Tuesday, October 6, 2009

Citi Personal Wealth Management Goes Fee-Only

Paul Menchaca announced the following story earlier today:

"Citi Personal Wealth Management is shifting its investment advisory model to a fee-only service and plans to work with RIAs in an effort to broaden its geographic coverage, the company announced today. The company plans to eliminate commission-based compensation by 2011, while also transitioning Citi Personal Wealth Management advisors to function solely as investment advisory representatives.

“Citi is in advanced discussions with some of the nation’s top independent RIA businesses and expects to announce agreements in select markets in the near future,” said Deborah McWhinney, head of Citi Personal Banking and Wealth Management. “Over the next several months, we will announce the formation of Citi Personal Wealth Management Investment Advisor teams comprising many of our top in-house financial advisors. We also expect to recruit advisors at other firms who are considering becoming independent investment advisors, as this will be an appealing alternative for many of them.” McWhinney has contacts throughout the independent RIA community owing to her past position as head of Schwab Institutional, the largest custodian for independent RIAs.

Clients will be able to work with a team of Citi’s own investment advisors—who will act as fiduciaries—or they can work with Citi Personal Wealth Management’s National Investor Center where they can choose securities or advisory products “on a self-directed basis or after seeking advice from a ‘coach-on-call.’” Terry Dial, head of North America Consumer Banking and Global Consumer Strategy, said the investment advisory model “is where the market is headed and it will help us offer clients greater flexibility, transparency and meaningful investment choices.”

I believe it is encouraging to see the larger firms recognize the importance of committing to a fiduciary responsibility to their clients. It's also encouraging that the larger firms in the financial service industry are realizing that fee-only is the best way to meet client needs. However, this transition will not take place until 2011, which indicates that most major firms in the industry, although moving in the right direction, are still a long way from placing the client's best interest as the top priority.

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