Wells, Credit Suisse Renege on Lucrative Retail Syndicate Plan
Former Credit Suisse brokers are blowing steam over a decision to dilute the near-exclusive share of the Swiss bank’s equity syndicate deals they have been allocated in return for joining Wells Fargo Advisors.
Wells Fargo managers late Wednesday dropped in on brokers recruited from Credit Suisse to tell them of changes being made to the lucrative retail syndicate scheme, according to five brokers and client associates in separate Wells branches across the country. In the very near future, allocations of retail deals will be expanded to brokers at three other unnamed firms, they were told.
Wells had presented five-year access to Credit Suisse’s initial public offerings and follow-on deals as a major selling point as it attempted to recruit brokers searching for new homes in late 2015 and early 2016 after the Swiss bank decided to close its U.S. wealth operations. Wells, with Credit Suisse’s direct support, recruited about one-third of the Swiss bank’s 336 American brokers, second only to UBS AG’s U.S. broker-dealer.
“Syndicate is a lucrative and relatively easy business, and it was a big selling point,” said an East Coast Credit Suisse emigree. He said allocations immediately increased on joining Wells because the pie was being split among far fewer brokers.
Over the past 18 months, Wells brokers with CS pedigrees got 85-90% of the retail syndicate allocation, he and others said, with a small portion reserved for representatives of discount brokerage firm Fidelity Investments. Two brokers who spoke to AdvisorHub said as much as one-third of their revenue comes from syndicate deals, though they acknowledged that the portion varies substantially from team to team.
Managers who briefed brokers late Wednesday afternoon said they had few details about the decision or whether brokers would receive some sort of compensatory award for the diluted allocations in the future.
One Wells Fargo advisor who heard about the change from a colleague said he believed that Wells may offer a forgivable loan to offset potential lost revenue resulting from the change, but others said their managers did not mention such a program.
Spokespeople at Wells and Credit Suisse did not respond to requests for comment about the planned changes.
Many brokers embrace new offerings because they often are in demand by retail investors who are granted only a small share of the allocation given to institutional investors. Syndicate deals also are relatively easy to sell.
“You take the orders at the end of the day when the deal has been priced, call them in to the trading desk and communicate the fill to the client the next morning before the open,” said the East Coast broker. “There’s no argument from clients because you don’t set the commission.”
The revised syndicate program continues a messy saga that followed the shutdown of Credit Suisse’s U.S. brokerage business, marketed as Credit Suisse Private Banking, almost two years ago.
The Swiss bank has brought a raiding lawsuit against UBS, and many of its former U.S. brokers who went to firms other than Wells Fargo Advisors are suing CS to collect deferred pay they say it has withheld.
—Mason Braswell contributed to this story.