Von Aldo
The Citibank's Great Bank Brokerage Makeover, "We're All Fee-based FAs Now"

The Citibank's Great Bank Brokerage Makeover, "We're All Fee-based FAs Now"

mcwhinney.gifLeading our April print issue for April and posted on our website is a story about how the new head of (what's left) of Citigroup's bank brokerage unit is undergoing a comprehensive makeover. Our reporting revealed that Debby McWhinney, a long-time financial services executive with long stints at BoA and Schwab, where she headed up its RIA business, intends to push Citibank's bank brokers into RIA-land, to wit, punish commissions and encourage fee-only advisory practices. She is also creating a network of outside RIAs to refer Citi bank clients to. The Citi FAs (the ones that didn't go into the Morgan Stanley joint venture) are not happy. Good idea? Or bad? Let me know, am canvassing for opinions.

Read our story for the particulars, but McWhinney, in my own humble opinion, may be on to something --- though the Citibank reps are hopping mad. Nearly 45 percent of the firm's bank brokers have departed since June of last year, leaving just 307 (as of February 2010) scattered across 1,003 North American Citibank bank branches. So what exactly does Citi have in store for this harried group? Some say McWhinney is giving the unit a covert makeover, intentionally purging most of the bank brokers, a breed that does not tend to have the asset acquisition drive, or product sophistication, that big-time wirehouse or RIA advisors do. Put another way, she is outsourcing the retail financial advisory function to handpicked fiduciaries — much like Schwab does through its branches. Under this scenario, Citi would collect a fee — something like 25 basis points on assets referred to outside RIAs. Since bank brokerages do not have a great reputation (they are not considered sophisticated), I think McWhinney's idea is a strong one. And one that perhaps other bank brokerages might be wise to emulate.

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