Smith Barney: New Focus On the Horizon

Citigroup Smith Barney Legg Mason Wood Walker. It's got a nice ring to it, doesn't it? No, that won't be the name of the new Smith Barney colossus — created by the addition of Legg's 1,300-plus retail advisors. When that deal closes in early December, it's actually going to be called the Legg Mason Division of Smith Barney.

While most Smith Barney advisor respondents were generally unimpressed by the acquisition of Legg advisors, it'll be interesting to see if Smith Barney's jettisoning of its asset management group — and resulting new focus on retail distribution — will rejuvenate the firm. (Certainly exclusive access for three years to a whole new line of mutual funds — the Bill Miller S&P 500-beating fund chief among them — might give the advisors something positive to talk about during client meetings.)

Smith Barney reps who participated in the survey are, again, somewhat lukewarm about their firm. Smith Barney's overall score came in under the average for all firms. But hidden in that score were some strong positives. Like elsewhere, reps say they do not feel “pressure to sell certain products.” As one rep told us, “There is great room for flexibility to do what we think is best for clients.” Reps surveyed described Smith Barney management as “entrepreneurial” and “laissez-faire.” Advisors also say that the firm set “realistic sales quotas.” One says, “Smith Barney doesn't have sales quotas. That's a definite 10.”

But while reps say they have autonomy when it comes to selling products and reaching quotas (or lack thereof), they, for example, are feeling the strain of the compliance. (Try sending mail to a client, one respondent complained.) Not surprisingly, 71 percent of advisors surveyed say they believe current compliance regulations are “too stringent.” As one advisor says, “I have to fill out a seven-page document to open an account for a corporation. If that same corporation wants to open another account, I have to fill out that document again — it's ridiculous.”

The “quality of operations” score improved from last year's: 7.6, compared to 6.97. Still, reps say that executing daily tasks is an exercise in patience. There is even a belief among some reps that the firm's compliance is worse than other firms' because Charles Prince, Citigroup's (Smith Barney's parent company) CEO, is a former attorney.

Things could be tougher for Smith Barney reps in 2006. The firm announced in mid-November, after this survey had been completed, that it plans to slash commissions in January for brokers producing below certain thresholds.

Smith Barney advisors have confidence in is the “quality of products offered,” which scored 8.2, compared to 7.91 last year. “The amount and quality of products that the firm has can't be matched,” an advisor said.

Indeed, Smith Barney brokers generally don't care about the $3.7 billion deal with Legg. Others feel the deal could improve business. “I think it's a great move for two groups of people,” says one broker. “We'll have access to better quality funds and extend our product platform greatly.”

Or as another put it: “It sounds like the firm went out and got about 1,500 decent brokers in exchange for our asset management and funds, which I didn't care about anyway.”