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Taking the Initiative

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In a move that is being closely watched on Wall Street, Smith Barney has launched Citigroup Institutional Consulting, a new business unit comprised of the firm’s top investment consulting teams.

With an ambitious growth plan of double-digit gains over each of the next five years, no one will be in the spotlight more than Paul A. Carter, the unit’s director.

Just 33, Carter himself has no institutional consulting experience, although he worked with the strategy team that served as the springboard for CIC. Carter’s boss, Paul Hatch, director of Smith Barney Investment Advisory Services, says he interviewed more than 30 candidates over a year-long period before honing in on Carter, after the CIC consultants themselves asked that he be considered.

“I don’t want to say they elected him, but they certainly pressed hard,” says Hatch. “This is a young man who has great promise for our organization. This is a very important initiative for us.”

Carter, known for his keen strategic thinking, says he’s thrilled at the opportunity to translate a business plan into action.

“CIC was formed after an extensive business-planning process. In a nutshell, we created CIC on the conviction that if we made the right investment, we could significantly grow our presence in the institutional marketplace,” says Carter, who joined Citigroup International in a strategic planning role in 2004. “Delivering on the plan, working with some of the most sophisticated and experienced consultants in the industry, executing ideas driven by this group — it’s all enormously rewarding.”

Carter, who grew up in Melbourne, Australia, studied economics and finance at the University of Melbourne and spent most of his career in his home country with Boston Consulting Group. His work with the group — involving classic growth strategies, cost-reduction programs, acquisitions and productivity enhancement across a range of industries — instilled in him a disciplined approach to problem-solving.

He came to the U.S. initially to attend Harvard Business School, then returned to Boston Consulting Group in New York in 2002 as a project leader focused on strategy programs for a global financial-services company.

His appointment in January as CIC’s director marks Carter’s first opportunity to run an operating unit.

“The question I got when I appointed him was: How do you have someone in a business as important and complex as institutional consulting who has never been an institutional consultant? Well, the greatest athletes don’t always make the greatest coaches,” says Hatch. “While he’s never been on the ground doing the institutional consulting, he’s been able to command the respect of people who have much more experience and a greater depth of knowledge about a particular subject. He gets it quickly.”

The new unit, starting with over $45 billion in institutional assets, is comprised of 26 of Smith Barney’s top-caliber consulting teams now operating in 24 offices across the nation. Each senior consultant has worked in institutional consulting for an average of 20 years and each team has its own research analysts, technical analysts and operations support, among other functions. The teams serve a mix of clients, weighted, however, with foundations and endowments, corporate pension plans and union plans.

Over the next few months, Carter says, CIC will roll out a dedicated platform that will elevate the teams to a whole new level.

First, there’s an expanded and enhanced investment and research platform that will span a range of investment options CIC consultants can recommend, including a wide mix of alternative strategies. The teams will also have access to specialized research and analytical tools to provide expanded asset allocation advice. Next, the unit will offer what Carter calls “best in class” support in the areas of custody, performance measurement and operations. CIC will also be separately branded, with customized marketing and organizational guidance.

What the unit is not, according to Carter: a financial advisor designation program, which is how some competitors have cast the new group.

“We are taking these teams and giving them a new identity and providing dedicated, additional support. Smith Barney already starts from a position of strength; it’s already one of the largest institutional consulting players in the marketplace,” notes Carter. “But we also recognize that the industry is going through significant change. In times of change, market share is up for grabs. We believe Citigroup, and CIC, are now well placed to demonstrate to clients the value of doing business with a company like ours.”

One added benefit is information sharing and knowledge transfer that’s beginning to occur among the various teams. When senior members of the unit gathered for the first time in April, some had never met one another before.

“In many cases, firms like ours in the past have not done a great job of capturing the value teams are producing locally, and then sharing ideas,” Carter says. “By defining CIC, we will enable that to happen.”

As an example, a consultant who has done local research on an investment manger now has the ability to post his assessment on CIC’s internal web site. “Ensuring information sharing is where we see huge value. There’s just tremendous excitement,” Carter adds. “Some consultants have been looking forward to this day for a long time.”