EXCLUSIVE: Wells Advisors to Keep Key Pay Component Unchanged–Sources
Wells Fargo Advisors will announce a 2019 compensation plan on Thursday to its Private Client Group brokers that will largely replicate the one currently in place—including keeping monthly production hurdles intact, according to several internal sources.
The key philosophy behind the plan is to reassure brokers that they will not have to hit new growth targets to qualify for current payout levels, as the company seeks to staunch a continuing outflow of brokers amid its parent organization’s consumer banking scandals.
“With all the other changes that are happening, we wanted people to have consistency,” a Wells official said, speaking on condition of anonymity because the compensation plan has not been provided to PCG’s approximately 9,450 brokers.
Under Wells’s two-tier cash payout schedule, which differs from the pure grid payout structure of other wirehouses, brokers receive 22% of the first $11,500 to $13,250 they produce every month, followed by a flat 50% keep on amounts above the production-keyed hurdles. Wells has at times raised the monthly “hurdle” in its annual compensation plans in a bid to jack up production, but has not done so for the past several years.
The exception in the 2019 plan will be for brokers generating less than $250,000 in annual revenue, who do not participate in the two-tier system and whose revenue payout will be cut from 2018 levels, one of the sources said.
Wells Advisors, like its wirehouse competitors, focuses on advisors who generally produce at least $500,000 and work with wealthy customers. To that end, Wells will continue to pay brokers a “segmenting” bonus if 75% of their customers have accounts of at least $250,000 on a household basis, and to encourage them to refer accounts under that level to salaried brokers known as “Financial Relationship Advisors.”
Merrill Lynch has not paid brokers on accounts under $250,000 for several years, and even smaller firms such as RBC Wealth Management have been phasing in policies to encourage working with wealthier customers.
Wells will be the last of the four wirehouse firms to roll out its compensation plans for 2019.
UBS Financial Services and Morgan Stanley Wealth Management have also said that they are keeping their core payout grids unchanged as they seek to retain more seasoned advisors at a time that they have reduced their recruiting budgets. Merrill Lynch, in a more aggressive move, has raised the asset and household-account growth targets brokers must hit in 2019 in order to avoid payout penalties and qualify for bonuses, and is withholding payment across the board on the first 3% of brokers’ monthly production.
Wells Fargo Advisors’ headcount across its private client, in-bank and independent brokerage channels has declined by more than 1,000 since its parent disclosed a fake account scandal in its consumer bank two years ago. It remains the only wirehouse that is actively seeking to recruit experienced brokers, and through the end of this year has been offering external recruiters higher fees for introducing producers from competitors.
Earlier this year, Wells merging its bank-based brokerage force into the private client segment as part of a broader wealth management restructuring.