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Elliott was not your garden-variety Citibanker, setting up checking accounts or making business loans. She worked for the vaunted Private Bank, a highly confidential bank within the bank that provides white-glove service to clients with at least $1 million to invest. While this might seem to be an obscure part of Citibank--and indeed it was until just a few years ago--it is now the crown jewel in the financial giant's strategy for growth. That strategy calls for Citibank and its parent, Citigroup, to reduce their reliance on cyclical corporate and real estate lending, which tends to be high risk and relatively low profit. It will emphasize the lower-risk, higher-margin business of consumer banking--and especially one-stop financial shopping for the world's booming population of the newly rich.
At Citigroup and like-minded institutions around the world, folks with six- and seven-figure portfolios can find not only traditional banking services like checking and savings accounts but also strategic financial advice; introduction to high-yield investment vehicles like hedge funds; tax advice and accounting; estate planning and all manner of insurance. They can also get help in protecting their assets from potential claimants like creditors and ex-spouses, which can involve moving money discreetly from country to country.
Citibank's private-banking unit holds more than $100 billion, which makes it about the same size as the entire bank was in 1982. Those funds are in turn part of a $17 trillion global pool of money belonging to what bankers euphemistically call "high-net-worth individuals"--a pool that generates more than $150 billion a year in banking revenue. The numbers are especially impressive when you consider that except at a few sleepy British and Swiss institutions, the private-banking industry didn't exist until the 1980s. Citibank predicted early this year that it would reach $1 trillion--that's trillion with a T--in private-banking assets by the year 2010. And it faces some 4,000 competitors, from global dreadnoughts like Switzerland's UBS to secretive banks in the tiny principality of Andorra to brokerages in Miami and accountancy firms in the Channel Islands.
Why should you care? Here's why: as these wildly various institutions scramble for business, more and more of the wealthy are availing themselves of sophisticated tools that can be used--often legally, sometimes not--to avoid taxes and potential claimants. In the U.S. alone, thanks to the vibrant economy and the long bull market in stocks, more than 2.5 million households now boast investable assets of more than $1 million, up from 2 million households in 1995. "This market is exploding," says Mark Stevens, president of personal financial services for the Northern Trust Co., based in Chicago. He notes that while the U.S. population is growing 1% a year, the ranks of millionaires are growing 10 times as fast.