Wells Fargo erasing hurdles for advisers looking to move to its IBD

If advisers commit to staying at FiNet for a two-to-three year period, they will not have to pay Wells the fees it currently charges advisers switching channels

Jan 24, 2018 @ 1:00 pm

By Bruce Kelly

The independent contractor arm of Wells Fargo Advisors, , or FiNet, intends to make it easier this year for brokers who are employees to jump to another side of the business and work as independent reps under FiNet.

Wells Fargo management is currently discussing cutting a two-year charge on compensation that it levies on employee advisers who move to FiNet, according to two sources familiar with the talks.

When employee advisers move to an independent broker-dealer, they see a higher payout — along with building equity in their own practice — that is offset by an increase in expenses for such costs as staffing and office space.

Keeping those forces in mind, over time it can be more lucrative for some advisers to work as independent contractors instead of as employees.

Right now, Wells Fargo charges advisers who move to FiNet 15% of their compensation the first year and 10% the second, according to the sources, who asked not to be identified. Wells Fargo will waive that charge, dubbed a "toll" or "tax" by some in the industry, if the adviser commits to a two- to three-year contract to remain at FiNet and not jump to another firm.

Wells Fargo's decision comes at a time when Wall Street's four wirehouses — Morgan Stanley, Merrill Lynch, UBS Wealth Management Americas and Wells — are rapidly realigning their strategies to hang onto brokers and advisers who may be looking to move to an independent RIA or broker-dealer, as well as the client assets they control.

Merrill Lynch is focused on training. In the final quarter of 2017, Morgan Stanley and UBS said they were dumping the protocol for broker recruiting, which makes it easier for advisers to leave one firm and join another.

Of the four, Wells Fargo is unique because it is the only wirehouse to have an independent broker-dealer under its roof.

Management at Wells Fargo would not discuss details of the planned changes to the compensation "tax" for advisers who move to FiNet but spoke in no uncertain terms about their desire to smooth the transition for employees who want to make the move to being independent contractors.

"The good news is we have looked at the hurdles, the toll or tax, whatever you want to call it, and want to make sure advisers who are perfect for independence have the smallest hurdles as possible," said Alex David, head of branch development group at FiNet. "We made some very significant adjustments, with perhaps some others going down the line.

"Things have changed pretty significantly on behalf of the adviser to allow ease of movement from our private client group to FiNet," Mr. David added.

Wells Fargo has had a tumultuous past year-and-a-half. It was fined $185 million by regulators in September 2016 following the revelation that employees had opened bank accounts for customers without their knowledge or approval. There were perhaps more than 1 million such fake accounts opened.

Wells Fargo experienced three consecutive quarters of adviser flight after news of the banking scandal broke. However, the firm seemed to turn things around in the third quarter, notching an increase of 37 advisers. It ended the year with a total 14,544 advisers and brokers, a loss of 20 advisers compared with the third quarter. That total is down more than 2% from 2016, when Wells Fargo ended the year with 14,882 advisers.

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