Wells Advisors Executive Hints at Protocol Decision
Wells Fargo Advisors has not yet announced whether it will remain in the Protocol for Broker Recruiting that large competitors are exiting, but a senior executive appears to be positioning itself for the event.
“We don’t have a stance yet, but regardless of what happens with the Protocol we’ll be a winner,” managing director Rich Getzoff, one of two division heads for Wells network of some 11,000 private client group brokers, said in an interview on Thursday. “We’re prepared for any outcome because we’re built for any outcome.”
He was referring to the bank-owned broker’s multi-channel structure, which is dominated by its conventional network of private client branches, as well as its Financial Network of independent brokers, its Wells Fargo Bank branch brokers and private bankers. Wells officials have declined to comment on whether they will actively promote the in-house alternatives to restless private client group advisors.
But they acknowledge that Morgan Stanley and UBS Financial Services’ decisions to withdraw from the inter-industry Protocol agreement have shaken up the retail brokerage world’s recruiting dynamics.
“We’re very aware of what’s happening, and we’re monitoring the developments,” said Getzoff, who oversees Wells brokers in six regions extending from the East Coast to the Midwest.
Though the largest broker-dealers created the Protocol in 2004 to end expensive litigation aimed at impeding brokers from contacting former clients, the pact has lost its efficacy for them as thousands of smaller firms have joined. The smaller firms have been attracting advisors from the larger firms, while the so-called wirehouses rarely recruit in the other direction.
UBS, Morgan Stanley and Merrill Lynch have affirmatively reduced their recruiting goals and signing incentives, while Wells has kept its hiring goals intact as it strives to reverse attrition caused by backlash against its sister bank’s fake-account scandals. Executive search consultants and industry lawyers widely believe that Merrill Lynch and Wells Fargo Advisors will soon follow their rivals out of the Protocol.
Wells Fargo is the only wirehouse to have an “independent contractor” channel for brokers. Such independents retain a higher percentage of customer fees and commissions than full-employee brokers but also pay for much of their overhead, ranging from assistants, technology and rent to compliance costs.
Like mid-size national firms Raymond James Financial and Ameriprise Financial that also have independent channels, Wells would most likely promote its Financial Network to private client group advisors anxious to leave by permitting some portability of customer-contact data, according to outside recruiters. Wells also has a small group of advisors in a quasi-independent unit called Profit Formula who earn higher payouts, but has not actively promoted the business for several years.
“If they do pull out of the Protocol, it would increase the number of people who go over to FiNet,” said Louis Diamond, a recruiter with Diamond Consultants in New Jersey.
But he cautioned that Wells’ ability to contain movement within its corporate walls is anything but assured, particularly for brokers who are disenchanted with the Wells platform or the loss of its brand equity due to the scandals. Like other firms, Wells also charges significant transfer fees to employee brokers.
Getzoff’s comments on the effects of its competitors’ Protocol imply that Wells is leaning toward following them out, Diamond said, noting that it’s likely since the bank-owned firm still recruits primarily from wirehouse competitors.
Jeff Bischoff, an industry recruiter in Greenwich, Conn., agrees.
“There’s no advantage to staying in,” he said. “It takes two to tango.”