Why Citi Needs to Woo its Smith Barney Reps

Citigroup was raked over the coals again today after the New York Post reported that it gave its top performing Smith Barney brokers $3.5 million worth of debit cards in lieu of a weekend getaway, which it canceled. The 500 best performers got $3,000 each, with lesser performers earning $2,000 and $1,000.

Not surprisingly, the Post didn't have to search long for an outraged critic of the TARP recipient's expenditures: "These people are outrageous," said compensation consultant Jim Reda. "It's an unnecessary expense that really doesn't do much besides cost money," he said, referring to the fact that the cards can be spent at will.

But now we know why Citigroup is so desperate to cling to these solid performers. InvestmentNews reports that 539 brokers left Smith Barney during the first seven weeks of this year. That's nearly 80 departures per week. And it's on top of the 970 brokers that left in the fourth quarter of 2008.

InvestmentNews cited unnamed sources and a Smith Barney spokesman declined to comment on headcount.

Suddenly, a $3,000 gift card for advisers who manage millions for the bank's coveted high net worth clients should not look so outrageous. If taxpayers want Citigroup to stay in business at all -- nationalized or not -- it needs to be able to retain its best employees. A $3,000 debit card might not do it, but at least it's a start.

by Megan Barnett