Citigroup Joins the Big 6 with Its Robo-Advisor, It Will Be Free for Some Customers

UTC by Teuta Franjkovic · 3 min read
Citigroup Joins the Big 6 with Its Robo-Advisor, It Will Be Free for Some Customers
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Citigroup is one of the biggest six U.S. banks that decided to have a robo-advisor. In the case of Citigroup, it will be free for customers with at least $50,000 in investments or deposits at the bank.

Citigroup decided to make a little bit of difference for its wealthier clients by having a new digital robo-advisor who can help them create their own portfolio. Clients who have at least $50,000 in deposits or investments at the bank automatically qualify for the bank’s Citi Priority package of banking services. It is planned that this package incorporates access to an automated investing program.

The program works like most robo-advisors. First, clients have to answer a few questions related to their risk demands and investing agenda, and the software then makes a premade portfolio of investments for them.

Citigroup Robo-Advisor Is Free If You Are Rich Enough

Those clients who have a Citi Priority or higher status can use the program, called Citi Wealth Builder, for one free portfolio. However, even those customers who don’t qualify can use this program but they are charged a fee of 0.55% of assets under management.

Citigroup is one of the last of the biggest six U.S. banks that decided to have a robo-advisor. JPMorgan Chase, Bank of America, Wells Fargo and Morgan Stanley already have one. However, that is where Citi saw its advantage. After it thoroughly went through all of the packages of other banks, Citi decided to offer its own – with a discounted price. Usually, the banks charge 0.35% to 0.45% of assets under management.

This step is totally according to “race to zero” when it comes to investing. In October, Charles Schwab said it was abrogating stock trading commissions. Soon, everybody followed. One of them was TD Ameritrade, which agreed to be bought by, of course, Schwab in just a few weeks since it cut its commissions.

For its robo-advisor, Citigroup chose an external provider, a digital advisory company owned by Invesco called Jemstep. The company is charged for the monitoring of robo-advisor’s software.

Portfolio Composed of ETFs

The program itself will be available through the bank’s website and mobile app. Clients will have a possibility of entering into one of six portfolios composed of ETFs. The ETFs will include management fees of 0.18% to 0.24%. The minimum investment will be $1,500.

Simon Roy, CEO of Jemstep said however that the robo-advisor is just a starting point. He said:

“Over time, businesses are looking for ways to essentially digitize their businesses. Every client today expects a digital experience.”

The third-biggest U.S. bank by assets is trying to put deposits and assets under management so they can grow. Those two are the main parts of the bank’s profits. By giving its clients access to, an investment bank can easily earn a bigger percentage of its customers’ wallet share. Citigroup has around 200 million customer accounts and does business in more than 160 countries.

Citi is “a Little Bit Late”

Jennifer Butler, director of asset management at the New York-based consultancy firm Corporate Insight thinks, however, that Citi is “a little bit late.”

She said:

“Robos are not a product that moves the needle for incumbents. This offer is just not as enticing. It makes sense for brokerages. They lost a major source of revenue when commissions went to zero. Financial services firms will have to stop thinking about serving clients with products and more about addressing the client life cycle.”

David Goldstone, head of research at Backend Benchmarking, thinks that automated investment products allow firms to start wealth management relationships much earlier.

“Firms can no longer wait to introduce wealth management services until clients have met minimums. Investors will have an existing relationship in place by the time they are wealthy enough to be attractive to a traditional advisor”, concludes he.

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Teuta Franjkovic

Experienced creative professional focusing on financial and political analysis, editing daily newspapers and news sites, economical and political journalism, consulting, PR and Marketing. Teuta’s passion is to create new opportunities and bring people together.

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