Smith Barney brokers skeptical of reorganization

Smith Barney brokers doubt that a recent reorganization of Citigroup’s retail-investment businesses will eliminate conflicts between the bank’s private-client unit and Smith Barney.

The reorganization of New York-based Citigroup Inc.’s wealth management businesses, announced this month, puts private bankers and Smith Barney brokers under one boss, Charles Johnston, who was named to the new post of president of wealth management for the United States and Canada. He was most recently Smith Barney’s chief executive.

The goal is to increase collaboration, Sallie Krawcheck, chairwoman and chief executive of Citigroup’s wealth management business, wrote this month in an e-mail to employees.

The changes are about “leveraging the expertise and capabilities across Smith Barney, the private bank and Citi to more effectively serve our different client segments,” she wrote.

“We do want to break down silos and create greater collaboration between Smith Barney and the Citi Private Bank,” Smith Barney spokes-man Alexander Samuelson wrote in an e-mail.

FRICTION OVER CLIENTS

As at all the major firms, Citigroup’s private bank and Smith Barney brokers share some wealthier clients, which can create friction.

“It’s not going to happen,” a Smith Barney broker in the Midwest said about collaborating with private bankers. “Business is tough enough. We’re not going to give up our best clients,” said the rep, who asked not to be identified.

“Can the retail stockbroker work well with private bankers? I’m sure they can all hold hands … if they were all paid the same way,” said Frank Campanale, head of Campanale Consulting Group LLC in Birmingham, Mich., and former head of Smith Barney’s Consulting Group. “But brokers are paid far better,” he said. “Until that is leveled out, there’s going to be a lot of animosity.”

Mr. Samuelson said no one will be forced to give up clients, nor will compensation plans change.

But divisional directors already put subtle pressure on brokers to work with Citi Private Bank on major accounts, the Midwest broker said.

Citigroup has created “a lot of political baloney [over the years] by not establishing any internal ground rules” about who controls client relationships when a conflict exists, said a Smith Barney broker on the West Coast, who asked not to be identified.

Getting bankers and brokers to collaborate has never worked, said Patrick Kearns, founder of Fulcrum Securities Inc. of Reston, Va., a former wirehouse broker and manager who worked at one of Smith Barney’s predecessor firms.

The reorganization appears intended to deal with some of the internal battles over accounts, Mr. Kearns said.

“Whether it gives the Smith Barney guy more of an edge over the Citi guy, I don’t know,” he said. “But the Smith Barney [brokers] do not think of themselves as Citigroup people.”

And they prefer to keep the two firms separate in their dealings.

“None of us are interested in throwing [the Citigroup] name in front of clients,” the Midwest rep said.

Mr. Campanale said he has seen some high-end brokers work well with private bankers, but Citigroup “has a long row to hoe to break down cultural barriers” across the firm.

The reorganization attempts to meld private banking with brokerage by adding several new-business-development directors, as well as creating new reporting lines for private bankers and product specialists.

In addition to reporting to Citi Private Bank, regional market managers at the private bank will also report to one of four Smith Barney divisional managers. Divisional managers report to Mr. Johnston.

The private-bank managers and Smith Barney divisional bosses “will partner closely to increase cross-business referrals,” Ms. Krawcheck wrote in her e-mail.

Brokers are always sensitive to product pushing that arises from firms’ attempts at cross-selling.

But Mr. Samuelson said the objective is not to have brokers sell more loan products; the reorganization is “about improving the client experience,” he wrote via e-mail.

Also as part of the reorganization, product specialists at the firm will also be reporting to four new divisional development directors.

Those directors will “work to drive firm initiatives,” Ms. Krawcheck told employees. They will report jointly to divisional directors and to Bob Matthews, formerly head of Citi Global Wealth Advisory Services, who was given a new post as head of business development.

He is responsible for sales, recruiting, training and marketing for wealth management in the United States.

The objectives of the management shuffle “are in line with [Citigroup chief executive] Vikram Pandit’s key priorities for Citi,” Ms. Krawcheck wrote.

In his own e-mail to the troops this month, Mr. Pandit stressed the need to “re-engineer business to more correctly address the needs of our clients, such as the strategic alignment of the U.S. global-wealth-management organization.”

E-mail Dan Jamieson at [email protected].

Related Topics: Citigroup Inc., Smith Barney