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Wells Fargo Makes It Easier for Advisors to Change Channels

“We believe the multi-channel strategy is the way to go otherwise we would not have that.”

Wells Fargo is making it easier for brokers to join the company’s network of independent advisors, part of a renewed strategy focused on leveraging the multiple advice channels it has available.

Until recently, brokers employed by Wells Fargo Advisors interested in becoming an independent advisor affiliated with the Wells Fargo Advisors Financial Network, or FiNet, paid a price. For the transition, they gave up 15 percent of revenue their first year with FiNet and 10 percent of revenue the second.

To encourage qualified brokers interested in FiNet to make the transition, those fees have been eliminated. Instead, Wells Fargo brokers who join FiNet will pay a penalty if they leave within seven years. That penalty scales depending on how long they stay with FiNet. Advisors who  will pay 35 percent of commissions earned during their trailing 12 months if they leave within three years, 20 percent if they leave between three and five years, and 10 percent if they leave between five and seven years.

Any advisor who leaves after spending at least seven years with FiNet will be subject to a “disaffiliation fee” of $4,500 that has always been in place to cover the cost of a one-year insurance policy the firm has on every advisor who leaves, a spokesperson said. The sliding scale does not apply to advisors who join FiNet from outside of Wells Fargo Advisors, but they are still subject to the $4,500 fee. 

Financial Planning was the first to report the changes. Wells Fargo leadership confirmed them with WealthManagement.com on Friday.

John Alexander, a senior managing director at Wells Fargo Advisors and the head of Advisor Led West, said the changes were not made to lure brokers from Wells Fargo Advisors to FiNet and “to characterize it that we’re looking inward is completely wrong.”

Over its 16-year history, FiNet has opened an average of about 100 practices each year and roughly 80 percent of its advisors come from brokerages other than Wells Fargo Advisors, Alex David, a managing director and the head of FiNet Branch Development, said. FiNet finished 2017 with more than 1,400 advisors and approximately $105 billion in assets under management. Wells Fargo Advisors had 14,544 advisors at the end of 2017 with assets under management of $543 billion. 

David said FiNet does not have a goal of adding a certain number of advisors each year—from Wells Fargo Advisors or elsewhere. FiNet has benefitted from the trend of brokers choosing to become independent advisors and a full-service platform that former brokerage employees are accustomed to having, he added.

On Wells Fargo’s multi-channel offerings (there are also brokers based in the company’s bank branches) and the ability to capture advisors, David said “That’s how it’s been forever.”

Still, Wells Fargo intends to make the choice between channels as easy as possible.

In addition to the changes in fees for joining FiNet, Wells Fargo will begin compensating managers for recruiting qualified advisors regardless of the advice channel the recruit joins, Alexander said.

Previously, managers were only compensated for recruits that landed within their advice channel.

“We believe the multi-channel strategy is the way to go otherwise we would not have that,” Alexander said.

None of the other three so-called wirehouse brokerages, which includes Morgan Stanley Wealth Management, UBS Wealth Management Americas and Bank of America’s Merrill Lynch, have a network of affiliated independent advisors like FiNet’s.

Both Alexander and Richard Getzoff, another senior managing director at Wells Fargo Advisors and the head of Advisor Led East, attended a meeting this week with 300 of the top brokers and said they were “very enthusiastic” about feeling like they have a stake and opportunity in all advice channels.

Getzoff said Wells Fargo’s strategy around choice is “a competitive advantage.”

“We feel like this positions us to thrive in the advice business,” he said. “Quite frankly, that’s how we’re going to win in the future.”

Beyond offering choices to advisors, there are benefits to harmonizing the multiple advice channels. Technology such as client-facing and advisor tools are scalable across the channels. Initiatives to help diversify the advisor workforce and new trainee programs are also relevant across them, Alexander said.

Those benefits undoubtedly help FiNet. David declined to share details about the unit’s performance but said FiNet’s assets under management per advisor is among the top in the independent space, its margins were positive and that Wells Fargo was happy with the business. “They love us,” he said.

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