Wells Sweetens Succession Deals to Keep Clients and Brokers In-House
(Corrects penultimate paragraph to say non-solicitation provisions apply to buyers of books, not sellers.)
Wells Fargo Advisors is sweetening its “sunsetting” programs in an effort to keep younger advisors in place and make it more lucrative for retiring brokers to sell their books internally.
Under a new program that will begin April 1, Wells will help younger brokers buy the books of colleagues by offering them financing that can reach 100% of a retiring brokers’ trailing 12-month revenue.
To encourage the growing number of older advisers to enter the new “Summit” program, Wells will give them a bonus equal to 25% of their trailing-12 at the time they enter the three-to-five-year program if they generated at least $500,000 of fees and commissions in the previous year. The bonus, which is deferred for five years, supplements the payments that younger brokers pay for a book of business.
Morgan Stanley in January began offering its top-tier advisors fattened payouts for several years after they retire if they participate in its succession program and contractually agree to remain with the firm for a set period after agreeing to participate in the program.
Wells Fargo Advisors has an extra incentive to keep assets and advisors in-house because of a heightened wave of departures in the two-and-a-half years since its parent bank company disclosed widespread fake accounts that retail bankers set up to meet sales quotas.
“This is going to be a big investment, but the economics should work well,” Alexander said of the new program that he said substitutes 25% of T12 to a retiree in lieu of a gold watch. “You have to believe that the demographics are going to drive a whole lot of activity.”
Kim Ta, Wells’ director of teaming and succession planning, said the firm is well aware of competitors such as Morgan Stanley, but she and Alexander claimed that they are building a better mousetrap by offering inheriting advisors a strong financing option that will tide them over as books transition.
“We think our program is more innovative because we’re investing in the buyer in a big way,” Alexander said.
To be sure, Wells is putting in some handcuffs to keep Summit participants with the firm.
Acquiring brokers must remain at Wells Fargo Advisors for a decade after the three-year account-transfer transition period to receive their full purchase-financing bonus. (Acquirers have an option of receiving a lump-sum payment for the 100%-of-T12 award that amortizes over ten years or a two-stage program that pays them through monthly installments.)
Also, brokers who purchase books and then leave are prohibited from contacting the inherited clients for three years from the date that they have completed their payments to the selling broker.
There is no revenue requirement for purchasing advisors to participate in the program. However, a Wells spokeswoman said the firm expects them to meet a bogey that requires at least 75% of their client household relationships to have $250,000 in assets with the firm by the time of the selling broker’s actual retirement.