Frank Campanale, recently ousted from his chief executive officer position with Smith Barney's consulting group, has agreed to stay on in an advisory role with the firm, sources tell MME. Sources did note however, that no contracts had been signed as of late last week, and a Smith Barney spokeswoman was unable to confirm the developments as of press time.

And in spite of published reports that Smith Barney removed Campanale as CEO to pave the way for Smith Barney to push its proprietary products, industry insiders said his ouster was the culmination of growing tensions at the firm. The prevailing school of thought among several industry watchers is that decision-makers at Smith Barney clashed with Campanale's strong-willed personality and his penchant for standing up for what he believes in. While these traits led to Campanale's success as one of the most important leaders in the SMA industry, his unwillingness to change his approach led to friction as Smith Barney's corporate culture evolved, industry executives said.

Smith Barney also felt that the consulting business had reached a mature stage and needed new legs, according to some insiders. Campanale, who has been with the unit since its start in the 1970s, became the CEO of the unit in 1996.

Campanale's apparent decision to remain in an advisory role may surprise many, who said that knowing his uncompromising nature, they did not expect him to accept a lesser position. However, others said it would make sense for Campanale to remain with the firm, if it aligns with his professional and personal goals.

Regardless of the reasons, sources said that the Campanale's exit as CEO will initially make a contingent of brokers feel uneasy, since Campanale was well liked in that community and because there is a cloud of uncertainty surrounding the episode. However, they say those feelings will subside as long as the move doesn't impede the sale of products.

Product-Neutral vs. Proprietary

Some industry watchers have speculated that the rift between management and Campanale stemmed from the firm's desire to push its proprietary products and possibly move away from an open architecture, product-neutral platform - a claim Smith Barney vehemently denies. "It's simply not true," said Susan Thomson, a spokeswoman for Smith Barney."Open architecture and a product-neutral platformhave and continue to be the cornerstones of our continued success."

Thomson points to Smith Barney's upcoming launch of a new product to dispel the notion that it is abandoning its commitment to an open architecture, product-neutral platform. Smith Barney this fall is launching Integrated Investment Services (ISS), a program designed to make monitoring multi-managed separate accounts easier for investors.

"Open architecture has been the fundamental business philosophy and driver of our successful of private client business," said Norm Nabhan, the consulting group's national director. Nabhan, along with Paul Hatch, the group's operating chief, will continue to run the day-to-day operations of the unit until Smith Barney finds a permanent replacement. "It's our continued commitment to meet client needs with asset management alternatives supported by independent and objective research. IIS is a pure manifestation of this commitment," Nabhan said.

Some industry experts agreed with Thomson's and Nabhan's assertions, saying it is highly unlikely that the firm would abandon its open-architecture platform. It would be illogical considering the success of the current business and the good health of both Smith Barney's internal and external products. Smith Barney has been consistently and successfully selling its own products alongside those of other firms for more than 15 or 20 years, they said.

However, there are those who give credence to reports claiming Campanale's ouster as CEO is a signal Smith Barney's business is about to change. "I believe that efforts by Frank to hold the consulting group as an autonomous group within Smith Barney to a large number of financial advisers may be at an end," said a senior industry executive who asked to remain anonymous. "I think that, probably more than anything else, is at the core of this situation."

Thomson said the firm will search both internally and externally for a permanent replacement. Industry sources said Smith Barney will be in no rush to fill the spot since Hatch and Nabhan already were running the day-to-day operations of the business. A lot can be gleaned or inferred about the future direction of the firm based on who is tapped for the CEO consulting group job, sources said. If Smith Barney stays in house and puts a company man or a "yes-man" in the spot, it might be a signal that the firm is looking for someone to simply follow instructions and execute the firm's premeditated plans - which could mean pushing proprietary products. However, if the firm goes out and brings in someone with a strong background in the consulting industry, it will signal the move had more to do with a clash in personalities with Campanale. At this point it's wait and see.

Copyright 2003 Thomson Media Inc. All Rights Reserved.

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