Citi looks to boost wealth arm with better lures for advisors

Citigroup is stepping up efforts to expand its wealth management division by enhancing recruitment packages for experienced financial advisors.

This move is part of the broader strategy led by Chief Executive Jane Fraser, as the bank looks to bolster its wealth management presence amid ongoing regulatory challenges.

According to Barron's, the Wall Street firm's Citigold business, which serves clients with assets ranging from $200,000 to $1 million or more, is offering new hiring bonuses to entice seasoned advisors in key wealth markets such as New York and Los Angeles. The goal is that by the end of 2026, the bank would grow its senior advisor ranks by 40 percent, or about 150 additional advisors, to support its wealth division’s expansion. Currently, Citi employs around 400 branch-based advisors.

The tweaks to its recruiting formula come at a critical time for Citi, which has been working to resolve longstanding compliance issues. The bank is working under two consent orders from the Office of the Comptroller of the Currency and the Federal Reserve, stemming from failures in risk management and data handling. In July, the regulators fined Citi $135 million for not making sufficient progress, and recent calls for further regulatory action have drawn attention to its ongoing challenges.

During an earnings call last week, Fraser addressed these concerns, stating: “We do not have an asset cap and there are no additional measures other than what was announced in July in place, and not expecting any.”

A key piece of Citi's wealth management overhaul is the recruitment of Andy Sieg, the former head of Merrill Lynch, to lead the bank’s global wealth division. Citi’s wealth management business has traditionally lagged behind competitors like Morgan Stanley and UBS in attracting high-net-worth clients, but Sieg’s leadership is expected to drive improvements.

To lure top talent, Citi is reportedly offering a combination of loans and bonuses that could amount to as much as 250 percent of an advisor’s annual revenue, depending on their experience and client book. For advisors generating between $500,000 and $1 million in annual production, the bank has introduced a deal featuring a forgivable draw amounting to 50 percent of annual revenue and a performance-based bonuses.

“As we make this investment and bring in top-caliber people, part of that investment plan includes a substantial support team,” David Poole, who oversees part of Citi’s wealth business, told Barron's.

Citi faces stiff competition from national brokerage firms, which offer recruitment deals that can reach up to 300 percent of annual revenue. However, Citi is hoping to overcome that with a different mix of incentives, including the promise of client referrals from other divisions – a strategy that's also been used at JPMorgan and Bank of America.

There might be something to that. According to one report by Cerulli, domestic deposits at US banks have swelled by 110 percent in the 10 years starting from 2013, while their wealth management assets have only gone up by 81 percent. To help bridge that gap and take full advantage of their cross-business opportunity, bank executives surveyed by Cerulli suggested several programs to incentivize internal referrals including one-time flat-cash bonuses (cited by 82 percent) and, to a lesser extent, banker recognition programs (27 percent).

“Banks have an irreplicable opportunity to be the first and final stop on an investor’s financial journey,” said Matt Zampariolo, research analyst at Cerulli. "However, they have yet to fully capitalize on the increased flows of deposit dollars by transitioning them to their wealth management practices.”