Smith Barney reps ecstatic over cost cuts

IRVINE, Calif. — Smith Barney reps are supportive of the cost-cutting plan New York-based Citigroup Inc. announced April 11.
Although Citi will be closing 43 Smith Barney branch offices and terminating 110 employees — including 30 reps — as part of the reorganization, brokers said that they are happy to see the firm cutting layers of management.
On a conference call with analysts, Citigroup chief operating officer Robert Druskin said that a review of operations found that “in many instances, we had … too many layers. We wanted to shrink the number of layers of management … between those folks who were actually transacting with clients and the people running the businesses,” he said.
“Some of the cost reductions had the effect of unclogging the system,” Mr. Druskin added.
The overall theme of “delayering” the Citigroup bureaucracy, as Mr. Druskin termed it, was cheered by Smith Barney producers. Brokers have expressed frustration with the amount of bureaucracy at the bank which has filtered down to the brokers.
Cause for celebration
News of the cuts got an “extensive round of applause here,” said one Smith Barney rep based in Texas, who asked not to be identified.
Bureaucracy at Smith Barney has been an “enormous stumbling block,” the broker said.
“It’s music to my ears,” said a rep on the East Coast about the possibility that the firm might ease compliance burdens.
As part of the streamlining process, the bank will be shrinking the number of compliance and legal staff, but it is not known how many of the 80 non-producing employees being let go from Smith Barney work in those areas.
“It’s gotten to the point where we’re afraid of our own shadows” because of second-guessing by compliance people, said the rep, who asked not to be identified.
The streamlining “was long overdue,” said a Smith Barney broker in the mid-Atlantic region, who also asked not to be identified. “The paper pushing here is out of sight,” he said.
This producer, who has been at Smith Barney for about a year, said that the compliance burden is “five times worse” than at his former firm.
Smith Barney reps give the firm credit for reducing impediments to business.
Since last year, the firm has been keeping reps up to date on issues brokers have raised — and what the firm has done about them — via a series of “we hear you” messages (InvestmentNews, Oct. 30).
“We’ve seen improvement in the last six months,” said the East Coast rep. “You used to get a call once a week [from compliance]. Every [broker] did. That has come to a halt.”
Minimal impact
The cuts are part of a planned $2.1 billion in expense reductions this year.
Cost savings will grow to $3.7 billion next year and $4.6 billion in 2009, according to Citigroup.
The company stressed that impacts on revenue-generating units such as Smith Barney branches will be minimal.
“There are no across-the-board closings and no across-the-board firings,” said the Smith Barney rep in the mid-Atlantic region.
Savings in Citigroup’s wealth management unit, which includes the private-bank and research departments, are projected to save $175 million this year, and $150 million annually in 2008 and 2009.
The announced office closings, 43 locations in total, are overweighted in the Southeast, said an insider at the firm, who asked not to be identified.
Four of them are satellite offices in Georgia and Florida. The firm has not disclosed the other offices targeted for consolidation.
Some reps suspect that legacy Legg Mason branches may be closed, but the Smith Barney source said that closures will be determined by terms of existing leases.
Last year, Citigroup acquired the brokerage operations of Baltimore-based Legg Mason Inc.