In The Still of The Night – The Stealth Launch of Wells’ First RIA

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It was a snowy Sunday, January 13th, morning in the Northeast, around 1AM when a LinkedIn post indicated the Schultz team, a Wells Fargo Private Client Group team based in Berwyn PA, was the “first to be ‘permitted’ to transition to the Wells RIA Pilot Program. This struck an odd cord with industry insiders. Why was a newsworthy move of this magnitude communicated during the wee hours of a Sunday via an advisor’s LinkedIn profile update and post and not handled by the Wells Fargo public relations team? Sunday came and went. Monday morning came and went. It wasn’t until Monday afternoon when the story became officially public with the publication of an AdvisorHub article.

As stated in the AdvisorHub piece, Carl A. Schultz, a 15-year broker with Wells, will be affiliating his newly minted Forefront Wealth Management RIA with the Wells Fargo RIA Pilot Program with two major caveats. According to his own words as quoted in AdvisorHub, Schultz will be relinquishing “relatively significant” deferred compensation for the RIA opportunity. Further, Wells will be prohibiting its brokers from soliciting Schultz’s clients for a scant 30-day limit. Which brings up interesting questions for which there seems no answer. Why did Wells force Schultz to give up his deferred compensation and why is Wells allowing it’s brokers to solicit Schultz’s clients in the first place? This leads one to speculate as to the real Wells Fargo game plan. While the AdvisorHub article alluded to “more details to come” by John Peluso, the head of Wells Fargo Advisors First Clearing, there were no clear statements as to the intentions and goals of the RIA Pilot Program provided by Wells leadership.

The launch of the Pilot Program is certainly an acknowledgement of the attractiveness of the RIA model to wirehouse advisors and it also confirms Wells intention to stem the outflow of advisors, teams, and their client’s assets to the RIA channel. While sound in its intent and purpose, though, the Pilot Program has – even at its outset – begun the downward spiral emblematic of Wells Fargo as a firm in crisis. Consider the problematic and disjointed messaging surrounding the Pilot Program launch. Initial statements about the program were made at the Market Counsel event in December, then quickly followed by radio silence, only to resurface again with a middle of the night LinkedIn notification. This disjointed messaging has sadly been a part of the ongoing Wells story as the firm seems too punch drunk to deliver a cohesive message to the press, its advisors, and the marketplace.

Even now, if one were to review the Forefront Wealth ADV and website, Wells has done nothing to differentiate their RIA Pilot Program. Instead they appear to be using a cookie-cutter, template website format to convey nothing more than that they are a #RIAUSTOO movement:

*Yes, we have a RIA!

*No, it is not differentiated.

*No, we might not offer what other RIAs do.

*But, Yes, we have a RIA!

What Wells has failed to realize is that the lack of structure and clear program messaging of the Pilot Program will do nothing to help them retain advisors and client assets and may ultimately drive more business away. Too many questions are open for interpretation at this point. Will there be a dissociation fee – reminiscent of those encountered by PCG advisors ‘permitted’ to transition to the FiNet platform – that results in a penalty if the advisor leaves or disassociates before their new Wells deal is up and forgivable note repaid? Can an advisor use more than Wells for custody? Will technology be open architecture or will it be limited to TradePMR and the existing Wells technology offerings?

What we do know from reading the Forefront Wealth ADV is that Forefront will offer family-office services and charge between .75-150bps. We also know from the Forefront Wealth ADV that First Clearing is listed as the custodian, which is either a typo or an effort to distance from Wells. First Clearing re-rebranded as Wells Fargo Clearing Services in the early stages of the Wells bad news bonanza. Perfect timing indeed.

Kudos to Wells for at least allowing a pilot RIA program and congrats to Forefront and the Schultz team for being the first. But we in the industry need to know more as too many details are left up for interpretation. At first glance, it appears as the though the Wells Pilot program is simply a reincarnation of the PCG offering with a RIA moniker whose only exception is that the RIA is fee-only. A more dubious consideration might be that the Wells RIA Pilot Program is the birth of an RIA custody business to rival and compete with the traditional RIA custodians such as Fidelity, Schwab, Pershing, and TD, while using its own advisors as a sacrificial lamb.

On the surface it appears their desire “to be first” with an RIA option, which I give them credit for, might have been too quick of a knee-jerk reaction to their ongoing attrition problems with large advisor practices. All options are on the table, and only time will reveal what their true intension might really be.

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Comments (1)
  • Hi Frank,

    Thanks for the Kudos to WFA, and Forefront. As an avid reader of your work, I appreciate your perspective, views and considerable knowledge on all things RIA.

    If its okay with you I’d like to clarify a few points.

    1. I was in Colorado when I posted on LinkedIn, so it was 11pm not 1am. For me that’s quiet time, I’m up doing my portfolio research, Instead, I posted up my news which I thought was pretty cool. It was my first time posting comments, that didn’t have to be reviewed by a compliance, and did not give much thought about the hour. My apologies, I’m not a writer, reporter, and have no publicist. I was just pretty jazzed, so please give me a little slack. It is not every day that something like this happens and I was excited,

    2. Regarding the deferred comp: The reporter asked and I acknowledged that I forfeited it. He failed to note that this money would also be fortified, if I retired, died, or opted to go to Wells FiNet program. WFA’s program is structured with a rolling 5 year cliff vest . Any departure means surrendering the next 5 yrs of deferrals. Deferred compensation at Wells Fargo is probably like other corporate offerings, Know as golden handcuffs, its not real compensation until it hits your w-2. There is a lot to discuss about deferred comp, but not in this forum.

    3.Thanks for your concern about my clients, but not to worry. Two weeks into this transition, 94% of my clients have transitioned to Forefront. As for the 30 day limit: Wells has in place a firm-wide account redistribution policy implemented when an advisor leaves for whatever reason (death, deal, Finet, RIA-Pilot). So any accounts that have not moved are distributed to other FAs in the branch. While that seems harsh, or worse, its really makes sense. This protocol guarantees that the client has someone assigned to handle their account. Which I think makes a client-centric way.

    4. Regarding Wells “radio silence”: seriously this is a pilot. Does Lockheed make a big deal when they are beta testing the next version of stealth technology? nah Sure, I’m thrilled to be first and yes there will be many more to follow. Frankly I’m surprised at the level of national interest in little old Carl from Berwyn PA. But why would Kowach or Peluso show their hands during their beta?

    5. As for the other questions; dissociation fee: Nope, My First Clearing is now Wells Fargo Clearing typo: yes that’s my mistake. Other custodians: Yes I can.

    6. “Dubious considerations”: More like a good business decision. Frank you know better than anyone, RIA is the good path because it is client centered. This decision, small (a little guy like me) or big (billion dollar practices) is a evolutionary step that had to happen. WFA is the first big B/D willing to take this step I’m both lucky and proud to be part of it. I’ve said many times over my 15 years at WFA that I was an RIA stuck in a B/D. My practice is well suited for RIA. I’ve always behaved as a fiduciary, serving clients best interests first, always. I volunteered, for the pilot because for me it just made sense. Now through Forefront, after 35 years, I’m finally doing what I always wanted to do when I grow up.

    Oops, now look at the time… it is actually 2:33 am and I’m back in Philly. Better stop now.

    Please let me know if you have any additional questions.


    Carl Schultz
    President / CIO
    Forefront Wealth Management Inc.
    [email protected]

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