WealthManagement Magazine

Citicorp Merger Could Stall Salomon Smith Barney's Bank Program

A March 20 story in the American Banker, a daily trade newspaper, confirmed rumors that Salomon Smith Barney had begun a bank brokerage program. Salomon Smith Barney's national director of sales, W. Thomas Matthews, and the consultant hired to run the program, Jeffery Champlin, explained that the firm had been placing Salomon Smith Barney brokers in banks in several states.The difference between this

A March 20 story in the American Banker, a daily trade newspaper, confirmed rumors that Salomon Smith Barney had begun a bank brokerage program. Salomon Smith Barney's national director of sales, W. Thomas Matthews, and the consultant hired to run the program, Jeffery Champlin, explained that the firm had been placing Salomon Smith Barney brokers in banks in several states.

The difference between this and bank-sales programs at other brokerage firms is the direct placement of brokerage employees inside the banks. In most cases, like the approach taken by Morgan Stanley Dean Witter with Wells Fargo, bank employees sell the brokerage firm's investment products. In Salomon Smith Barney's program, there's a negotiated fee-sharing plan wherein participating banks refer their customers to Salomon Smith Barney brokers working in the bank branch.

With the Citicorp deal, however, Salomon Smith Barney's bank program is up in the air.

According to one veteran Smith Barney broker, concern on the part of those affiliated with the program has arisen over just how welcome the firm's brokers might soon be under the roof of smaller banks.

"I would say the welcome mat will be rolled up," says the broker. "Even if the bank is a thousand miles away from the nearest Citibank branch, they are not going to refer their customers to our Citicorp-affiliated brokers."

According to one former Smith Barney executive, now working for another New York firm, the merger may simply render the program unnecessary.

"A large measure of this program was based on the firm's decision to grow internally rather then through acquisition, I think Matthews has even stated publicly that that was the reason. Obviously that's is no longer the strategy supported in the boardroom."

In originally creating the program, Salomon Smith Barney was likely trying to soothe the concerns of brokers who often feel that sales programs run through outside institutions undercut the firm's commitment to them, according to Dennis Gallant, an analyst with Cerulli Associates in Boston.

"This program was designed to let the brokerage expand its sales channel while still supporting its broker force," Gallant says, " but now [the brokerage is] likely to face the heaviest resistance from their bank partners."

Salomon Smith Barney disagrees, however. While admitting that the creation of the world's largest financial services firm could create some unknowns, the creators of the bank/broker program believe the new mega-firm will only help their cause.

"I think the feeling out there is that we will be able to bring even more to the table for investors," says Champlin.

According to Champlin, several of Salomon Smith Barney's 40 current banking partners located mostly in Utah, Colorado, Tennessee and New Mexico have signaled continued support for the program following the announcement of the merger, as have other banks the firm has been negotiating with.

"What each bank is getting is a Smith Barney Investment Center. That's not the same thing as bringing in a Citibank office," says Matthews.

Matthews adds that with Citibank only in 10 states, there's no reason to think the merger poses a threat to community banks that might install an Investment Center.

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