EXCLUSIVE: Wells Ups Recruiting Deals to Replenish Diminished Brokerage Force
Wells Fargo Advisors is amping up its signing bonuses to levels that have been abandoned by most of its rivals in an attempt to replenish its dwindling force of brokers, according to sources at the wealth management arm of the scandal-plagued bank company.
Brokers who generate $500,000 or more of fees and commissions will receive “forgivable loans” on signing that equal two times their previous year’s revenue production, said the sources who were briefed on the new deal this week.
If they hit two revenue and asset transfer “back-end” targets in future years, the deal is worth as much as 325% of their so-called trailing 12-month (T-12) production, according to the internal sources and some outside recruiters.
Raising eyebrows even higher, Wells is offering all-in bonuses that can total 275% of T-12 to brokers generating $250,000 to $499,999 in production, a sales range considered relatively mediocre in the full-service brokerage industry. Wells in 2017 upped its “all-in” deal to as much as 280% of T-12 to brokers producing around $2.5 million.
Both of the new deals, which apply to brokers joining Wells’ private client group and its in-bank offices, consist of an upfront loan (200% of T-12 at the higher end, 150% at the lower), another 25% of the trailing-12 in deferred compensation that vests after five years and the identical back-end targets. The sources did not give the duration of the upfront forgivable loans that are secured with promissory notes, but recruiters said brokerage firms usually lock in brokers who receive such rich deals for nine or ten years.
The new offers resemble those that Merrill Lynch, Morgan Stanley and UBS once made to top-tier advisers. They have withdrawn the expensive deals over the past three years, citing an overhang of forgivable-loan debt that depressed their parent companies’ balance sheets and their inability to receive adequate returns before brokers bounced to other bonus-touting firms.
“They can’t make money with these deals,” said Frank LaRosa, head of recruiting firm Elite Consulting Partners, adding that the big money also creates bad morale among top brokers who fear resources are being diverted to the new hires. “Recruiting can be profitable, but not when you’re spending like a drunken sailor.”
Wells, which also is paying outside recruiters higher fees than its rivals, risks signaling desperation with the new deals but needs to replace departing brokers, he and some internal Wells managers said.
Wells Fargo Advisors has lost a net 914 retail brokers—including 576 in the last 12 months—an exodus that began at the end of 2016 as its parent began disclosing fake-account and lending issues that have scarred its reputation with consumers and legislators.
“We are proud of our financial advisors and their commitment to clients, and we’re investing in our own teams,” Wells Fargo Advisors spokeswoman Shea Leordeanu said, without commenting specifically on the new recruiting deal. “We also want to hire the best client-focused advisors in the industry.”
Wells Fargo Advisors ended 2018 with 13,968 retail brokers across its private client, in-bank and independent brokerage channels.