Citi Revises Advisor Comp Model
Citigroup has shifted the payout structure and pay schedule for senior financial advisors at its U.S. consumer bank.
The advisors, who until this year received a monthly paycheck based on a traditional revenue-based production grid, will now be compensated with a quarterly payout that will supplement a small monthly salary, a spokesman confirmed.
“We take great care in designing our incentive plans to encourage behaviors that are in our clients’ interests,” spokesman Drew Benson said in an e-mailed statement. “We believe that this approach better aligns our incentive plans with our focus on building long-term, trust based client relationships. It also has the added benefit of ensuring our colleagues have stability and predictability in their income.”
As part of the new pay regime, junior advisors and others with small books of business will shift from grid payouts to full salaries supplemented by an annual discretionary bonus, said a person familiar with the change.
Most of the retail branch advisors will remain on the “hybrid” grid-salary plan, with overall compensation remaining “virtually the same” as under the previous plan for similar performance, the person said.
Citigroup sold its Smith Barney retail brokerage business with more than 7,000 advisors to Morgan Stanley following the 2008-2009 financial crisis. It continues to employ about 900 financial advisors and private bank relationship managers in bank branches and private bank offices, though private bankers are traditionally not on a grid-based plan.
Despite its small size in conventional retail wealth management, Citi’s compensation shift could rile advisors who have long feared that large bank-owned broker-dealers such as Merrill Lynch, Morgan Stanley Wealth Management, UBS Wealth Management and Wells Fargo Advisors will be tempted to phase out revenue-based pay for salary-plus-bonus plans.
Salary-dominated compensation could reduce conflict-of-interest regulatory sales issues, more effectively promote cross-selling of bank products to wealthy investors and possibly result in more predictable budgeting. But they also could incent more aggressive advisors to move to broker-dealers that continue to tie their payout percentages to fees and commissions they produce, according to recruiters, who spoke on condition of anonymity.
Five years after completing its divestiture of Smith Barney in 2013, Citigroup attempted to corral its brokers by leaving the Protocol for Broker Recruiting. The pact allows brokers to take some customer-contact information with them so they can jump-start their business when joining rival firms. Broker-dealers outside of the Protocol have asked courts to prohibit brokers from calling former clients.
Morgan Stanley, whose more than 15,000 advisors make it the largest employee-channel broker-dealer, also exited the Protocol three years ago as it tightened its recruiting budget. But the wirehouse has re-entered the recruiting market and has no plans to shift from a grid-based pay plan, Chairman and Chief Executive James Gorman told analysts in 2019.
Jane Fraser, who next month becomes Citigroup’s chief executive and currently heads its consumer bank, said in a recent interview that she plans to focus on cross-selling wealth management and institutional products internationally. She did not specifically address the U.S. market.