Citigroup has tapped Gary Crittenden, formerly of American Express, to become CFO of Citigroup on March 12 — making Citi's former CFO Sallie Krawcheck the leader of Smith Barney and Citi's global wealth management division. (Krawcheck led Smith Barney from late '02 to late '04 before becoming Citi's CFO.)
Krawcheck will now oversee ongoing changes to the '07 compensation plan for Smith Barney's 13,000-plus financial advisors. Based on the feedback from the branches about the new plan — meant to resolve overtime-pay issues — Smith Barney intends to implement the following changes:
o Enhance the business development account (or BDA). BDAs can now be used to pay support staff in addition to other business expenses such as client entertainment and seminars; this should alleviate the need for commission splits between FAs and staff. Also, the firm is increasing funding of the BDA by $26 million. The BDA will now be available to FAs with $250,000 in gross production, and the highest allowance has been increased to $20,000 for FAs producing $1.5 million and up.
o Exempt support staff by increasing payments from the firm, consisting of a salary increase to the top of the job's salary band and transition payments for 2007; this should add up to a maximum of $80,000; and additional compensation needs will be funded through the BDA or a split of gross commissions.
o Pay flat rates for some small tickets. Many fixed-income product tickets fall below the minimum $75 level for payout; thus, fixed-income products with a ticket size of $50-$74.99 will now be paid at a flat rate of 20 percent, retroactive to Jan. 1, 2007.
o Re-examine teams. The firm plans to adjust compensation and related measures for Net Journal Family Teams.
