Good old fashioned stockbroking and money management is supposed to the hot new thing on Wall Street.
Citi (C) has big plans to merge its Smith Barney brokerage unit with Morgan Stanley (MS), a move that’s supposed to net the firm a big windfall and create a new powerhouse. But in the meantime, the unit isn’t looking so hot.
Registered Rep takes a look
Global Wealth Management’s total client assets in North America fell to $894 billion in the first quarter, a 30 per cent drop versus the first quarter of last year. “It is encouraging indeed that Citi has turned in a quarterly profit for the first time in six quarters. However, looking at the firm’s wealth management numbers – specifically the US$40 billion net client asset outflows – gives one plenty of reason to worry,” says Alois Pirker, senior analyst at the Aite Group. “Citi stated that advisors attrition was one of the major drivers of these outflows. These numbers demonstrate the impact breakaway brokers can have on a firm’s asset base and revenues.”
Smith Barney’s total financial advisor headcount dropped to 12,659 FAs and bankers in the first quarter, a 17 per cent decrease from last year, and a13 per cent decline versus fourth quarter of last year. “At firms like Citi that have suffered most severely in the recent crisis, financial advisors find it very hard to grow their book of business and ultimately will start looking for alternatives to their current employer,” Pirker says. “If this trend continues at Citi, it will be devastating for the firm’s wealth management operation. Morgan Stanley can only hope that Smith Barney brokers will be happier once this part of Citi has completed the merger with Morgan’s brokerage unit.”
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