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Jenny Surane | Aug 02, 2022
(Bloomberg) — Citigroup Inc. is planning a 500-person hiring spree over the next three years for a new wealth division catering to junior employees at private equity offices, consultancies and accounting firms, betting those clients will someday join the ranks of the ultra wealthy.
The bank started the unit, known as Wealth at Work, last year and tapped longtime private-banking executive Naz Vahid to oversee its development. Vahid has spent years leading the private bank’s law-firm group, which counts 50,000 lawyers and 1,000 firms as clients.
“We are already the undisputed No. 1 in the space, and we’re going to take that law-firm group model and apply it to these other verticals,” Vahid said in an interview from Citigroup’s headquarters in Manhattan’s Tribeca neighborhood.
Vahid’s division is a key component of Chief Executive Officer Jane Fraser’s plans to remake Citigroup into a wealth-management powerhouse. The business generated $353 million in revenue in the first six months of the year — a 3% jump from a year earlier — and was the only one of Citigroup’s wealth operations that posted an increase for the period.
The law-firm group got its start more than 50 years ago with a simple strategy: offer wealth-management services to employees at the world’s biggest law firms, many of whom were already using the bank’s cash-management, financing and custody services. The firm developed an expertise in salary policies and payment trends at top law firms, which it used to offer wealth products to meet those lawyers’ financial needs.
“We understand bonus payout structures, changes in income when our clients go from associates to partners, unique retirement needs,” Vahid said. “We know when they’re likely to buy a house, when they’re likely to begin planning for college, and more. We know the career life cycle.”
Some of the most successful attorneys can earn as much as $20 million a year. Before they get there, though, many junior employees are saddled with hundreds of thousands of dollars in student debt, making them unlikely candidates for wealth-management businesses that typically cater to high-net-worth individuals. At Citigroup, the average net worth of the firm’s private-bank customers is a whopping $400 million.
But Vahid’s division is different.
“We acquire clients when they have more debt than money,” Vahid said. “We get them when they’re early in their careers, when they’re not yet wealth clients and they’re extremely busy individuals,” she said, adding, “We get them young and we keep them.”
Citigroup’s wealth-management offerings have long paled in comparison to rivals. The firm finished 2021 with $7.5 billion in wealth-management revenue, a 7.6% increase from five years earlier. That compares with jumps of more than 11% at Bank of America Corp. and 23% at JPMorgan Chase & Co.
For Fraser, the decision to expand the bank’s wealth-management offerings was “blindingly obvious,” she said at Citigroup’s investor day earlier this year. Even before she took over as CEO last year, Fraser merged the firm’s wealth-management and private-banking units and plucked longtime trading executive Jim O’Donnell to lead the combined operation.
Within months, O’Donnell unveiled how he planned to structure the new operation, settling on three components for the push: The private bank, led by Ida Liu, focuses on the world’s wealthiest individuals and their family offices. Citigold, led by Fabio Fontainha, serves individuals with as much as $10 million in assets. Then there’s Wealth at Work.
With Vahid, Fraser and O’Donnell are relying on a 35-year veteran of the bank to lead Citigroup’s push into what O’Donnell has called “the fastest growing channel in the industry.”
“We are uniquely positioned to build a winning business here,” O’Donnell told investors in March. “We know our strategy works because we’ve road tested it for the last 50 years with our law-firm group.”
Vahid arrived in the US when she was 16, after she and her brother fled their native Iran during the nation’s 1979 revolution. After obtaining a bachelor’s degree from Hobart and William Smith Colleges, Vahid took a job as a temp in the loan office for Citigroup’s private bank.
In those early days, she took graduate-school classes nights and weekends. After receiving her master’s from Columbia University, she ultimately became a banker. By the early 2000s, she was running one of Citigroup’s largest client books.
The bank named her head of the law-firm group in 2009. At that time, the business was producing annual revenue of $220 million. This year, it’s on track to generate more than $700 million.
The firm has already inked an agreement with two asset managers and began working with their employees in recent weeks. It also signed its first deal for the part of the unit focused on enterprise companies such as consultancies and accounting firms.
“We’re expanding this strategy to other, select industries,” Fraser said during the company’s annual shareholder meeting in April. “Our goal is to build a best-in-class experience for our clients and a high-returning business for our shareholders.”
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