Wells Fargo Opens RIA Channel with First ‘Breakaway’ Broker
Wells Fargo Advisors has captured the first customer for its new registered investment advisor custody business.
Carl A. Schultz, a Philadelphia-area broker in Wells’ private client group for almost 15 years, has opted for the convenience of affiliating his new Forefront Wealth Management RIA with the new custodian, he said on Monday.
“They gave me a chance to do it on my own and not disrupt clients,” said Schultz, noting that he has been exploring moving to independence for several years but was worried about the systemic and client-retention issues of the move.
The 62-year-old advisor, who oversees more than $100 million of customer assets, believes he can retain most of his clients since he focused primarily on advisory accounts and will work near his former Wells Advisors office in Berwyn, Pa.
He is giving up what he described as “relatively significant” deferred compensation, but said the value of going independent—retaining more revenue and having greater freedom working with customers—still makes sense. Wells also has agreed to prohibit its brokers from soliciting Schultz’s clients for 30 days.
Wells, which also operates an independent brokerage channel known as Financial Network (FiNet), is the first major brokerage firm to open a business offering practice management services to independent advisors in return for providing their customers investment products. The decision is widely viewed as an attempt to keep at least some assets from the company’s wave of exiting brokers within the California bank’s system.
Since Wells Fargo & Co. disclosed fake account scandals more than two years ago that have made it a poster child for an over-aggressive, ethics-challenged corporate culture, more than 1,000 brokers net have left Wells Fargo Advisors.
“They’re acknowledging that the RIA space is a viable alternative for the wirehouse,” Schultz said.
Wells allowed him to announce his independence plans to clients, allaying fears of lawsuits and arbitration complaints that firms often bring against breakaway brokers for allegedly violating employment contracts and using firm-owned customer-contact data.
Trade-PMR, an introducing broker-dealer that executes customer trades through Wells’ clearing unit, will provide transactional services to customers of RIAs on the custody platform.
Wells said it expects other brokers to follow Schultz’s lead in the near future.
“While we will have more details on the program to share later in the month, adding custody and platform services for advisors wanting to start their own fee-only RIA is a natural evolution of our multi-channel model,” John Peluso, the head of Wells Fargo Advisors’ First Clearing business, said in a prepared statement.