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STREET MOVES: Smith Barney Morphs Broker Designations
By Evelyn Juan
DOW JONES NEWS SERVICE
December 6, 2005

NEW YORK (Dow Jones)--Smith Barney will relabel its "financial consultants" as "financial advisors" in January, a move that the Citigroup Inc. (C) unit says better denotes their roles in guiding customers' financial future. The more than 14,000 FAs, as they'll be known, were once known simply as brokers.

In other nomenclature shifts, brokers with the title "vice president of investments" - reserved for those generating at least $500,000 of fees and commissions annually - will be renamed "vice presidents of wealth management." All current sales assistants will be rebranded "client service associates."

The planned changes were confirmed by a Smith Barney spokeswoman.

Most of Smith Barney's rivals, including Merrill Lynch & Co. (MER), Morgan Stanley (MWD) and UBS Wealth Management, use the FA designation for their brokerage force. The title reflects their attempts to transform what was once called a "customer's man" from commission-based stock jockeys to more patient relationship managers who often work for an annual fee.

"This new professional designation portrays to our clients the significant advisory nature of the quality relationships clients have with their FA," Smith Barney said in a memo to branch managers.

The more than 1,000 brokers who joined Smith Barney last week from Legg Mason Inc. (LM), which in turn bought Citigroup's asset-management unit, were already called financial advisors.

"It's sort of a cosmetic," said Jacob Zamansky, a New York lawyer who often represents investors suing brokerage firms. "When clients see the designation financial advisors, they feel they are getting someone who is knowledgeable and looking out for their own interest."

But Smith Barney says the change goes deeper. Starting next year, it will reimburse brokers up to $5,000 each for taking courses leading to their designation as "certified financial planners."

The trend toward fee-based compensation, which is usually based on the amount of assets customers keep in their accounts, is rapidly growing. The Securities Industry Association estimates that fee-

based accounts at its more than 600 member firms had soared to 32.7% of client assets last year from 13.7% in 1997.

"With the advent of fee-based managed accounts, there is a lot less 'brokering' taking place," said a spokesman at Wachovia Corp.'s (WB) Wachovia Securities, which adopted the "financial advisor" designation more than seven years ago.

Merrill Lynch, which has the biggest brokerage force, has rechristened its brokerage force several times. The brokers morphed from "account executives" in 1985 to "financial consultants." The firm switched course again in April 2001, when it adopted the FA designation currently in use for its more than 14,000 brokers.

Too Much Artifice

Despite the new label, brokerage firms are careful to assert that their FAs do not as a rule have fiduciary responsibility for their customers' assets. That has angered the community of financial planners, most of whom must meet the rigorous standards of the federal Investment Adviser Act.

In an attempt to ease confusion, the Securities and Exchange Commission recently ruled that brokers who market themselves as planners must register as of January under the Investment Adviser Act. All brokers must pass tests and register with the National Association of Securities Dealers, whose rules must pass muster with the SEC.

The SEC's decision has not mollified financial planners, who say that brokerage firms' designations of their brokers betray their intent to steal customers from registered advisors.

"There's just a little bit too much artifice," said Neil Simon, director of government relations at the Washington-based Financial Planning Association. "We maintain that if you offer financial-planning services, you must be registered as an investment adviser."

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