Citi to shift to fee-based model for invst advisory biz

Looking to revamp its retail investment operations, Citigroup will come up with a fee-based model for its investment advisory business, a move that will gradually do away with the practice of commission being paid for transactions.

The fee-based investment advisory model would be followed by qualified financial advisors of the retail investment business of Citi Personal Wealth Management.

As part of the new plan, clients may work with a team of Citi's own investment advisors or with independent Registered Investment Advisors (RIAs), Citi said on Monday.

With the strategic shift, "Citi Personal Wealth Management will also offer clients access to an open platform designed to support the fee-based business.

"The ultimate goal is to eliminate commission-based compensation to its advisors, transition Citi Personal Wealth Management advisors to function solely as Investment Advisory Representatives, and establish agreements with independent RIA firms around the country by 2011," the financial services major said in a statement.

The clients can choose to with a team of Citi Personal Wealth Management's own investment advisors who would act as fiduciaries, "charging a transparent fee for advice, based on assets instead of commissions".

According to Citi, one of the main aspects of the new strategy is that the firm would also be working with independent RIAs to complement its in-house expertise and broaden the geographic coverage.

"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," Deborah McWhinney, head of Citi Personal Banking and Wealth Management, said.

In the coming months, Citi would form Citi Personal Wealth Management investment advisor teams.

"Moving to an investment advisory model is the right decision for our clients and for Citi. This model is where the market is headed and it will help us offer clients greater flexibility, transparency and meaningful investment choices," Terri Dial, head of North America Consumer Banking and Global Consumer Strategy, said.

A few months back, Citi, one of the worst hit in the ongoing financial turmoil, combined its retail brokerage entity Smith Barney with Morgan Stanley's wealth management unit.