Wells Stands Behind Wealth Business, At Least for the Short Term
Wells Fargo & Co.’s wealth management businesses are not on the “short list” of units it is considering selling, despite advisor and client attrition, Chief Financial Officer John Shrewsberry said on Friday.
Wells earlier this week announced a plan to sell the retirement services business of its Wealth and Investment Management division, and on Friday reported that its broker ranks fell by another 140 advisors during the first quarter while all its wealth businesses had net “outflows” of client assets.
During a conference call to discuss the bank company’s first-quarter earnings Wolfe Research analyst Steven Chubak asked Shrewsberry if the bank would consider a “strategic sale” of the wealth division, given “the steady pace of advisor attrition and strong interest from peers to pursue M&A in this area.”
The business, which is dominated by its Wells Fargo Advisors brokerage units of almost 13,900 brokers, has “clearly been impacted by the account scandal,” Chubak said.
“It’s not on the short list of things that we’ve been talking about as we do the non-core trimming here and there, like the retirement business most recently,” Shrewsberry said. He noted that he was talking about prospects for “the relatively near term.”
Wells’ brokerage force has declined by a net 1,258 since it disclosed its fake account scandal in September 2016, and both customer assets and advisor headcount fell in this year’s first quarter.
Wealth and Investment is the smallest of Wells’ three business segments, which includes the company’s widespread retail banking network and its wholesale banking units. The wealth division’s first-quarter net income of $577 million was down 19% from the year-earlier period, and comprised 10% of the $6.2 billion of profit the three segments generated.
Referrals between the company’s advisory businesses for wealthy people and other parts of the bank remain the “path to the greatest value creation” for shareholders, Shrewsberry said, citing as one example the mortgages sold to wealthy customers of Wells Fargo Advisors.
Referrals from the bank to the wealth and investment division totaled $2.4 billion in the first quarter, up 10% from the fourth quarter of 2018 but down 8% from the year-earlier period, Wells said in its earnings report.
Shrewsberry expressed confidence in the executive running the Wealth and Investment Management division, which includes private banking services, the Abbot Downing family office and Wells Fargo Asset Management’s fund business, as well as the brokerage business.“The changes that Jon Weiss is making in running that business will continue to generate a high level of value creation,” Shrewsberry said.
Weiss began the first stage of a reorganization of his division last summer by merging Wells’s bank-branch brokerage operations for the mass affluent into its Wells Fargo Advisors’ private client group, which employs more than 9,000 brokers in standalone offices and is run by David Kowach.
Weiss had earlier exhorted employees employees in his division to exercise “discipline, fortitude, integrity and compassion” amid a broader restructuring he was planning.
While Shrewsberry said that Wells’ remaining wealth businesses are not on the auction block, he cautioned that the bank company has a fiduciary obligation to consider all offers.
“If anybody made a proposal that was value-maximizing for our shareholders, our job is to respond to that,” he said, adding that he doubts that any such proposal will be coming anytime soon.