Citibank has decided to change to a fee based system

After selling a lot of its brokerage business, Citibank has decided to regroup and change how it runs its brokerage business in the United States and across North America. The biggest change that it is going to implement is the decision to have the financial advisers that work for the company to charge a service fee for any advice that they may give. Right now, the company has a commission based service for the sale of stocks, bonds, mutual funds, etc.

Citibank issued a statement and said that it wanted to get rid of commission based compensation by 2011.

This would be out of line with the competition. Other brokerages that are the main competitors of Citibank are Morgan Stanley Smith Barney as well as Merrill Lynch Wealth Management. They still, and will continue to have commission based sales.

Citibank wants to start the shift immediately. The company has decided to assign 600 branch based brokers into teams. The branch based brokers were only the ones not included in the sale of Morgan Stanley.

The current CEO of Citigroup, Vikram Pandit, wants to be a larger competitor in the financial investments business. It is having to find new ways to do that since it had to sell off its share of Smith Barney to generate capital for the company.

While some feel that the move is good for the customers, I am not sure because there is no fee structure that was announced. Customers could find themselves paying more for services than they did in the commission based structure that the company used to have. I suppose that, when compared to the main competitors of Citibank, the fee structure could be seen as an advantage, but only if it means that the customer will be happier with the service and paying less.

It’s all about how much the customer is getting for his or her money. No one wants to pay more for a service that was once less expensive.

Source