By Steve Garmhausen

David Bailin has moved from behemoth to boutique: The longtime Citi executive, known for designing and managing Citi Private Bank's $190 billion investment platform, now leads a $240 million-asset wealth management start-up. But Bailin says his New York-based business, CIO Group, is breaking new ground with its AI-powered offering for wealthy clients. "What we're doing at CIO Group is creating a distinct path of change for the finance industry," he says.

Speaking with Barron's Advisor, Bailin touts his firm's "Total Wealth Intelligence" model, which he says harnesses artificial intelligence to help deliver both investment and tax alpha on a new scale. He argues that investors shouldn't be focusing too much on the Iran war. And he shares some of the most promising investments he sees, including one that he says could yield extraordinary returns in a year or less.

You were the chief Investment officer at Citi Global Wealth from 2017 to 2024, but you think CIO Group can improve on the Wall Street giants' wealth offerings. How? When you work at a large bank with high-net-worth and ultrahigh-net-worth and family office clients, you have a limited purview. You can only see a portion of a client's assets, and you therefore can only give partial advice. I wanted to see all of a client's assets and give advice for the entirety of their portfolio. When you can look at a client's whole portfolio, you can optimize their cash, their asset allocation, their tax efficiency. You can optimize what is in their portfolio on a global basis. I was hellbent on identifying a way of coming up with that aggregation.

Using AI, we built a data-ingestion system that we call Color AI. We input all of a client's data into our system, then go to third-party providers to get the attributes or performance of those underlying investments. For example, for a private-equity fund, we could get the specific constituents and their performance. We can get the rating of a stock. We can get the rating of an ETF or a mutual fund, and what the underlying constituents are. We can take an MRI of a client's portfolio and know exactly what they have. We can then compare that with the underlying assets' benchmarks, or to our own portfolio construction. We can give clients incredible insights on what can be optimized in their entire portfolio. We call our holistic wealth management service Total Wealth Intelligence.

We're creating a distinct path of change for the finance industry. We have reviewed $4.5 billion in family wealth portfolios. The average family is spending between 1.2% and 1.4% per year in total fees for their accounts, 35% to 40% of which is going to compensate financial advisors. CIO Group charges 45 to 65 basis points plus underlying fund fees of 25 basis points. [A basis point is 1/100th of a percentage point.]

Almost all advisors are using models. Many do not know who designed those models, and most of the models are backward looking. I envision a future where the human element becomes more important in concert with AI, because AI is not great at looking forward and dealing with the complexity of the environment we're in. We can deliver that. We can deliver a lower-cost investment program and give clients better results by avoiding active management, by using AI as a tool. There's been a lot of laziness in the industry; the focus has been on rolling up RIAs instead of making RIAs better investors.

There's lots of analytics software on the market. How does Color AI improve on them? Today's software in general does not do what ours does with AI. For an example using taxes, a wealthy family will have, let's say, an embedded gain in their portfolio of $3 million. They'll have an AQR tax-loss-harvesting strategy that helps them mitigate their taxes. They will have an individual-stock tax-loss-harvesting strategy. They may use a 351 ETF to do further tax deferral. The most sophisticated families are using all of those. Ninety-five percent of the outside accounts we see are using no tax-loss-harvesting strategies. So it's a question of using all the tools to optimize returns.

What's your investing approach? Eighty-five percent to 90% of all actively managed funds do not hit their benchmarks and therefore they don't earn their fees. We created an allocation model that only uses low-cost ETFs that are highly specific. If we are going to make more money than the market, we have to allocate better. So for example, we're overweight international: Today, 31% of our total equity exposure is overseas. The valuations of the large-cap stocks there are lower, and we think the dollar is going to do less well; that combination will add alpha. Which ETFs will we buy? Well, we don't want to own banks in Brazil. We don't want to own banks in Asia. We want to own the underlying industrial companies in those places. We build our ETF portfolios or our direct-index portfolios with that level of that specificity.

We decided on the money management side that we have to be holistic and look at everything. We have to manage a client's portfolio in a tax-efficient way, to expose their portfolios to areas of future growth in the economy globally. That's completely atypical to the way a bank or a typical wirehouse would manage money. I believe that there are ways to manage money that are more tax-efficient, that give you a higher probability of getting a better return and of giving a client much less risk.

All of that is important today because you've just had 10 years of 14%-plus returns. The stock market typically gives you 10%. We're entering a period where there hasn't been a correction for a while, and there is one in front of us. We don't know when, but it's coming. For somebody my age that means, do you have an adequate amount of bonds today? You should have 20% or 30% of your portfolio in bonds because they're a good value right now. Most people don't -- they have a high concentration of technology and a low position in fixed income. In the $4.5 billion worth of client accounts we reviewed, we found 85% were deficient in asset allocation, tax efficiency, cash management, bondholdings -- they just don't have the right blend.

How concerned should investors be about the war in Iran? I don't think that's where they should be focusing their time. The only industrial revolution of our lifetime is happening right now. If you're not focused on that, you're missing everything.

It's a big shock. Shouldn't investors respond somehow? Right now the market is trading on oil prices, and that is a bad way to manage portfolios. You wouldn't want to buy energy stocks, which are obviously the leading stocks, today. You wouldn't want to buy defense stocks. You want to build portfolios that are full of profit gainers, market share gainers, earnings gainers.

Do you worry about stagflation or other macro impacts from the conflict? It's not stagflation that I worry about. When the war ends and the Strait of Hormuz reopens, we will see a normalization of oil prices over time, and its long-term impact on the economy will not be significant. I do worry about the combined impact of this oil shock and the tariff uncertainty. The tariffs are inflationary because they add to the cost of goods associated with U.S. consumption. The falling dollar has made things more expensive, and now we have oil as a compounding factor. So the policies being followed in the United States right now add to inflation.

Over the past three decades, and especially the past two, labor has earned a smaller and smaller percentage of the value of the productivity that technology has driven. AI is going to accelerate that trend, and that means companies in the aggregate will become more profitable and that labor will become under more stress. You read all the frightening articles, and you could conceive of a situation where you have high unemployment. But if this transition takes place over seven to 10 years rather than over two, then some amount of that destructive quality of AI will turn into innovation. The U.S. will benefit from that productivity and efficiency, which will counter the inflation. What's unusual about this time is that rather than having a country that's focused on its incredible strategic advantages, which are both in energy and in technology and in the ability to effectively reinvent itself, as the United States has done before, our policies collectively are creating confusion and the opportunity for others to compete with us more easily than ever before.

Let's talk about AI. Will it spur an extinction event for legacy software companies? The panic about software and AI is partially misplaced. There are definitely companies that are going to benefit from the inclusion of AI in their software, and there are companies that won't. Oracle has virtually no competitive edge in the rollout of their data centers. They don't have a particular cost advantage -- they're spending a lot of money on their [graphics processing units]. They're buying a lot of expensive chips. Google or Amazon both have the ability to buy less-expensive hardware and to build AI capabilities themselves. So the delivery cost of generative AI is different among these major companies.

Have you changed global allocations recently? We've changed global allocations twice in the past four months and increased our total portfolio exposure internationally by four percentage points -- international equities are now 31% of our total equity exposure. And we've added to Asia technology. We've added to Switzerland and to Canada -- Switzerland because of the strength of their economy and currency, and Canada because it has woken up as a result of all of this and is taking a much more macro government policy to change the very construction of their economy. Each of these additions has been made with a deliberate intent to give us certain exposures. We haven't added to India, for example, which is deeply negatively impacted by AI.

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March 13, 2026 12:59 ET (16:59 GMT)

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