The sudden departure this week of Deborah McWhinney, head of Citigroup's personal banking and wealth management unit, raises concerning questions for brokers, advisors, customers and the firm's executive management team as it embarks on a search for her replacement and, more important, its strategy for the highly coveted mass-affluent market.

McWhinney, who joined Citi in March 2009 after a successful run atop Schwab Institutional, will now take over as head of Citi's Global Digital Merchant Acquiring group, according to an internal Citi memo circulated Monday, reporting to Paul Galant, CEO of Citi's global enterprise payment group.

The abrupt management shakeup leaves Citi with a two-fold dilemma, according to financial services analysts and former Citi employees:

Will it stay the course with the fee-based advisor strategy that sparked a massive defection of brokers and their accompanying books of business now that its champion has moved on?

And will McWhinney's eventual replacement have the guts, skill and upper management support to do whatever is necessary to soothe the concerns of its remaining brokers and advisors and right its personal banking and wealth management unit to keep pace with innovative competitors who are aggressively targeting some 13 million potential clients with between $50,000 and $250,000 in investable assets?

"[McWhinney's departure] is very surprising," said 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," he added.

A former Citi manager who didn't want to be identified 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 McWhinney implemented in the personal banking and wealth management business.

"To be put in a digital operations type thing, I don't know why she'd take it," the ex-Citi manager said. "Maybe it is a good opportunity. She doesn't need the money. It's hard to say what the real story is and we may never know. What we do know is that her strategy didn't sit real well with the retail bank broker program which is the lion's share of their business."

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

Besides the defection of between 150 and 200 brokers -- and their clients -- following the spin-off of its Smith Barney brokerage unit in 2009, Citigroup missed analyst estimates in its latest quarter by 3 cents a share with its securities and banking unit sales, down 37% sequentially, and fixed-income sales, off 58% sequentially, at least partially responsible.

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. considering 59% of its total sales and 76% of its net income last quarter was derived from international operations.

"What's troubling is that as a big retail bank, [Citi] doesn't have a mass-affluence strategy," Pirker said. "Whatever importance this unit had is just taking 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 scraping the fee- and team-based advisor strategy in favor of a pure online strategy like the one Bank of America Merrill Lynch launched last month and that was the brainchild of Sallie Krawcheck, the former head of Citi's Smith Barney advisor unit.

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

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

As for McWhinney, Galant said her background in the payments industry at Visa International and Bank of America makes her an ideal choice to lead a key group in Citi's Global Enterprise Payments unit which itself was launched just this past October and described as a "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 Digital Merchant Acquiring, McWhinney will attempt to parlay her wealth management skills into signing up new merchants, online and off, 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 the 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 said. "There's no one set of skills you need to be successful. Sales is sales is sales. When you're dealing with merchants, you're dealing with human beings. 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, I think it suggests that maybe management feels there's not a ton there to be worried about," Pirker said.

"If they have an ace up their sleeve and can find the right person, maybe it will give them a second change," he added. "But right now, it doesn't look good."