CITIBANK? CHANGE THAT TO CITIADVISER: IT’S TURNING BANKERS INTO STOCK, INSURANCE BROKERS

Citigroup is embarking on a bold nationwide campaign to transform its retail banking franchise into a financial services juggernaut.

It’s licensing all its personal bankers — virtually everyone but tellers — to sell mutual funds, annuities and life insurance from its 400 U.S. branches. Bank branch managers will be converted to full-fledged brokerage supervisors, with key responsibility for regulatory compliance.

Citigroup, born of the merger last fall of Travelers Group and Citicorp, also is changing how bankers are paid as it attempts to forge a sales culture in the branch. Bankers — ready or not — now will rely more on sales commissions than on salaries and bonuses.

The goal: to change the experience of retail banking from just making faceless transactions to one where financial advice is central.

The changes are being spearheaded by Joseph Plumeri, chairman and chief executive of Citigroup insurance subsidiary Primerica Financial Services Inc., who was tapped last fall to lead Citibank’s U.S. retail franchise.

Mr. Plumeri is widely credited with rejuvenating Duluth, Ga.-based Primerica by focusing its sales force on basic financial planning and recruiting large numbers of new advisers.

Other banks have undertaken similar programs, but on a much smaller scale and with mixed results.

Chicago’s Bank One Corp. and Charlotte, N.C.-based First Union Corp., for example, have been the most aggressive in licensing bankers to sell securities, but thus farBank One has licensed just 2,000 and First Union just 2,800.

“In most (licensing) programs, bankers Citibank? Make that Citiadviser

are bankers 85% of the time and brokers 15% of the time,” says Mike Dillon, vice president at FTR Inc., a Chicago-area consulting and training firm for sales managers in financial services. “If (Citigroup) gets 100% of their bankers to spend 15% of their time selling mutual funds, look out, everyone, because that will be scary.”

The potential benefits are clear. Citigroup aims to forge closer relationships with banking customers so it can sell them more financial products, including mutual funds of Citibank and Travelers Corp.’s Salomon Smith Barney unit.

Equally clear are the risks. The shift to a commission-based structure could drive away a large number of employees and prompt turf wars over access to clients.

Already, there are casualties. The odd people out in the restructuring are Citibank’s investment sales managers, who oversee the bank’s more than 500 brokers. Those brokers now will report to the bank branch managers, all of whom will be expected to obtain Series 7 and Series 24 securities licenses and become responsible for compliance with securities laws.

Bank executives say some investment sales managers will find new roles with the company, but other Citigroup insiders say many will have to find new work.

“Citigroup sees its future more on the investment side than on the banking side,” says Michael P. Kostoff, executive director of the Washington-based Advisory Board Co.’s VIP Forum/Insurance Advisory Board. “Maybe they take their lumps now. No revolution ever took place without its lumps.”

hitting the road

Word of the initiative is spreading as executives set off on a four-week road show for employees that began on the West Coast last week and is moving slowly eastward.

Primerica requires every rep to perform a “financial needs analysis” — essentially a rudimentary financial plan — for clients before selling them anything. That will be the goal at the new Citibank, too, except the plan will be dubbed a “financial needs instrument.”

Indeed, the entire lexicon is changing at Citibank. Branches now are “financial centers.” Brokers are “financial executives.” And personal bankers are “client financial analysts.” Even tellers — who won’t be getting securities licenses — now will be “financial associates.”

This Primericazation of Citibank comes from the belief that customers crave the human touch, one architect of the new approach says.

“For the first time for middle America, there will be something other than an 800 number or an ATM to answer their questions,” says Steven Barger, senior vice president of Citigroup and one of Mr. Plumeri’s key lieutenants.

“Traditionally,” Mr. Barger says, “the banking industry has decided to deal with the middle market electronically. If the client has enough money, (banks) will deal with them personally.”

Now, at Citibank, customers will be assigned to a specific person who will be in charge of taking care of all their financial needs.

Not only will that be a jarring change for bank employees, but also for customers, who are used to walking into a bank branch and dealing with whoever is available — or an automated teller machine.

Clients interested mainly in making a transaction and leaving may not cotton to a banker suddenly insisting on doing a financial plan.

“They expect banking to be a walk-in business,” says Mark Pershan, former investment sales manager for Citicorp in Chicago and senior vice president of investments at New Century Bank, a new community bank there. “They’re going to be frustrated. I don’t know how the customer will deal with that.”

foresees defections

Mr. Barger acknowledges the challenge, but says the change must happen if banks are to compete as the regulatory barriers between banking, investing and insurance fall. “Client education is a big, big deal for us.”

He also allows there`ll be some turnover, though he says internal reaction to the changes has been very positive.

“I think there will always be a group of people who say, `This isn’t what I signed up for,’ ” he says. “I don’t think it will be a huge number of people.”

Another issue is bankers and brokers duking it out for customers. Mr. Barger says Citigroup will allow split commissions to ensure that bankers will not be disinclined to refer clients to brokers when they’re in need of more advice.

Mr. Pershan is skeptical. “If you and I are in the same branch, and we’re given a goal of $100,000 (in sales) a year, it’s a race, baby,” he says. “I think logistically there’s a lot to work out.”

But, he asserts, Citigroup’s moves are right — even if they’re bold.

“It’s going to be a couple years of cold water in the face for a lot of people,” he says. “But what would be left, if they follow through, is a tremendous organization.”