting advisors to work in its team-based structure—how to position and brand their team and how to create a mission statement for a team. “We believe that by treating advisors like traditional teams, they’ll start to think of themselves more entrepreneurially, which is a big step towards their success,” McWhinney says.
McWhinney’s plan is to bolster Citi advisors’ expertise with help from independent registered investment advisors (RIAs), particularly in areas where the bank’s coverage is spotty, such as Northern California. The bank is still conducting due diligence on which RIAs it will work with; a pilot program will run in San Francisco’s Bay Area and in the New York Metro area, where Citi advisors have the most potential clients and could use the support. Published reports suggest that RIAs will pay Citi a fee for the referrals.
While shunting smaller clients used to working one-on-one with an advisor to an 800-number, McWhinney touts the acumen of Citi’s call-center staff, all of whom are Series 7s and some are CFPs. Besides serving sub-$250,000 clients, the call center will also work with wealthy people who want to self-direct their investments and for wealthy clients outside the geographical reach of its investment advisors.
Citi’s investment program is also bolstering its ties to retail branches in a new initiative launched April 1. “We have an agreement with the retail bank based on the quality, not the quantity, of referrals,” McWhinney says. “The cutoff in the past was $10,000; the new agreement is up significantly from that.”
McWhinney’s program is getting props from the new boss, Manuel Medina-Mora, who replaced Terri Dial as head 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 says. “His exact quote was to ‘have a sense of urgency.’”
Not all Citi advisors are quite so gung-ho, according to a former Citi manager on the West Coast who asked not to be identified. “Some people are happy, but many advisors have no place in the new order,” he says. For those left over, the fee-only model is a challenge, especially advisors in California. That’s because their fishing pools are former savings and loans branches that Citi acquired, but they still retain the same client base they had before, and those aren’t the “upscale clients Citi has back East,” the former manager says. “It’s going to be an interesting row to hoe whether they can replace their old blend of transactions and advisory.”
For advisors already aggressively pursuing fee-based accounts, though, Citi’s new model merely pushes them harder to focus on their A-clients, and the bank has a two-year compensation structure in place to help them transition to fees. “From where we're sitting it makes a lot of sense,” says Peter Darke, an advisor in senior advisor Kathy Feeney’s group in Washington, D.C. “Being exposed to the wirehouse at Smith Barney exposed us to what's profitable and what doesn't work,” Darke says. “This is a great experiment. If we can direct small accounts to our National Investor Center, and do it successfully, then I could see our competitors moving in that direction too.”