McWhinney faces challenge at Citigroup

Ex-Schwab exec looks to expand struggling bank's wealth management unit

Apr 26, 2009 @ 12:01 am

By Charles Paikert

Industry veteran Deborah McWhinney has been given the reins to lead Citigroup Inc.'s efforts to expand its wealth management service and premium personal banking services. It is a formidable but not insurmountable challenge, industry observers say. Ms. McWhinney, 54, who retired in 2007 as the president of Charles Schwab Institutional in San Francisco, was brought in last week as managing director and head of New York-based Citigroup's newly created Citi Personal Wealth Management unit, which will include about 600 financial advisers already in place in retail bank branches throughout the country. The bank branch advisers will deliver wealth management services including investment and banking products, insurance and financial planning, she said. "Deborah knows the adviser space better than anyone," said Tim Kochis, chief executive of San Francisco-based Aspiriant LLC, which has $4.1 billion under management. "Everyone is scrambling to find the right formula for how to do this right now. Independents have a big head start, but are limited by resources and scale," Mr. Kochis said. "Citi can leverage enormous scale to reduce costs," he said. "It's a lumpy playing field out there right now, but at the end of the day, there's room for lots of different players." Industry observers said that Ms. McWhinney clearly has her work cut out for her at Citi, which has been engulfed by negative publicity for taking funds from the Troubled Asset Relief Program and is saddled with huge losses, toxic assets and questions about its viability as a going concern. "As far as institutional credibility goes, Citi is dead," said one wealth management executive, who asked not to be identified. "There will be potential investors asking themselves if Citi will be around in the long term," said Alois Pirker, a senior analyst for Boston-based Aite Group LLC. The bank's tarnished reputation will also make it difficult for Ms. McWhinney to attract top talent, several industry recruiters said. "It's no secret on Wall Street that Citi has a tremendous morale problem, and people who are there are terrified for their own jobs," said Danny Sarch, founder of Leitner Sarch Consultants Ltd., a recruiting firm based in White Plains, N.Y. "It makes it tough to recruit." But Ms. McWhinney insisted that Citi's brand, and its employees, re-main the bank's "greatest strength." She also noted the impressive reach of the bank.

"We're going to work closely with the branches, and as we work through this, we will figure out what the right marketing approach will be," Ms. McWhinney said.

If done right, the new Citi venture could well pay off, observers said.

"It's a huge opportunity for them. They don't need to have full-service brokers to cross-sell, and if they offer relationship pricing, where bank customers won't have to pay fees for these services, they can attract more money to the bank and increase the stickiness of clients," Mr. Pirker said.

"[Ms. McWhinney] brings deep experience in broad financial platforms, and Citi clearly has a broad financial platform," said Doug Regan, an executive vice president of Northern Trust Corp. in Chicago and president of its wealth management group. "Her challenge is, how does she transition to make relevant offerings to the high-net-worth market?"

Ms. McWhinney said she envisions a broad-based market for the personal-wealth-management business. She also cited the need to "listen and remain flexible."

"None of us have had to respond to how investors are feeling in this environment," Ms. McWhinney said.

When asked if the term "wealth management," which traditionally refers to a business that caters to clients with at least $1 million in investible assets, was a misnomer for the new unit, she said she isn't going to use "those kind of metrics."

"I challenge people to use their imagination, and not their rear-view mirror," Ms. McWhinney said. "There are a lot of possibilities to offer financial services in ways that are different and yet the same."

Among those will be Citi's technology platform, myFi, which uses the Internet and a call center for investing products and planning services.

For the time being, the personal-wealth-management business will use the Smith Barney platform. But after the brokerage unit is spun off into a joint venture with Morgan Stanley later this year, Ms. McWhinney is expected to develop a new platform.

Smith Barney and Morgan Stanley are both based in New York.

Many in the industry view Citi's new wealth management unit as a rebranding of Citicorp Investment Services, which was absorbed into Smith Barney at the end of 2006.

Ms. McWhinney said she views it as an evolution of the wealth management business that will "meet the needs of investors of the future."

In addition to her seven years at Schwab, she spent 17 years as an executive at Charlotte, N.C.-based Bank of America Corp. Ms. McWhinney will report to Terry Dial, chief executive of Citi Consumer Banking North America.

E-mail Charles Paikert at cpaikert@investmentnews.com.

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