On the other hand, the move from CFO back to wealth management was a lateral one, amid speculation that Krawcheck lacked the experience to run the finances of a $2.2 trillion institution lumbering under the weight of Weill’s legacy of acquisitions. There is a ready supply of blogs accusing Krawcheck of letting her youth and good looks work in her favor, and noting that both her previous and present husbands were her bosses earlier in her career. She has been fairly vocal in public appearances about how her first marriage, to John Binnie—whom she met while working in the investment banking side of Salomon Brothers—fell apart over career stresses. She has been married since 1993 to Gary Appel, who was a founding partner at Donaldson Lufkin Jenrette Merchant Banking.

TOP VIEW Sallie Krawcheck faces many challenges after taking over last year as the head of wealth management for Citigroup. But in a bank shaken by the subprime mortgage crisis and a new regime at the top, she is running a profitable division with an eye on expanding its global reach. Along the way, she must improve Citigroup’s private banking credibility in Japan after the regulatory-abuse scandals of two years ago, and help the division’s clients navigate the shoals of recession. With straight talk and a keen sense of humor, this banking- industry wunderkind comes well armed for these and other tasks ahead.

"I’m very fortunate to be in a marriage now where my husband and I both work very, very hard to balance the time out with the children," she says. "Yesterday I was in Geneva; he was at our son’s track meet. I always tell women that one of the most important career decisions you can make is choosing the right husband. You could say the same thing to a man, by the way. It’s hard to be effective in your job if you don’t have a good home life. And it’s hard to have a good home life if you’re struggling with things in the job as well."

If Krawcheck can bring order to Citi Global Wealth Management, someday she just might emerge as a strong contender for the top spot. That contest would be something like the presidential race—just more political.

Insights
Krawcheck on Citigroup and the industry:

If you were an analyst now, what would you say about Citigroup?

Citigroup has certainly taken a hit of late, but one of the reasons I’m so happy to be here, and particularly to be responsible for global wealth management, is that I think we’re well positioned, better positioned for these trends than any other financial services company out there. The investment from Abu Dhabi could be a real win-win for both sides. To have a strong and sophisticated institutional investor make an investment in Citigroup at this time, with the nervousness in the market, I think is a real statement. As we look to globalize even more, a strong partner like that in that part of the world can only be helpful.

If you see the growth and returns that financial services companies have delivered over time, and if you were to close your eyes and not know what industry they were in, given their long-term earnings and return trends, you would say they traded at market multiples, if not in excess of market multiples. What is not always apparent during "normal" quarters is that these companies are risk-absorbing businesses—be it market risk, liquidity risk or credit risk, all of which we saw the impact of in the third quarter.

When all three issues impact a company at one time, you can see a significant downturn in earnings. Added to that is the fact that the drivers of those earnings can be opaque to the outside world because the balance sheets can turn over quickly, and there’s a good deal of leverage in them. And that’s why these companies tend to trade at fairly low price/earnings ratios. Risk-absorbing businesses are very profitable over time, but we’ve seen several risks go wrong at one time.

Of course, I am no longer an analyst; I am overhead. But when I was an analyst, I used to comment to investors that in periods of uncertainty are the greatest opportunities.

One of your most important holdings abroad is Nikko Cordial, which is Japan’s third-largest wealth manager but has, like Citigroup itself, suffered from a regulatory run-in there. Does this feel like one of your make-or-break challenges?

The wealth management part of me believes Nikko is an excellent business. The issues it faced were really around its private equity business. But the wealth management business—the core of Nikko—is in very good shape. Our goal is by no means to fix it, but rather to provide all of our capabilities to really open the flow.

Having been both an analyst of Citigroup and its CFO, are you making yourself pinch pennies?

Krawcheck has earned her stripes at Citigroup cleaning up after men who flew too high.

It’s on two levels. There are the expenses that are spent on the senior executives—one has to question those, and that is what the press wrote about. And then there are expenses to grow the business. We have increased those, and we have plans to continue to invest behind our advisors and our bank-ers. You always want to play to your strengths. We will be adding advisors and bankers in Asia. We are adding to technology in the U.S., in particular to help our advisors drive greater productivity and greater insights for our clients. That’s the good cholesterol.

The bad cholesterol tends to be the more symbolic expenses. In addition to the symbolic spending, we removed some layers of management. We had global overlay, which was helpful at times in the private bank’s history but was a layer not needed going forward. With fewer folks in between, I can find out what’s going on in the field pretty quickly. And while I can’t personally manage all 46,000 employees, the more you can do to facilitate that back-and-forth, the better. You should see the conversations between our client-facing professionals and our New York–based professionals—the informal back-and-forth. It’s the most interesting cultural characteristic.

If you had it to do over as CFO, would you do it differently?

