STREET MOVES: Wells Fargo's FiNet Attractive To Some Brokers
September 18 2009 - 3:57PM
Dow Jones News
While the financial crisis led some advisers to abandon major
brokerages and go independent, Wells Fargo & Co. (WFC) offers
one alternative that has a little bit of both approaches.
Wells Fargo Advisors Financial Network, the bank's independent
broker-dealer operation, expects to finish 2009 with 140 more
advisers, to add 85 advisory businesses, and to triple its net new
assets from a year ago. That forecast, made in an interview with
Dow Jones Newswires, comes as many advisers are leaving major
companies - or wirehouses - to set up their own businesses.
Wells Fargo's Financial Network - or FiNet - is particularly
attractive to advisers because they can set up their own practices,
earn a higher payout than their wirehouse peers, but still have
access to Wells Fargo's own technology and products.
"What makes [Financial Network] different from other independent
brokerages is that it's the best of both worlds," said John Peluso,
president of Wells Fargo Advisors Financial Network in an
interview.
Wells Fargo, which acquired FiNet along with Wachovia
Securities, is the only major brokerage to offer such a program.
Wells Fargo also has its traditional private client group, which
has roughly 15,500 advisers, as well its bank brokers.
FiNet is open to experienced brokers and independent advisers
with a minimum of $25 million in assets under management. The firm
has 405 practices, which include 705 advisers, and $32 billion in
assets under management. FiNet expects to add $9 billion in net new
assets in 2009. A year ago, FiNet had 645 brokers, 340 business and
attracted $3 billion of new client assets.
Peluso said that, while 30% of FiNet brokers use the Wells Fargo
name, some based upon their location, the remaining brokers have
the option to choose "custom branding." Some brokers may prefer to
select their own business names, given the reputation damage that
wirehouses suffered over the past year, though Peluso says Wells
Fargo is a "safe, reliable brand."
Besides being able to make their own marketing decisions,
brokers who choose to go the independent route have the opportunity
to generate more from commissions and fees than if they had
remained at a major firm. Analysts say that, while independents
typically have higher operational costs, they take home about 70%
to 80% of their payout, compared with 40% to 50% at the
wirehouses.
A Wells Fargo spokesman said "experienced brokers choose
independence because they are seeking more control and more
opportunities to make decisions about how they want to build equity
in their practice. Their success often translates to higher
payouts."
Bob Ellis, principal at research and consulting firm Novarica,
compared FiNet to a similar independent affiliation offered by
Raymond James Financial Inc. (RJF). Ellis said he expects more
brokers to go independent with the stock market stabilizing and
sees FiNet as a way for Wells Fargo to prevent some potential
departures.
"If you know that you are going to lose some people to the
independent [broker-dealers], why not maintain some of the
relationships and some of the revenue? A little bit of something is
better than nothing," he said.
Alois Pirker, a research director at Aite Group, said FiNet "can
grow from both ends," adding that the firm has the ability to
attract brokers from its own wirehouse side as well as recruit
advisers from competitors such as Bank of America Corp.'s (BAC)
Merrill Lynch.
-By Brett Philbin, Dow Jones Newswires; 212-416-2173;
brett.philbin@dowjones.com