Cross-Sell? Citi Unit Talks 'Purchasing Management'

By Ackermann, Matt | American Banker, November 17, 2003 | Go to article overview

Cross-Sell? Citi Unit Talks 'Purchasing Management'


Ackermann, Matt, American Banker


Acquisition, cross-selling, and product development are the buzzwords for most banks looking to expand their wealth management companies.

Just don't tell that to Citigroup Private Bank.

Damian Kozlowski, the head of the New York unit of Citigroup Inc., said it will double its assets under management over the next five years by making fewer acquisitions and opening fewer branches than its competitors, and without uttering the word "cross-selling."

"In the upper end of the market, cross-selling is dead," Mr. Kozlowski said. "If you go to your client and treat that client like a channel, you aren't going anywhere in the high-net-worth space. You have to be a purchasing manager for your client."

That means using a team-based approach to offer clients proprietary and nonproprietary products ranging from equity funds to alternative investments, he said.

Citigroup Private Bank, which has $180 billion of assets under management, has taken this approach since Citicorp merged with Travelers Group in 1998. To some, it may sound similar to what other banks would call cross-selling, but Mr. Kozlowski says there is a difference: Rather than sending a wealthy customer from silo to silo at a bank through referrals, the private banker can discuss alternatives with a team of experts and then come up with the right package for a customer.

The private bank, which has increased its assets under management and its revenues over the past five years, has "succeeded while the industry has not," because it was willing to restructure its entire platform, he said. "Clients are more sophisticated" now than they were before. "To service those clients in a meaningful way, you have to reassemble your business to meet their needs." Clients' needs "are much more integrated than they were in the past."

Customers with at least $25 million of investable assets want a bank to integrate their wealth management, investment, and banking capabilities, he said. Citigroup does this by structuring its 130 private bankers in the United States into teams. Each customer works with two to five private bankers, who are each backed by 12 product specialists.

"Unless you offer a diverse group of ideas, you will sub-optimally be presenting solutions to clients," Mr. Kozlowski said. "As the sophistication of the industry and clients have been raised, many clients now have their own advisers. To do well in the industry, you have to raise your game, and that means getting top-tier capabilities across the broad product spectrum, but then integrating better to deliver that to your clients."

Despite the large teams, the private bank wants to do more with less, he said. It has only 20 offices in the United States.

It has strong penetration in the Northeast but room to grow in places like California and Florida, Mr. Kozlowski said. Over the past two years it has opened offices in Palm Beach, Fla., Miami, Washington, Orange County, Calif., and Beverly Hills. It also enlarged its office in San Francisco and upgraded offices in Short Hills, N.J., and Greenwich, Conn.

"We have built out a lot over the last three years, but we don't even have 0.5% of the market share in those markets," he said. "If we replicated the 3% market share we have in the Northeast, it would double to triple the size of our business."

It is difficult to open any more than three offices in a year and still maintain a high-level of service, Mr. Kozlowski said.

"The industry standard would have 10 to 20 times more offices than us," he said. "We just want to have sizeable offices of the right scale to have top-quality people in those offices. If you think about the segment we live in, the $25 million client, there is no enduring necessity to be around the block. …

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