AmEx Plans to Spin Off Financial Advisory Unit

American Express Co. said Tuesday that it would spin off its financial advisory business so it could focus on the faster-growing charge card, payments processing and travel businesses.

The announcement by the New York-based company came a day after Citigroup Inc. said it would sell its Travelers life insurance business to MetLife Inc.

Both moves suggest that the “supermarket” approach to financial services that was so popular in the 1980s and 1990s may be proving cumbersome.

American Express bought into the financial advisory business when it purchased IDS Financial Services in 1984.

James Cerruti, president of Vivaldi Partners, a marketing strategy firm in New York, said the spinoff move was an acknowledgment of the difficulty of cross-selling financial products.

“Their advisors business was always a middle-market business,” he said. “They thought, ‘Let’s cross-sell these investment services to our cardholders.’ But it turns out the cardholders are a more upscale crowd and have a lot of other options, so it doesn’t work.”

The American Express advisory business, based in Minneapolis, provides financial planning, asset management and related services through more than 12,500 advisors nationwide. It has 2.5 million clients.

The business generated revenue of about $7 billion and earned about $700 million in 2004. But it has been about one-third as profitable as American Express’ credit card unit.

American Express Chief Executive Kenneth Chenault said that with the spinoff, the company could raise its target for return on equity to as much as 30% from the current 18% to 20%.

The company’s shares rose $3.40 to $56.75 on the New York Stock Exchange.

American Express said its shareholders would get all of the stock of the new company. The spinoff is expected to be completed in the third quarter.

After the spinoff, American Express would be left with businesses that earned $2.7 billion on revenue of $22 billion last year.