Last month's sudden departure of Deborah McWhinney, Citigroup's head of personal banking and wealth management unit, raises questions for brokers, advisors, customers and the firm's executive management team as the company seeks to fill the void. It also raises questions about Citi's strategy for serving the highly coveted mass-affluent market.

McWhinney, who joined Citigroup in March 2009 after a successful run atop Schwab Institutional, will take over as head of Citi's Global Digital Merchant Acquiring Group, according to an internal memo. McWhinney now reports to Paul Galant, CEO of Citi's Global Enterprise Payment (GEP) group.

The abrupt management shake-up leaves Citi with a twofold dilemma, according to former employees and financial services analysts.

Will it stay the course with the fee-based advisor strategy that sparked a massive defection of brokers now that its champion has moved on? Also, will McWhinney's replacement have the guts, skill and upper management support to do whatever is necessary to soothe the concerns of its remaining advisors and right its personal banking and wealth management unit? This will be a challenge given that innovative rivals are aggressively targeting some 13 million potential clients, with $50,000 to $250,000 in investable assets.

"[McWhinney's departure] is very surprising," says Alois Pirker, an analyst at Aite Group. "They defined a strategy, a pioneering, fee-based model that's not very common, and a change like this so early on certainly puts the whole effort in question. I just wonder if this is just an executive move or if the whole strategy is in question."

A former Citi manager who didn't want to be named, added that it was shocking that someone in charge of such a high-profile sales management group would be "moved to some kind of back-office position," especially considering her experience and the magnitude of the changes she implemented in the personal banking and wealth management business.

The GEP unit was only started last October and involves signing up merchants to use Citi's debit and credit cards.

"To be put in a digital operations-type thing, I don't know why she'd take it," the former Citi manager says. "Maybe it is a good opportunity. She doesn't need the money. It's hard to say what the real story is. What we do know is that her strategy didn't sit well with the retail bank broker program, which is the lion's share of their business."

And while Galant praised McWhinney for doing an "excellent job of setting strategy and driving execution" during her two-year run as head of the unit, the numbers tell a different story.

Besides the defection of 150 to 200 brokers with their clients following the spin-off of its Smith Barney brokerage unit in 2009, Citigroup missed analyst estimates in its latest quarter by three cents a share with its securities and banking unit sales, down 37% sequentially, and fixed- income sales, off 58% sequentially.

From a big-picture perspective, some analysts wonder if Citi is just conceding the personal banking and wealth management market to competitors, particularly in the U.S., since 59% of Citi's total sales and 76% of its net income last quarter came from international operations.

"What's troubling is that as a big retail bank, [Citi] doesn't have a mass-affluent strategy," Pirker says. "The importance of this unit has taken a nosedive with her stepping aside. It all still depends on who they bring in, and I suspect that if they were going to give it up right away, they would have let McWhinney just kind of wind it down."

Ironically, one of the options still available to Citi is scrapping the fee- and team-based advisor strategy in favor of a pure online model like the one Bank of America Merrill Lynch launched last month. Ironically that initiative was the brainchild of Sallie Krawcheck, the former head of Citi's Smith Barney advisor unit.

That effort—Merrill Edge—offers banking and investment accounts through BofA ATMs, branches, online and mobile, as well as offering call center support for the mass affluent.

"Krawcheck and her whole group from Citi who were working on myFI—Citi's old online strategy—learned all the hard lessons at Citi and then rolled out a slightly different version at Merrill Lynch," Pirker says. "It was there for Citi all along."

As for McWhinney, Galant says her background in the payments industry at Visa International and Bank of America makes her an ideal choice to lead a key group in GEP, which he describes as "one of the most strategic growth opportunities, allowing us to leverage our industry-leading wholesale and retail payment capabilities across regions and organizations.

As head of the Global Digital Merchant Acquiring unit, McWhinney will attempt to parlay her wealth management skills into signing up new merchants, both online and off, who are willing to pay either a fixed fee or percentage per transaction for Citi's back-end services for credit card and debit card payments.

The digital merchant acquiring market, stymied by generally lousy economic conditions, now stands at roughly $15 billion a year, according to Aite Group analyst Adil Moussa.

"The people that I run into in merchant acquiring come from all different backgrounds," he says. "There's no one set of skills you need to be successful. Sales is sales is sales. As long as you have a good value proposition, they'll sign up with you."

Bank of America, First Data and Chase Payment Tech dominate the digital merchant acquisition terrain right now, with Citi ranking somewhere near the bottom of the top 20 providers, according to Moussa.

Meanwhile, Citi's personal banking and wealth management unit remains in limbo, still shell-shocked by the departure of its leader and searching for an identity.

"Considering they haven't even named an interim replacement and didn't have a replacement already in mind, suggests that maybe management feels there's not a ton there to be worried about," Pirker explains. "If they have an ace up their sleeve and can find the right person, maybe it will give them a second chance. But right now, it doesn't look good."