Wells Fargo Wealth Headcount Slips Again, Fee-Based Assets Rise
Wells Fargo kicked off the bank earnings season on Friday by saying that while its retail broker count of 14,527 fell by 138 advisors over the three months ending June 30, its advisory assets grew by $13 billion on rising markets and “continued positive net flows.”
Wells Fargo Advisors’ decline in broker headcount of 1% from the end of the first quarter and 3% from June 30, 2016, comes despite the company being the only one of the four large U.S. brokerage firms that has not announced a deliberate pullback in recruiting of experienced advisors. In this year’s first quarter, advisor headcount fell by 204 brokers, or 3% from 12 months earlier.
Merrill Lynch and Morgan Stanley have said they were honoring hiring agreements that were in their pipeline as the second quarter was winding down, meaning Wells’ ability to build its brokerage force at the expense of the two firms (and of UBS Financial Services, which announced a recruiting slowdown last year) may not be apparent until the second half of 2017. Merrill and Morgan Stanley report their second-quarter results next week and UBS will report in early August.
Like its competitors, Wells continues to encourage brokers to move clients from commission to fee-based accounts and said the effort bore fruit in the second quarter. Advisory assets in Wells Fargo Advisors’ employee, independent and bank channels grew 3% during the quarter and 13% from a year ago to $503 billion, the company said. It did not break out how much represented market growth versus new money from existing and new clients.
Banks are emphasizing fee-based assets because they generate more stable revenue than commission accounts and conform more closely to requirements of the Department of Labor’s new fiduciary “customer best-interest rule for retirement accounts.
Wells’ total retail brokerage assets of $1.6 trillion were up 8% from the end of the 2016 second quarter and represents the lion’s share of the $1.8 trillion of client assets across the bank company’s brokerage, private banking and investment management businesses. The total at Wells Fargo Advisors includes holdings and deposits in Wells’ proprietary mutual funds.
The San Francisco-based bank does not break out income and expenses for the businesses within its wealth and investment management division but net income for the unit was 9% from the end of the first quarter and 17% from the year-earlier quarter to $682 million. Noninterest expenses for the divisions fell 4% from the first quarter but were p 3% from the year-earlier quarter on higher operating losses.
The bank’s scandal-tarred community banking division reported a 6% year-over-year decline in net income to $2.99 billion while its wholesale banking trading and investment banking businesses recorded a gain of 15% to $2.38 billion.
Wells said that its “cross-sell” culture continued to bear fruit during the quarter as client referrals between the wealth and community banking divisions grew 12% during the quarter.
The bank company’s total net income of $5.8 billion was up from 5% from the year-earlier quarter, beating analysts’ expectations. Its revenue of $22.2 billion during the quarter slightly missed Wall Street forecasts of $22.5 billion.