Wells Fargo Advisors Reports 1% Loss of Brokers in Third Quarter
Wells Fargo Advisors continued to shed brokers in the third quarter, reporting that headcount as of September 30 fell 3% from a year earlier, and 1% from three months earlier, to 14,074 advisors.
That puts the total number of net broker losses since Wells Fargo & Co. disclosed a regulatory settlement two years ago at 1,012—larger than the average brokerage firm count in the U.S. The initial settlement involved the opening of fake bank and credit accounts for retail banking customers, but the San Francisco-based banking giant continues to defend itself against numerous regulatory, legal and congressional investigations of its alleged high-pressure, cross-marketing sales culture that has raised questions for brokerage customers.
In a conference call with analysts after the bank company reported a 32% jump in quarterly profit on the back of expense reduction, Chief Executive Officer Timothy Sloan said that Wells Fargo Advisors have reversed the attrition numbers. New hires in September, he noted, were “net up.” He did not provide specific numbers, and a Wells spokeswoman also declined to break out attrition figures.
“There’s been some impact from some of the reputation issues,” Sloan said, “but the important thing you see in the overall numbers and performance this quarter is improvement.”
In its effort to staunch the outflow of its advisors, Wells has sweetened fees for outside recruiters and enhanced signing deals for experienced brokers at a time when peers such as Morgan Stanley, Merrill Lynch and UBS Financial Services have retrenched from hiring.
“Recruiting has been slower than previous years, but we had a strong September and the anticipated hiring over the next quarter is strong,” Wells spokeswoman Kim Yurkovich wrote in an emailed statement. One-third of net advisor departures in the third quarter were due to retirements, she said.
The broker outflow this quarter was exacerbated by the expiration of retention packages given to advisors from A.G. Edwards, which Wells Fargo inherited via its acquisition of Wachovia Corp. in 2007, Sloan said. Productivity of Wells’s brokersis on the rise, he noted.
“[F]or our existing FA population, we’re seeing improvement in loan origination as well as improvements in the overall size of their book,” the CEO said.
Overall results for the company’s Wealth and Investment Management division, which includes its retail brokerage, private banking, asset management and retirement businesses, were generally flat.
Assets under management in the division were up 2% to $1.9 trillion, driven in part by higher market valuations that were “partially offset by net outflows,” the company said without specifying the source of the outflows.
Fee-based accounts rose 7% from a year ago to $560 billion as of September 30, the company said.
Wells does not break out net income and revenue among the wealth division’s component businesses. Overall revenue of $4.23 billion was down from $4.26 billion in the year-ago quarter. Earnings rose 2% from the year-ago quarter to $732 million on lower operating losses.
Wells Fargo began reorganizing the wealth division, the smallest of its three core businesses, in the third quarter combining its bank-based brokerage operation with its flagship private client group brokerage business. The change is part of the division’s drive to reduce annual expenses by $600 million.
Referrals between the wealth management business and Wells’ core retail “community” bank division were also flat with a year ago, the company said. The bank in the aftermath of the sales scandals no longer publishes cross-sell results by division, a metric where the retail brokerage operations had excelled.
Net interest income at the wealth unit fell 6% in the third quarter from a year earlier, reflecting in part margin squeezes driven by a decline in client deposits and overall depressed loan growth. Chief financial officer John Shrewsberry said in a September presentation that reputation issues “may have slowed some new customer activity” in commercial and real estate loans at the bank.
Average deposit balances in the wealth division were off 13% year-over-year to $159.8 billion, which partly reflected customers’ shift into “higher-rate alternatives,” the company said.
Wells Fargo & Co.’s overall results beat Wall Street analysts’ consensus expectations, as revenue rose to $21.9 billion from $21.8 billion a year ago and net income of $6 billion was up from $4.5 billion.Wells Fargo shares were up 1.61% as of 10:45 a.m. Friday morning.