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Earning back clients' trust

JANE Fraser doesn't mince her words about the state of the wealth management industry after the financial crisis. 'Private banking is at an important crossroads and has quite a few lessons to learn from the crisis,' says the woman who became global CEO of Citi Private Bank in June last year.

Tue, Nov 02, 2010
The Business Times

JANE Fraser doesn't mince her words about the state of the wealth management industry after the financial crisis. 'Private banking is at an important crossroads and has quite a few lessons to learn from the crisis,' says the woman who became global CEO of Citi Private Bank in June last year.

Since then, Ms Fraser, 43, has spoken repeatedly about the need for private banks, including Citi's, to earn back clients' trust.

'The strategy for us is really about getting three things right for the client.

'First, the client needs to get access to the best possible opportunities that are available for investing wherever in the world they might be. So you want to give them institutional calibre in terms of their choice, access and quality of products and advice.

'Second, you've got to give clients exceptional service. This is a client's wealth; it's their legacy for their children. They think about it differently than they do the type of service for their own company, or if it's just a checking account.

'Finally, they've got to have confidence in an open and transparent relationship with their bankers and their private bank. A lot of our strategy is really going back to investing, transparency and relationship basics.

Among the steps she's taken since becoming head of the private bank is to reduce the number of clients served by each banker, to improve the quality of service that clients get, she says.

'We've been steadily increasing the number of private bankers. Our goal is to have around 30 clients per banker, and then to have a team around it. We're at about 40 or so right now.

'This year, we've hired globally over 100 managing directors and directors so far, just for our private banking segment (excluding the Citigold business, which caters to the mass affluent.) Over the next three years, we'll probably hire - net - another 300 bankers on our frontline. We're also bringing in product specialists in asset management, for selecting really good hedge funds and private equity firms.'

'We put a lot of attention around the clients' experience. That's not just the bankers; you've got to care about the infrastructure, their experience on the Internet, if they walk into a branch, or if they call one of our trading desks.

On top of that, 'we've also eliminated a lot of the conflict of interest with clients', she adds.


'First, we moved all of our bankers off any formula or commission base, so no one in the private bank is on a formula-based compensation. Everyone is paid on a discretionary bonus at the year-end now (there's no commission component); we changed that last year. I very much hope that the rest of the industry follows.

'What we're looking at is running ourselves as a client franchise. And if you do that, your client has to feel that you're a partner on the same side of the table. That means telling them not to do certain things, or when they want to do something and it's the wrong thing, saying no.

'So you have to make sure that your bankers and product specialists are indifferent to whoever the provider of the product is, that they're looking for the best ideas for the client.

'That's really important for building trust in an environment where it's not easy for clients to make money. It's really important that they don't lose money.

'We've got a lot of capabilities that aren't there to generate revenue; they're there to provide clients with advice. And if we give them good advice, they'll reward us with opportunities in investments.

Other private bankers have also observed that the rich - many of whom lost money in the financial crisis - are more reluctant now to put their money into risky investments.

'There's a lot more conservatism we see from our clients', she says. 'Many rich people were very worried during the crisis that they were going to lose their wealth.

Now clients are 'very conservative' with the bulk of their wealth, usually allocating a much smaller portion of it to riskier investments, she says. 'It's going to take a while for them to move out of a conservative investment for that large portion of their wealth into riskier, but higher return investments. They prefer to go with lower return, lower risk for a large part of their liquid wealth at the moment.'

As part of a broader overhaul of the group at the height of the financial crisis, Citi sold its controlling stake in its Smith Barney asset-management and securities brokerage business to Morgan Stanley in January 2009 for US$2.7 billion and a 49 per cent stake in a newly created joint venture, Morgan Stanley Smith Barney, that absorbed the business.

That sale has helped to sharpen the focus of Citi's private bank on the truly wealthy, or 'ultra high net worth' individuals, instead of the mass affluent, she says. 'The sale of Smith Barney enabled us to replace some of our capabilities from being very US-focused and quite affluent-focused into global and ultra high net worth. So we've put a lot more capabilities on the ground that are purely pitched at the ultra high net worth client.'