It was a tough time, however we made some good decisions. I was very proud of the capital-allocation processes we began to put into place, so that we are becoming more systematic, structured and targeted.

The tough part was that the earnings were under pressure for us as a company. With hindsight, there is always stuff you could have done better, faster, more stringently. But I do believe that the movement from an acquisition focus to a focus on balanced, organic growth in acquisitions is right.

To work through the breadth that is Citigroup, product-wise, business-wise and geography-wise, is an experience that few people in the industry get. So while I cannot tell you that every morning I jumped out of bed saying "Yes! I’m the CFO of Citi!" I wouldn’t trade the experience for anything.

So how did you manage to corner Sanford Weill on a plane?

I had invited him to go to London to visit some investors, and I managed to get myself seated by him on the plane. I didn’t quite stalk him, but I did spend however long it takes to fly to London peppering him with questions. I think I exhausted him.

I covered Travelers for a while, and I think one of the reasons Sandy ended up liking me had to do with Travelers buying Salomon. When they combined the two business models, their earnings went up, so they took their target prices up. In my analysis, though, I said that the underlying driver of profitability—the return on equity—was going down, so I took my target price down. People said whoa. I actually remember a very large investor calling up and screaming obscenities at me after I’d done it. Sandy wasn’t thrilled. But I will tell you Sandy was very respectful of it.

And darn if a few months later, we didn’t have the Asian crisis. Not that I predicted it or projected it, but it actually proved out the theory of the increased risk that Travelers brought in with Salomon. So I think Sandy and I developed a very healthy respect for each other. I certainly had a very, very healthy respect for his vision for the company and his derring-do.

Do you think the industry is doing research the right way now?

I do. It’s still hard for an analyst to put a "sell" recommendation on a stock. A sell sticks out as pessimistic, and that goes against our grain as Americans. Also, there’s a little bit of fear that the managers know more than I do as an analyst. If they’re looking and sounding optimistic, which they always do, I’m making a bet against them.

I don’t think we’ll ever get sells up to 50 percent of all recommendations, though I thought about forcing that when I got here five years ago. I managed to get us from a horrible rating system, in which a stock could underperform or outperform, to buy/sell/hold. I wanted to rate a stock as yes or no. We’ll never get there. But now that the banking business does not pay the research business, we have 99 percent of the battle won.

Sallie Krawcheck on Money & Meaning
My father had money, but my mother [grew up with] none. I grew up in a family of four kids, and when we talked about money, it was mostly about the absence of it.

I learned about how in one moment you can make a difference in a kid’s life. For me it was in my junior year of high school, when my guidance counselor caught me and said, "Have you seen your IQ scores? You can really do something with yourself, and you’re on track not to." I was interested in running around with my boyfriend and giggling and trying to date the quarterback. Boom. That was when I thought, "Well, I can go to the University of North Carolina." When I got there, on a Morehead Scholarship, I thought, "I can go to New York." But at first, North Carolina was as far north as I was going.

I studied journalism in college, but then I started thinking I should have a specialization—maybe I should know something before I went out and wrote about it. So I went to Salomon Brothers for a couple of years to learn about business, figuring I’d probably go work for an Atlanta newspaper on the business side. And you meander along and you like this job and you go to business school. Then you like that man. Then you’re married. You’re having kids and a cat and an apartment. And the next thing you know, you’re running global wealth management in New York City.

Almost all of the charitable work I do is based around education. But the thing that’s very close to my heart is the scholarships my family and I are endowing at my high school, Porter-Gaud, for very talented young people who would not otherwise be able to afford to go there. I took the idea from the Morehead Scholarship, which made all the difference in my life.

I haven’t worked out the details, but when it comes to a will, I’m leaning toward using the wealth I leave behind to do good, rather than to have trust-fund kids. But I told my daughter she can have all of my shoes.

Sallie Krawcheck on the Markets
What’s notable about the recent volatility is that there hasn’t been a knee-jerk reaction in which what’s happening in the developed markets affects the emerging markets. There truly is something fundamental going here. There is a shift from the center of the universe being New York and the U.S. to there being several financial centers. Some of it is occurring because of the emphasis in these markets, with the Middle East really thinking about how to invest petro dollars. But I think we should be quite honest with ourselves: It’s also been driven by the litigation regime, the regulatory regime in the U.S., the approach we take to inviting or not inviting foreigners into our markets. There is an insular nature here, and we have not fully recognized—I know we have not fully recognized—the seismic shift that is occurring. That is not to say there won’t be volatility in all of the markets. The fundamental issue remains the lack of liquidity.

I think the key mistake that a lot of pundits make is, they keep saying that while we have a liquidity issue, the fundamentals are OK. The point I try to make is, liquidity is the fundamental. The liquidity issue, in turn, is led by concerns about what will happen to economic fundamentals.

Photography by Thomas Hart Shelby

Jan Alexander is a features editor for Worth.