As Market Booms, Wells Fargo Financial Advisers Struggle
February 01 2020 - 5:59AM
Dow Jones News
By Rachel Louise Ensign and Ben Eisen
The booming stock market has meant brisk business for financial
advisers. Not so at Wells Fargo & Co.
The bank's wealth-management profits have barely budged from
2016, the year its fake-account scandal burst into public view.
Bank of America Corp. and Morgan Stanley, meanwhile, have posted
double-digit gains in their wealth businesses.
The stall has some of Wells Fargo's more than 13,000 financial
advisers heading for the exits. To stem the tide, the bank is
luring new advisers with six-figure bonuses while asking for money
back from those who don't meet performance goals, according to
interviews with current and former Wells Fargo advisers.
Times are generally good for financial advisers, who are in high
demand as the stock market rises and a growing population of
retirees seek investment advice. What's more, fee-generating
businesses such as wealth management have become more important for
banks since low interest rates have crimped lending profits. But
Wells Fargo is finding that it is hard to win back the trust it
lost when it came to light that branch employees opened perhaps
millions of phony accounts without customer knowledge.
Wells Fargo executives believe the wealth operation -- one of
the bank's three main business lines -- is close to turning around
after the scandal. Wealth-management head Jonathan Weiss has put
new managers in place, and the bank said 2019 was its best
recruiting year since before the sales scandal erupted. Yet
expenses have jumped 23% from a year ago, in part because of higher
compensation and benefits.
"We are proud that so many outstanding financial advisers are
choosing to join us," a bank spokeswoman said. "We remain
optimistic about the business and the future."
The business has a long way to go to make up ground it lost
following the sales scandal. The wealth division managed client
assets worth $1.9 trillion at the end of last year, up 12% from the
end of 2016. Client assets at Bank of America and Morgan Stanley
rose 21% and 28%, respectively.
Wells Fargo is paying up to replace advisers it has lost in
recent years. It is offering candidates a bonus of as much as 200%
of their revenue from the prior year, recruiters said, which is
around 25 to 50 percentage points higher than what competitors are
offering.
The bank is trying to attract advisers with bigger books of
business, and it recently changed their pay structure to discourage
them from taking on smaller accounts.
Wells Fargo's damaged reputation makes it a tough sell.
"Advisers tell me they don't want to have to apologize for the firm
they work for," said Brian Hamburger, chief executive at
MarketCounsel Consulting, a consultancy to financial advisers.
Times are especially tough for financial advisers who work out
of Wells Fargo branches and depend on referrals from bankers,
according to current and former advisers. Referrals fell after the
bank eliminated sales goals in 2016 to stamp out an aggressive
sales culture that led to the fake-account openings. The lender has
reintroduced some goals and says referrals from bankers to
in-branch advisers are up.
Wells Fargo's consumer bank referred $2.6 billion of investment
assets to the wealth business in the final three months of last
year, up 18% from a year earlier, but still down from the $3.2
billion in the third quarter of 2016.
Some in-branch advisers said they are earning less than half of
what they did at their former firms, and they are struggling to pay
their bills and cutting back on expenses.
Wells Fargo has also sent some advisers repayment demands in
connection with the upfront sign-on payments they received years
earlier.
The payments are essentially advances, typically structured as
loans that advisers repay with a portion of their monthly bonus
payments, according to internal employment documents viewed by The
Wall Street Journal. But the bonuses depend on meeting certain
performance standards. Miss those targets, and Wells Fargo can dock
the bonuses, causing the advisers to fall behind on the loan
payments.
Advisers said the repayment notices they got from Wells Fargo
were vague, and even managers weren't able to explain them. Some
advisers say they have been told they are behind on their loans
even when they are meeting performance goals or haven't worked at
the bank long enough for them to kick in.
Wells Fargo wealth-management executives said the business
explains pay clearly to financial advisers. They said only a
fraction of advisers have, at some point over the past 10 years,
received less than their full bonus payments.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com and Ben
Eisen at ben.eisen@wsj.com
(END) Dow Jones Newswires
February 01, 2020 05:44 ET (10:44 GMT)
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