And while private banking is still a small contributor to the overall group's revenue and profits - Citi doesn't disclose exactly how much the private bank earns - 'it's going to start growing', she says. 'We've made a lot investments in the business over the past year.'

'A lot of what we're looking at is serving the rise of the global client. Such clients want access to ideas from all over the world - distressed US real estate, Chinese investment opportunities, technology from India; they expect us to have global investment ideas.

Its successful private banking base in Singapore is a good example of what it hopes to achieve elsewhere, she says.

'For the private bank, we've got our global head of marketing, global head of human resources, global head of investments, and global chairman here in Singapore. Those are four of the most important positions. To have our chairman and our investment, marketing and talent heads here - it's a statement about what Singapore is to us.'

But she says it's unlikely that Citi would consider buying a wealth management business in Asia. 'I doubt it. We don't have a challenge accessing clients. In the affluent segment, you can acquire someone who will bring in clients. But private banking at the very high end is much more personal. You might see us buying some capabilities or entering joint ventures, but you can't really buy clients at the very high end.'

A bright student from Scotland, she started her working life at Goldman Sachs in London, in 1988, as a mergers and acquisitions analyst, after graduating with a degree in economics from the University of Cambridge. 'Oh, no, it couldn't possibly be, because I'm not that old!' she laughs, before admitting: 'That was my first job, at age 20.'

After that, she joined Asesores Bursatiles, a Spanish securities broking firm that was later bought by Morgan Stanley. 'I lived in Madrid for two years,' she says. 'I can swear shockingly in Spanish.'

She says she went to Spain mainly because she wanted to learn a new language. 'I was thinking about what language I could learn that would be valuable. Today I'd probably come straight to Asia to learn Mandarin, but in those days I went to Spain, because Spanish was a useful language in many markets of the world.

'And Spain has its own attractions over and above the language,' she adds, laughing.

After that, she left for Harvard Business School, graduating with a Master of Business Administration degree in 1994. 'And then I joined McKinsey & Co in New York. I was in New York for six years, and then moved to London, for four years.'

During her time at McKinsey, she started a family. 'I had one son in New York and one in London; they're aged eight and 10.'

She eventually left McKinsey to join Citi in July 2004, as head of client strategy for its investment and corporate banking division, later rising to global head of strategy and mergers and acquisitions in October 2007. When the financial crisis struck with full force in 2008, she was part of the top-level team of executives charged with restructuring the group, leading its re-engineering effort, making divestments and raising new capital.

Her experience at Goldman Sachs and McKinsey shaped her belief that a firm's culture matters deeply, she says. 'Goldman was a small partnership at that point, and McKinsey is a partnership.

'I think it's one of the pieces that I found the most affinity with in the private bank (at Citi). You've got a professional services culture and partnership where you've got a group of people who have got to share the economic stake and have got to have mutual trust about it and mutual dependence. It's not a star system in a partnership, it's a shared sense of ownership of the franchise and a sense that you're all in it together.

'That's something that McKinsey, in particular, has brought - a conviction that that is the right model and has to be defended and invested in, and that your financial success will come as a result of having the right model. That's certainly the Citi private bank philosophy.'

How do her sons view her life now as a top banker? 'They're bemused. They like being global citizens; they like travelling around the world, but the youngest one wants to be a professional golfer.

'I'm originally from St Andrews in Scotland and my husband, who's Cuban, likes playing golf. He decided that he was going to start the boys playing golf very early so that he could play golf every weekend. So we play golf as a foursome regularly and all of them trash me; they practise more diligently than me.

'The older one is fascinated with science and maths, so I hope he enjoys doing something in that arena; it's rife with possibilities.'


She tries her best to spend as much time as possible with her family in London, she says. 'I spend most of the time on British Airways, going somewhere, the truth be told. I probably spend one weekend every month in London and that's it. And at every weekend, I'm a mum, and that's very important to me. We always try to be together at the weekend.'

'They're very jealous of me now,' she adds, laughing. 'They want to know when they're coming to Singapore, so I've promised them that they will. I've warned them that it's a bit hotter than Scotland.'

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