Wells Fargo’s Fledgling RIA Channel to End Year with 11 Advisors
(Adds comments from new RIA in Virginia Beach in last four paragraphs.)
Wells Fargo will end 2019 with 11 firms in its new registered investment adviser channel, a tally that a senior executive says reflects its methodical process for keeping former Wells Fargo Advisors’ brokers and their customers satisfied with the service.“We are thrilled with the results,” said John Peluso, president of Wells’ First Clearing broker-dealer that is overseeing the new advisor channel. “The folks that have come over are very happy, which is the best measure of our success.”
The four advisors that have made the move to date have retained about 99% of the clients and assets they wanted, he said. Wells has seven more commitments from advisors who will launch RIAs by the end of 2019, he said. None are affiliated with the broker-dealer’s Financial Network channel of independent brokers.
The average practice oversees about $350 million of customer assets, though the number is skewed by the $650 million managed by Seattle’s David Hohimer, who moved in May, and by the approximately $500 million in Perry Mattern’s eponymous RIA in Denver that he set up in February.
Wells still has kinks to work out with outside software providers before it asks internal recruiters to market the RIA channel next year to brokers and advisors beyond the Wells family, Peluso said.
It will embark on the more aggressive RIA sales strategy in 2020 as it tries to exploit the accelerating trend toward independence and defend against the shrinking number of small broker dealers that use correspondent clearing firms like First Clearing, Peluso said.
Meanwhile, it is allowing internal brokers who want to explore the fee-based independent route to kick the tires, Peluso said. Most of the 20 or so employee and independent brokers looking at any one time decide to stay where they are, he said, but those who make the move are thrilled that they don’t have to “repaper” client accounts.
The RIA channel is aimed as much at staunching the outflow from Wells Fargo Advisors in the aftermath of its banking affiliate’s fake-account scandals as in exploiting the RIA growth trend, according to consultants. Wells Fargo Advisors had just under 13,800 brokers as of June 30 across its private client group, in-bank-branch and independent Financial Network (FiNet) channels, down 427 from a year earlier.
Wells, which unveiled its RIA channel in January, refers RIAs to TradePMR for trading and middle-office services. The Gainesville, Florida-based broker-dealer, which has about 400 RIA customers, has been a First Clearing client since 2011.
Frank LaRosa, an outside recruiter at Elite Consulting Partners, said the ease for Wells brokers of transitioning to a First Clearing customer should be balanced against costs that are likely higher at TradePMR than at self-clearing custodians.
Pricing, according to Peluso, is competitive with that charged by other RIA custodians.
Robb Baldwin, TradePMR’s chief executive, said he launched his firm after running his own RIA for years because he found large custodians such as Charles Schwab and Fidelity Investments inefficient for smaller practices. His firm had been growing by 40 to 50 RIA clients a year before the referrals from Wells, he said.
Mattern, who set up his Denver RIA after 18 years at Wells Advisors and its predecessor firm A.G. Edwards, said he is generally satisfied with TradePMR’s trading and servicing platforms but is looking forward to integration of new customer relationship management and trade-reporting software, such as Orion, that he is currently beta testing.
“We are operating with clients like we always had been, and it’s great that it was uninterrupted,” he said, “but the best technology is outside the old wirehouse enterprises.”
Peluso said Wells is working hard to remedy gaps that advisors are finding. “We are building deeper integrations with all the third-party software providers,” he said.
Wells’s first RIA emigrant was Carl Schultz, who set up his $100-million Forefront Wealth Management firm in January after 15 years as a private client group advisor in Berwyn, Pa. Virginia Beach advisors Jeremy Ingram and George MacDonald, Jr., who had been Wells Private Client Group advisors for almost a dozen years, opened their RIA, Beacon Harbor Wealth Advisors, in May.
Ingram and MacDonald, whose shift has not been previously reported, manage about $215 million for some 300 household accounts, and moved 98% of them within weeks of setting up as independent RIAs, Ingram said.
The pair, who operate with three associates as Beacon Harbor Wealth Advisors, had been researching an independent fiduciary practice for almost three years in order to have better client-management technology and to operate as pure fiduciaries. They weighed custody affiliations with TD Ameritrade, Fidelity and Raymond James, but opted for the ease of remaining within the Wells clearing fold, according to Ingram.
The service from TradePMR “is a breath of fresh air,” he said, and trading costs that Beacon Harbor pick up on behalf of clients are reasonable.
“It was a huge success,” he said of the transition, “but being an independent RIA is not without its challenges. Wells used to make all the decisions, and now we are the business managers.”