Wells Aims New RIA Channel at Larger Advisors
Wells Fargo Advisors formally introduced its registered investment advisory platform on Tuesday, offering it to fee-only Securities and Exchange Commission-registered advisors with at least $100 million of client assets under management.
Wells appears to be positioning its new business channel as a place for independent-minded brokers within its private client group of more than 10,000 advisors to land if they are considering leaving. It also hopes to recruit new business through introducing broker TradePMR, which has sent its RIA clients to Wells’ First Clearing subsidiary since its founding in 1998.
More than 1,000 brokers net have left Wells Fargo Advisors since the bank disclosed fake account scandals two years ago, prompting it to pump up its recruiting efforts across its employee and bank branch brokerage channels.
“This is a new option for advisors to consider when doing their due diligence,” said John Peluso, the head of Wells Fargo’s First Clearing subsidiary, which will operate the channel and offer financing to RIAs and banking products to their customers. “It gives our hiring managers another avenue to present in their role as true career counselors.”
Wells will require advisors using the new platform to execute trades and receive business services through TradePMR, which has long offered RIAs Wells’s trust and banking services.
Wells is offering its SmartStation desktop platform to RIAs, at a fee scaled to the assets they keep at Wells, but they will not have access to trading, service request and workflow support on the platform. TradePMR, which currently services more than 700 individual advisors, will provide its “Fusion” service, a package including portfolio rebalancing, custody fee-deduction and client relationship management to participants in the new channel.
“Pricing is competitive with all of the other custodians,” said TradePMR founder and CEO Robb Baldwin, alluding to discount brokers such as Charles Schwab, Fidelity Investments and TD Ameritrade that dominate the RIA custodian market.
Wells earlier this month landed its first RIA client, a former private client group broker near Philadelphia who told AdvisorHub that a high percentage of his “book” moved with him to his new firm within weeks.
TradePMR has hired a six-person “boots-on-the-ground” team to work directly with brokers converting to the RIA channel. “We want it to be an absolutely seamless experience for the end client,” Baldwin said.
Wells advisors who choose to become RIAs will forfeit deferred compensation, just as they do when they voluntarily resign to join Wells’s Financial Network (FiNet) of independent brokers, Peluso said.
“Going independent is not for everyone,” Peluso said of the RIA and the FiNet models, “but we are providing the option for those that are willing and capable.”
Wells has no goals or targets for attracting RIAs in its first year of operation, Peluso said.
Advisors with fee-based practices who remain at Wells’ private client group, meanwhile, will contend with a new fee that will be charged their advisory clients.
Starting in April, Wells will levy an “advisory platform fee” of 5.90 basis points of client assets annually, meaning those with $1 million of assets in their accounts will be charged $590 in addition to their management fee that usually runs between 1% and 1.5% of assets.
The new charge is “in step with other firms in our industry,” Wells spokeswoman Kim Yurkovich said in an e-mailed statement. “We are committed to increasing transparency and want clients to fully understand the fees we charge related to their advisory accounts and the payments we receive from mutual fund companies.”
Wells will soften the blow by rebating the fees to customers with revenue-sharing money that it collects from mutual fund companies and other managers. While the rebate is likely to match or even exceed the fee initially, Wells cannot guarantee that it will continue in future years as relations with fund companies evolve.
The new advisory fee, which will be announced to customers in February account statements, was reported earlier by “Investment News.”