EXCLUSIVE: Wells to Raise Payout to 50% on Top Brokers’ First Dollar of Revenue
Wells Fargo Advisors will unveil its 2018 compensation plan to the 11,000 brokers in its private client group on Friday morning, adding a significant enhancement to encourage them to work with wealthy accounts.
Brokers who generated at least $2 million of fees and commissions in 2017 and have at least 75% of their accounts concentrated on households with $250,000 or more at the bank-owned firm will be paid 50% of every dollar they generate. (They also must “fully participate” in the firm’s Delta sales coaching program.) The hurdle removal is a change from the 22% payout rate that Wells currently pays top brokers on the first $11,500 they generate monthly before qualifying for the 50% rate.
Wells, which has not made a decision to date on whether it will follow rivals Morgan Stanley and UBS Financial Services out of the Protocol for Broker Recruiting, also is applying the new “no-hurdle” rate to teams that have combined trailing-12 production of $2 million, if the average producer on the team generated $800,000 of 2017 revenue.
Wells is not changing its current two-tier cash payout schedule for other brokers, continuing to pay them 22% of the first $11,500 to $13,250 they produce every month, with lower hurdles for higher producers, before graduating to the handsome 50% payout.
Wells executives are proud that they’ve made no downward adjustments in production hurdles despite the “very real business inflation in our economy that’s typically passed through in comp plans,” said Richard Getzoff, who heads Wells Advisor’s six-region East Coast division.
“I think that the cash component of the plan will go over very well with advisors,” he said.
Wells Advisors’ private client group is the last of the four major-name broker dealers to unveil its 2018 comp plan. (Brokers at Morgan Stanley and Merrill Lynch must produce at least $5 million annually to qualify for payouts of around 50%.) The relatively moderate changes Wells is making reflect the firm’s goal of keeping stability among its advisor force at a time that regulators, politicians and the public have excoriated its parent bank for creating fake consumer checking and credit card accounts and overcharging for auto loans and other bank products.
“Wells Fargo has had to be much more conservative in terms of the types of compensation changes or reductions that might upset advisors,” said Andy Tasnady, a compensation consultant who advised Wells on creating its unusual two-tier grid-payout scheme when it was created more than a decade ago.
Almost 350 brokers left Wells in the first six months of this year amid the headlines but Wells Advisors rebounded in the third quarter with a net gain of brokers, reflecting its decision to keep its recruiting packages at elevated levels that Merrill Lynch, Morgan Stanley and UBS have backed away from.
“We’re still recruiting the best financial advisors in the industry,” Getzoff said, adding that Wells Advisors’ hiring pipeline is very active and that unlike some competitors Wells has not changed hiring incentives for branch and complex managers.
Tasnady said it is unlikely that Wells has a significant number of individual brokers who will qualify for the no-tier level. Wells spokeswoman Emily Acquisto declined to break out Wells’ projections. Individual advisors who do qualify stand to earn an additional $38,640 annually, Tasnady said.
Getzoff said the new comp plan also has significant enhancements to deferred compensation awards that should be attractive to brokers at all levels of the organization.
While base awards for asset and revenue production based on length of service will not change from 2017, Wells is raising its five-year deferred bonuses for brokers who work with wealthier customers.
Those who have at least 75% of household accounts holding $250,000 or more will be paid higher bonuses than this year because the formula is switching from a flat $5,000-to-$20,000 bonus based on three tiers of production to an eight-tier percentage-based bonus. The award will be higher at comparable production levels, Getzoff said.
At the top of the ladder, Wells is introducing a 3%-to-6%-of-production bonuses for advisors if three-quarters of their household accounts have at least $500,000 with the broker-dealer.
In contrast with Merrill, Morgan Stanley and UBS, which offer bonuses for having brokerage customers take out loans and/or for referring them to sister bank platforms, Wells in the shade of its bank scandal for the second year in a row will have no bank or product-related bonuses.
Wells next year is introducing a new “multi-generational household policy” that will allow brokers to offer account fee waivers and other discounts to “lineal descendants” of customers who have $1 million in their combined household accounts. Wells currently allows such rising-generation customers discounts only if their elders keep $5 million in their Wells Advisors account.
UBS recently told its brokerage force that it will hike account fees for customers who have less than $2 million in their combined brokerage and bank accounts.